Banana NAMA and ‘Mark To Market’

September 4, 2009

“Pick any trough, fast forward 7 years, that’s what that set of data shows.” Since 1971, there’s always
been a recovery, commercial recovered to 88%, residential property recovered to 99%” John Mulcahy,
Chief Valuer, NAMA, to the Joint Committee on Finance and the Public Service, Sept 1, 2009.
Mr Mulcahy is reassuring us that property prices will return within 7 years to the value they were at the peak of the boom! Goodbye, Mr Mulcahy, on this performance you were lucky not to be hauled away for contempt of court!
Mr Lenihan, TD Minister for Finance reported at the same hearing, said the draft legislation provides a framework for the valuation of loans which must be approved by the European Commission”. See previous post on the mysterious role of the ECB that, if it allows NAMA to go through, as envisaged by the Minister, is alleged in breach of EU guidelines/regulations guarding against monopolies distorting the market place, price fixing.
In keeping with Mulcahy’s falsifying, Lenihan spoke against ‘blanket nationalisation’ although ‘blanket nationalisation’ is not proposed by any commentators, rather selective, temporary nationalisation for institutions that cannot fix themselves, to protect the tax payer from risk.
Clearly opposition to his proposals is making its mark, including concern expressed by the ECB, see earlier post, Lenihan stated he risk-sharing proposals do merit consideration. Duhhhhh, you would not by any chance be prepared to outline for us, at this late stage, what your risk-sharing proposals might be? In many ways, both Mulcahy’s and Lenihan’s performance could be compared to two dodgy salesmen trying to sell us an old banger, but refusing to tell us the price they would sell us the vehicle
at until Sept 16.
more to be added here later today, well worth returning to, nb nb

This post dedicated to Bethany Mclean, Fortune Magazine, Enron whistle blower, http://www.namasayno.com/images/Enron01.mp3

http://en.wikipedia.org/wiki/Bethany_McLean

Say No To NAMA!

FHV is a term invented by Geoff  Skilling Enron CEO to describe a concept whereby profits could be made ‘mark to market’ So instead of writing value/profit according to market value, instead you gave it a ‘hypothetical future value’ based on its performance in the future. I guess he wasn’t as smart as he thought! Of course you could put down anything your imagination came up with to value your assets. So the Enron scam took off, see Enron:The Smartest Guys In The Room available at this and other urls.

I  draw your attention to the similarity between the HFV and ‘Long term market value’ terminology the ECB is concerned about in the Draft Legislation…..?? Make up your own mind about it!

August 30, Business, Jane Suitar, Irish Times, ‘Last week, it also emerged that the agency is looking for people with expertise in derivatives. But not only will it be buying these from the banks when they relate to the property loans, it also reserves the right to include these in the securitised packages.’

Mr Lenihan is a big gambler. It’s my view he does not at all wish to get into the property game at all, he’ll ignore the McCarthy recommendation to offload Government portfolio. It’s my view also his approach is to play the stock market and sell on toxic debt perhaps through derivatives to other investors in the Irish property market!

“Pick any trough, fast forward 7 years, that’s what that set of data shows.” Since 1971, there’s always been a recovery, commercial recovered to 88%, residential property recovered to 99%” John Mulcahy, Chief Valuer, NAMA, to the Joint Committee on Finance and the Public Service, Sept 1, 2009.

Mr Mulcahy was reassuring us that property prices will return within 7 years, to the value they were at the peak of the boom!

Goodbye, Mr Mulcahy, on this performance you were lucky not to be hauled away for contempt of court!

Mr Lenihan, TD Minister for Finance reported at the same hearing that the draft legislation provides a framework for the valuation of loans which must be approved by the European Commission. See previous post on the mysterious role of the ECB that, if it allows NAMA to go through, as envisaged by the Minister, is alleged in breach of EU guidelines/regulations guarding against monopolies distorting the market place, price fixing.

In keeping with Mulcahy’s falsifying, Lenihan spoke against ‘blanket nationalisation’ although ‘blanket nationalisation’ is not proposed by any commentators, rather selective, temporary nationalisation for institutions that cannot fix themselves, to protect the tax payer from risk.

He repeated this falsification of the nationalisation position when on Prime Time he also said he was against nationalisation, “We can’t take the entire banking sector over 100% in every bank. That’s what they did in Iceland and their banking system collapsed soon afterwards..”

Mr Lenihan, no one wants the entire banking system taken over. We are taking about selective nationalisation of a temporary nature for Allied Irish and BOI, if they can’t put their house in order, better still if they can themselves! Furthermore, there is no comparison between the collapse of the Icelandic banking system with its dependance on toxic paper debt of an overseas nature, not local property/development based lending. Mr Lenihen could well take a lead though from Icelandic Prime Minister Geir Haarde’s resignation last January 23rd! 

Clearly opposition to his proposals is making its mark, including concern expressed by the ECB, see earlier post. Lenihan stated the risk-sharing proposals do merit consideration.

Duhhhhh, you would not by any chance be prepared to outline for us, at this late stage, what your risk-sharing proposals might be? In many ways, both Mulcahy’s and Lenihan’s performance could be compared to two dodgy salesmen trying to sell us an old banger, but refusing to tell us the price they would sell us the vehicle at until Sept 16, or if we might be insured against a catastrophe in using the vehicle! But, he’s considering some form of risk sharing!

You’d think the Minister on September 16 will have brought the kernal problem of the NAMA project to its conclusion. Not quite, its really only the beginning of the Fr Ted fun, according to his proposed legislation, my simile, its like throwing a large rock into an aquarium filled with man eating sharks. A ripple effect ensues, who knows when this to and froing will end, what political interference and corruption will be made bare during the following process, but read the following carefully from the proposed legislation and make up your own minds. Remember, they propose not an across the board haircut, but dealing with loans on a one by one basis, this could last forever:

“Objection to value placed on bank assets acquired from participating institution.

98.—(1) If, after the service on a participating institution of an acquisition schedule, aparticipating institution objects to the acquisition value specified in that schedule in respect ofa bank asset, the participating institution shall serve on NAMA a notice in writing of its objection within 14 days after the service on it of the acquisition schedule or amended acquisition schedule, as the case may be.

76

National Asset Management Agency Bill 2009

For public consultation purposes only

(2) On receipt of a notice under subsection (1), NAMA shall do one or more of the following:

(a) remove the bank asset the subject of the dispute from the acquisition schedule;

(b) revoke the acquisition schedule;

(c) continue with the acquisition in accordance with the acquisition schedule.

(3) Where NAMA continues with an acquisition in accordance with the acquisition schedule concerned, the participating institution may dispute the total portfolio acquisition value in accordance with section 99.

Dispute over total portfolio acquisition value.

99.—(1) If, after service of the practical completion notice on a participating institution,the participating institution wishes to dispute the total portfolio acquisition value, it shall do so only if—

(a) it is of the opinion that the total portfolio acquisition value of the bank assets specified in acquisition schedules served on the participating institution is incorrect having regard to the current market value of the bank assets, and

(b) it has served a notice or notices under section 98 in respect of acquired bank assets comprising at least 12.5 percent by value of the total portfolio acquisition value.

(2) A participating institution that wishes to dispute the total portfolio acquisition value shall serve on NAMA a notice in writing, in such form if any as may be prescribed, no later than 14 days after the service of the practical completion notice under section 75, specifying the reasons for its opinion under subsection (1).

(3) If a participating institution serves notice under subsection (2), NAMA shall refer that notice to the valuation panel for review in accordance with section 100.

(4) The giving of notice by a participating institution under subsection (2) does not affect the acquisition by NAMA of the bank assets concerned.”

On Prime Time Sep 3, The Minister said “Typically commercial loans were not advanced without some equity” and he mentioned the figure of 25% – 30%. Theoretically, if bad debt amounted to €90 billion then approx €30 billion should be in the bank vaults from developers as equity leaving the state liable for €60 billion of toxic loans. The fear is that this equity is phantom money possibly itself the subject of further loans and further toxic debt. The question is, therefore, why hasn’t the minister in this process instructed the banks to write down their toxic loans and for the sake of due prudence with the ECB provided that information to the ECB and directly or indirectly to members of the Oireachtas and the general public? Everything is smoke, mirrors, shenanigans and incompetence as the tax payer gets closer to being fleeced.

Can you see the lads poring over an application to contest evaluations in excess of 12.5% portfolio value going through each and every one of the challenged items of thousands and thousands of similar challenges in a short time frame. Its ludicrous, worse than anything Franz Kafka could imagine in ‘The Castle’, state interference at its bureaucratic craziest!

That’s why, the Legislation provides for the Minister to take a look at how things are going on after 5 years. Have you got that, no ceiling to conclude everything after 5 years. No breaking up of these toxic assets into 5 property companies to expedite the clean up as Bo Lundgren, Minister for Fiscal and Financial Affairs did in Sweden in 1992 along with nationalisation. Banks were given the option of getting themselves out of the hole and refinancing themselves, nationalisation was proceeded with as best practice as proven by its success. What Lenihan does is build a recipe for a giant mess that will ruin Irish tax payers for generations! NAMA under Lenihan will go on forever! Nope, Mr Lenihan, young Irish people will not let you get away with this. You and your government are gone!

http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html

Get the banks BOI and Allied Irish to write down their losses, nationalise them with safety net legality that will ensure the state of accuracy of those losses, divide out the good/bad property into 5 property companies, firesale the assets within a time frame.

Mc Carthy, Bord Snip is already elsewhere advising the government to sell its property portfolio….Lenihan’s NAMA project is heading for the rocks!

…Next post, back to draft legislation, more focus!

..Thanks for reading!..

Colm

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