Bank shares soaring on belief taxpayers will bear NAMA pain

See … /#comments for the true horrific cost of this.

:smiley: Crashandburn is right yet again 8DD


Predicting the past is an art all right :slight_smile:

One has to wonder however if they will be anything left to pay for NAMA by the time it gets established. And if not, bank shares are heading back to zero fast.

This makes my stomach churn.

The smaller the haircut,

  • the greater the benefit for the brokers, investment managers and shareholder classes who failed to oversee the banks risk taking
  • the greater the benefit for the bankers themselves who took the risks and paid themselves undeserved amounts
  • the greater the subsidy provided by the taxpayers and PAYE workers
  • the more social divisions and strata will bepreserved just when we had all be brought back to earth together.

Worse again, there is no transparency as to who is getting bailed out from bondholders to shareholders to bankers to brokers. I will be disgusted if this happens.

EDIT: Another ill of a small haircut is that it removes the option of Nationalisation down the road. We are locking the door and throwing away the key. TBH though, I don’t see where Davy have the inside line on this.

It disappoints and disgusts me too. The feeding trough of these magnates used to be filled by persuading people to walk into a bank and promise away as large a proportion of their future working lives as possible. Now that that persuasion doesn’t work anymore, the government are in effect making that promise for everyone on their behalf, without their consultation, to keep the trough topped up. The only hope lies in our kids getting their heads properly around what is being done to them and kicking up the biggest stink ever about it.

The entire idea is crazy. The government paying to effectively recapitalise the banks, but not taking the corresponding shareholding. By choice.

On the issue of haircuts etc., I have on good authority that HSBC have been draften in to look at loans prior to transfer to NAMA on a case by case basis. There will be no general haircut but each loan will be decided individually. This means that property agents seem to be left out of the process.

So essentially:

HSBC: This is prime, centrally located rental property at 95% occupancy. The rent roll is servicing the interest and some portion of the capital but risks remain that vacancy periods could increase, rental rates could drop and the value of the asset will most likely fall as well. We recommend a 10% haircut on this one.
FF: No problem, 10% sounds about right … what about the next one on the pile.
HSBC: This one is absolute garbage. It’s a contaminated silage pit in Leitrim, on which planning permission for an eighteen story “beach” condo was refused. The developer went ahead and half built the thing anyway and is currently being sued by An Bord Planala and everybody else in an eighteen mile radius of the place. The loan is for three hundred million and the developer laughed so hard when we enquired about interest payments that he had to be rushed to the Blackrock Clinic in his private helicopter. Frankly, the banks should be paying you to take this one off their hands.
FF: No problem, 10% sounds about right on this one too … tell me did Frank get the flowers we sent? His mother tells me he’s expected to make a full recovery but that was a close one. We’d advise you don’t go shocking some of the developers with questions about interest payments and the like. Here’s a list to help you out …
HSBC: This says “Fianna Fail Contributions List” on the top …
FF: Ahem, yeah, about that …

To be honest, I don’t see why NAMA should pay anything other than market rate. Better yet, let companies who specialise in buying junk loans buy these loans on the open market. If the banks then need funds from government, they can have some funds, but they’ve got to earn it and eventually pay it back.

bank shares have been good to me!

Bank shares will destroy my childrens’ hopes. :smiling_imp:

I’m alright Jack eh? :smiling_imp:

just to provide some context from the ISEQ thread on the central bank board:

For possible reasons for overpayment, look at comments from Karl Whelan and Joe Traynor near the bottom of the page at: … /#comments

Amateurs :wink:

TUG and others on here had figured out both why the government would try and overpay and the mechanism that could be used to avoid this (directly issuing treasuries for recapitalisation). The whole scheme depends on the ECB’s acquiesence in the QE that is involved in directly issuing treasuries without the intermediation of the financial markets (i.e. without a price setting mechanism).

Despite what Mr. Bacon says, I still think that zero coupon bonds could be used for this mechanism.

(The Irish Economy piece also has a Brian Lucey ST general NAMA article from a few weeks back)

Is it intended that the draft legislation will deal with fundraising, and NAMA payments to banks? Will the payments to banks be stretched out over the lifetime of NAMA?

I suppose the payments would have to be, for more than one reason:

  1. The Government couldn’t raise the €50-80b in the short-term anyway.
  2. The “revenue streams” the banks were expecting from these loans dished out in the last few years would have only been expected to come in over a similar time period that NAMA will be around for, so the banks shouldn’t be paid any quicker than that. If they do receive large upfront payments, again, they will gain at the expense of the taxpayer.

Will any future levies on the banks be discuss during upcoming legislation? (for overpaying on loans, as opposed to levies on NAMA for underpaying, because the likelihood of that is laughable)

Are most of the banks liabilities in the form of corporate bonds?

Well instead of paying a generous premium on the bad debts, they could use the funds to recapitalise if viable or else to set up a new bank if not. They could even pay the market rate and say, “by the way here’s a little something something for yourself” but to deliberately overpay is dishonest and foolish.

The government doesn’t need to. The bonds will be issued directly to NAMA to swap with the banks, or directly to the banks for recapitalisation purposes. The bond markets will not be involved.

why would you be annoyed about somebody making profit on an otherwise fairly hopeless situation?