Why NAMA will lose €11.65bn

Saturday, November 07, 2009

The Government has designed NAMA in such a way that it will absolve the Banks from the consequences of their extremely bad lending in the amount of €77bn.

It was that €77bn bad lending, and more besides, which forced the State (that’s us) to guarantee all the Liabilities of the banks yes, all the liabilities of the banks, amounting to €420bn. By any measure €420bn was a massive temporary bailout.

The Government has further arranged things so that NAMA (that’s us, the taxpayers) will buy the €77bn bad loans from the banks. The €77bn is made up of two categories of loans, €30.8bn performing loans (which provide some income) and €46.2bn Non-performing loans (mainly secured on development land having doubtful, little or no value).

Qualified experts with huge professional experience agree that it would be extraordinary, bordering miraculous, if all, that is 100%, of the €30.8bn performing loans are successfully recovered. The facts show that it’s highly unlikely that even as much as 25% of the €46.2bn non-performing loans will ever be recovered. If 25% was recovered that would amount to €11.55bn (€46.2bn X 25%).

Adding €11.55bn to €30.8bn totals €42.35bn. But NAMA (that’s us, the taxpayers) is being asked to pay €54bn. So it’s patently clear that on day one, NAMA’s launch date, NAMA will suffer a loss of €11.65bn.

While the Banks will receive an extraordinary absolution of €54bn for their appalling lending profligacy of €77bn, we the taxpayers will receive a penance of €11.65bn (and that’s not even counting the further cost of the unavoidable €2.64bn for fees to preferred professional advisers).

Peter Mathews MBA, FCA
Mount Merrion
Co Dublin

This story appeared in the printed version of the Irish Examiner Saturday, November 07, 2009