The Bad Bank

Statement here
budget.gov.ie/2009SupApril09/dow … ompany.pdf
And Q&A here
budget.gov.ie/2009SupApril09/dow … stions.pdf

Utterly believable.

Let me get this right…the taxpayer is on the hook for an unknown portion of 80-90 billion and to ensure the survival of the banks, this will have to be a high portion?

I said after the Sep 30 guarantee that the developer bad loans would end up on the national debt.

Well, now we see that written down in black and white.

NTMA will issue gov bonds and swap them for the banks developer trash.

And all this is being overseen at every step by people who have destroyed their country,and a few thicko greens.
That includes fucking estate agents who will value the trash for a fat fee.

Just fucking unbelievable …

Plus interest and administrative costs. Plus the higher coupon on Irish government borrowing (it will be financed by government bonds).

Worse, it sounds like they are going to buy the debts at face value without any further investigation. Some of these loans have no personal recourse to the developers are are worth maybe 20c in the euro (assuming they are realised today at no administrative or legal cost).

Also, I would imagine there is no point in transferring the bad assets of Anglo as these have already been nationalised, so the 80-90bn figure possibly excludes the €35 or so in Anglo.

IMHO, sailing very close to the Moral Hazard wind.

Blue Horseshoe

This is the scariest thing about the budget. 80 to 90 billion is mind boggling!
Why didn’t they let Anglo fail? The consequences surely couldn’t have been worse than this.
What the fuck do they think they are doing? They are killing this country!

Copied from the budget thread - sorry didn’t realise there was one on the bad bank already.

I think it is nationalisation of the banks. The banks get treasuries for the assets they offload. From the language, they will be marked at some sort of intrinsic value rates, so land value plus current cash flow (?). But to take the losses from writing down the assets, they will have to either fund that themselves or borrow from the government to do so - the borrowings to be in the form of ordinary share issues.

The 80-90 bn probably reflects some 40 or 50 bn of Anglo assets, so maybe 30 bn from the rest of the banks. Even at a haircut of 30% this is more than they are all worth, so it will be at least 50% dilutive probably leaving the government as the majority share-holders.

IMO, there will be more to come than the C&D loans - commercial will also go bad, or ‘misunderstood’ as I believe we are supposed to say.

It’s only nationalisation of the worthless part. The good parts of the bank remain private. In a FF democracy, you are only allowed to socialise losses, not profits.

There are no good bits of the banks. We will become owners of the bits that sold the assets to recapitalise them.

The fact that AIB haven’t completed their due diligence yet suggests there’s something amiss there to me. And it fits in with the rumour I heard they were having problems doing it. Interesting.

So we now have 80/90 billion of bad debts when only last December the govt were rubbishing the notion of 14 billion of bad debt. The fucks.

The most depressing thing of all is that us dumb fools will take the bullet for these heroes.

Lenihan made much of the need to regain competitiveness, which would entail falling costs such as rent etc. But we have a dichotomy, we now own assets secured on property the value of which is based largely on the income stream (rent) it can generate. Effectively the more competitive the economy becomes the greater the pressure on the valuations of these property assets. Catch 22.

This had the potential to be very bad, though we need to see more detail on it. In particular this:

Firstly, you’d want very specific criteria on when the Windup is triggered and then you want to see exactly what the levy is. The “shortfall” should include interest to bondholders and NAMA running costs and an adjustment for higher borrowing costs on other Irish gilts. (If this is done correctly, it could be good.) We need to see the detail.

80-90bn - way to go! Presumably no interest payments being made, so the only cashflows the NAMA will get is when they dispose of the distressed assets. Assuming 5% coupon on 90bn, that’s €4.5bn p.a. to be paid with nothing coming in and this is before we get to write-offs!!! (this amount is greater than this budget)

Despite the governments spin, the NTMA is not a star performer.

Cronyism is alive and well. :smiling_imp:

Hmmmm… the cynic in me wonders who the levy will be applied to, Joe-Taxpayer or the banks???

There are good bits to be fair, such as the branch network, the clearance system etc and AFAIK personal debts in Ireland are still profitable. Even with a lot of arrears cases, residential mortgages can still turn a profit.

Commercial sensitivity used yet again so they can hide the true reality from us.

I don’t understand how it’s commercially sensitive - from whom? Ourselves?

Sorry johnny …

The branch network was to a greater or lesser extent sold and leased back by the larger banks.

The clearance system is a joke, it does not work efficiently and for a good reason, so the banks can continue to hold your cash for as long as possible between transfers.

Personal debts … Hmmm. we’ll see how much longer.

Blue Horseshoe

Do you mean the branch buildings as opposed to the actual branch network including established consumer deposits, current accounts, goodwill (I know, I know).

It may be a joke but it makes money. Whenever you pay a fee to transfer money, use an atm or visa card etc, the banks take a slice out of that.

But as things stand, a profitable part of the banks.

My point is that if you take out all the bad loans from AIB or BOI, you still have a bank worth maybe €20/30bn. The reduced market capitalisation reflects the lossess anticipated from the losses in the loan books. You take out all the rubbish, and the bank is worth more than it is currently valued. It would pale in comparison with the scale of their dodgy commercial and developer loans, but its still worth something.

In what way does this let developers off the hook? Genuine question.

(BTW, I’m very, very struck by the conversational tone in those government releases. Most odd).