The total cost of rescuing the banks is said to be €70 billion. However NAMA has taken on another €70 billion of bank loans and it is unlikely that all of this will be recouped. Maybe they’ll only get half of it back? In addition there is cost of operating NAMA which will add considerably to the overall loss.
Why is this not included when our leaders claim to be seekiing to restore confidence? Clearly stated bad news is better than evasion.
Also, NAMA took on 70 bn or so worth of loans at an average discount of 50% or so (can’t be bothered to find the exact figures) so the stress has already been built in there. Whether it achieves a full recovery of the value it has placed on the loans or not remains to be seen.
I know yesterday’s figures were about the banks and the assets in NAMA are no longer a part of the banks. However it concerns me that the real extent of the cost of the bailout is being dodged by compartmentalising the situation. When we are told that the cost of recapitalising the banks is €75 billion, a lot of people will think that this is the total cost of the bailout when this is not the case.
NAMA imposed an average haircut of around 50% on the assets it brought from the banks but even the best quality Irish property has fallen in value by more than this already. We can assume that much of NAMA’s porfolio is not of high quality so its loss of value will be greater than that of the market as a whole. If the market stabilises at about 65% off peak with an additional 10% fall for the NAMA holdings, losses for NAMA will be about 50% of its investment. These very rough calculations, which are optimistic in my opinion, suggest that NAMA will lose the taxpayer around €35,000,000,000 plus costs. I hope I’m wrong.