Almost all the discussions so far about NAMA Act 2009 have concentrated on what the principals want you to talk about and on the areas where they want you to look. So stop playing their game by their rules. Start looking where they dont want you to look.
All good frauds are constructed the same way as a murder mystery, you start with the crime (or cash out) and work backwards from there. Working out the mechanism and the steps needed to implement it in reverse order. Meanwhile leaving lots of false trails, red herrings, surprises and various twists and turns.
There are only three rules when deconstruction a fraud…1) Follow the money; 2) Follow the money; 3) Follow the money.
Everything else is completely irrelevant. Trivia intended to confuse and distract.
So when looking at what has been released into the public domain so far the main guiding principal when analyzing it should be - follow the money. How do the various principal players benifit and how does it further their plans to cash out? The Who? The When? And The How?
The next thing to look for is what are they not saying - listen for the silences. The Bill goes into great detail in some areas but is curiously silence on several key areas. Compare and contrast with other ROI Acts, or the nearest equivalent available in English, H.R.1278, the Bill passed by Congress to set up the RTC in 1989. There is lots of detail in the NAMA Bill about how NAMA is organized, and how it acquires assets, but little or nothing (except indirectly or in very vague terms) on how, or in what form, it is to dispose of the various assets. That is the most important revealing silence.
They are silent not because they have not worked out the details of the mecahnism of disposal yet. Quite the opposite. They started with the disposal method first (the principal cashout method) and built the mechanism of the fraud around it. The silent about the disposal mechanism for the moment is very deliberate. Details will be released in dribs and drabs when it suits them but it is vital in order for the fraud to work to have its execution progress so far that it will present any future government with a fait accompli. Something that cannot be undone.
The key to the cash out mechanism for all the principal players is securitization of the bank assets aquired by NAMA. Not all of the assets, just enough to enable NAMA to pay off enought of the government supplied bonds and to publish public accounts that are politically acceptable. Enough for NAMA to hide the losses and spread them over a decade or more. And most importantly of all, enough for NAMA to front load the bail out for the various principals, in case there are any more ‘suprises’. The Banks in pole position , the Small Developers next, then the Big Developers. With the Land Bankers trailing, quietly buying back most of the land they sold during the boom.
I can just imagine the meeting (probably late last year) when some player from the IFSC first explained to Lenihan exactly what were Market Value CDO’s (thanks for the pointing me in the right direction, babytooth). Or rather what where the genral principals behind them. This was the deus ex machina moment for FF and the Golden Circle. They get to keep the loot, offload the price of the bail out onto the taxpayer, and get to hid the details of what they were really doing through opaque structures, obfuscation and obscurity.
The fact that the market for CDO’s and structured products like them has been dead for almost two years is nether here nor there. Enough people on both the buyer and seller side need instruments like this long term, so the market will revive sooner or later. And it looks like NAMA is planning on being a player.
In a nutshell this type of CDO (Collateralized Debt Obligation) allows the seller to shovel non-performing loans (and other assets) into a derivative instrument that gets the toxic crap off the sellers (NAMA’s) balance sheet and pays the buyer a very nice premium for this service. The beauty of CDO like derivatives is that they can also make completely opaque the mechanism that the seller uses to enhance the cash flow to the buyer over the life time of the instrument. The underlying assets does not recover “the long term economic value”? No problem. NAMA or one of its subsidiaries or partnerships issues more debt, or does a fancy roll over, or else goes to the government for cash, and then adds that to the SPV cash pool to pay out to the CDO holder. Think Enron. Except Enron actually made a profit…
That is how they plan to hide the huge losses over the life time of NAMA.
Result, the cost to the tax payer of the bail out is spread over a very long period and is paid out in less obvious and totally untraceable chucks. Say a few billion a year in direct cash, on top of the 100B so far committed, minus the eventual 30% recover rate from the bank assets. Net loss to the tax payer over the next decade or two, somewhere well north of 100 billion. All dumped on the national debt.
Once you have the NAMA securitization and asset liquidation stragey worked out then you can quickly work back upstream to structure the cash out mechanisms for the various Developers. All the clues are in the Bill. Big Developers? Development partnerships with NAMA interest being bought out when net plus again. Small developers? Indirect acquisition by NAMA agents with favorable valuations of collateral land.The Banks? Offload all toxic developer assets at full book value with a nice little premium on top for “managing” NAMA’s said assets.
And at the very end of the process when NAMA is finally wound up the tax payer gets to own all unsellable assets that no one else will buy.
There you have it, the classis FF stroke in all its glory. All very cunning and quite neat really… Except for the tax payer and the long term economic future of the country, that is.