How To Sort Out The NAMA Mess!

October 4, 2009

If you can, try and catch, ‘BBC Open University Productions’, ‘The Love of Money’.

The programme puts the global economic crisis under microscope.  It follows the development under President Bush and Hank Poulson, Secretary of the Treasury, of TARP policy, Troubled Assets Relief Programme  http://en.wikipedia.org/wiki/TARP response to the global economic crisis in the US, in the midst of which occurred the collapse of Lehmans bank.

As the crisis spread to the rest of the world, Royal Bank of Scotland, one of the ten biggest banks in the world, came close to collapse as did HBOS, one of the largest of the UK  mortgage lenders.

Alistair Darling, Chancellor and Gordon Browne, Prime Minister decided to take the UK response to the threatening global crisis in a new direction.

They decided that instead of the TARP approach, taking over the toxic assets from the institutions, that instead they would infuse the endangered banks with tax payers’ money, all the big UK banks would get increased capitalisation. There would be a bank guarantee scheme. This would result in nationalisation for some banks. The scheme worked and financial markets in the UK were stabilised. Equity stakes replaced the policy of bank bailouts.

Struggling with TARP in the US, Poulson was persuaded by the success of the UK intervention. The TARP method was replaced by an historic announcement on 14th October by Hank Poulson, ‘The Treasury will purchase equity stakes to guarantee….'(see details earlier post).

The taxpayer gets a stake in the banks the taxpayer is bailing out. The banks get to manage their own loans no doubt under new management informed by new regulatory guidelines! The taxpayer can make input on a cleanup of the banks.

In Ireland, instead of a cleanup, we get NAMA, a cleanout of the taxpayer by bankers, developers and Government! Not as competent as Hank Poulson, Alistair Darling or Gordon Browne, Brian Lenihan is unable tolearn from proven good practice from the UK and the US!

In an ill advised go-it-alone policy NAMA will bizarrely take over the toxic assets and manage them on behalf of the state in a project beset with risk and bad management even before it sets out!

Currently the word is the Greens will insist the Government pay market value for the toxic assets it will take over. This is not good enough! NAMA should be avoided at all costs and in its place a new response backed by the ECB along the lines of the UK and US response needs immediately to be put in place.

Hopefully the  crazy awfulness and wasteful incompetence of NAMA can still be avoided!

 

rgds

 

Colm

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