The cost could be worse if NAMA is scuttled
Ultimately it is Auntie Mae as it is known in the financial world that will determine the level of discount the banks will face and what level of risk will be borne by the banks.
The word is that they believe NTMA is playing very hard ball on land and property values and making them and not the taxpayer pay for their past sins of greed and bad judgment.
It is difficult for us ordinary mortals to get a handle on this financial quagmire, spawned by the banks and by the lavish flow of international credit that landed us in the worst property bubble of all.
It is easy to get side tracked by polls saying 40 economists oppose NAMA and by calls for nationalisation by the Labour Party and for a twin bank solution from Fine Gael.
There is no doubt opinion is seriously divided and that lots of ordinary people out there feel they will now be sacrificed to bail out the property developers and the bankers who grew fat on the bonuses they got for lending to them. It is not an unreasonable stance to adopt. But will it get us anywhere?
If people cast their minds back to the early stages of this crisis, when the banks were on their knees, a position they will remain in until this crisis is sorted, the one fundamental, respected analysts kept insisting on was for the level of bad and toxic debts sitting in the banks be sorted out as quickly as possible.
By quantifying the amount of debt the argument was that we could then proceed to a solution.
Sweden was held up as the shining example of how to deal with the crisis.
Japan was seen as a disaster because in Japanese culture admitting mistakes does not come easy — it’s taken them 50 years to vote in an alternative government.
Finland was a bit slow off the mark as well and took longer to get back on its feet.
Respected voices like Professor Ray Kinsella of the Smurfit Business School in UCD stressed the importance determining just how badly the Irish banks were exposed to bad debts as did others.
While backing the concept Gerry Robinson, the Irish-born British businessman who is former chairman of Allied Domecq and the ex-chairman/chief executive of Granada television in Britain warned that civil servants should not be allowed to run it.
That’s a different issue. After the lengthy uncertainty we are getting to the point where €90 billion of toxic and other property loans will be transferred to NAMA at what is looking like a discount of between 20% and 25%.
That seems indecently low to some, but in a new report Kevin McConnell of Bloxham Stockbrokers said a 23% discount would represent more than a 42% write down in the cost of the assets from peak to trough.
Fine Gael effectively said that as a broker he had a credibility issue given that his company made too much money from dealing in the Irish financial sector.
He favours NAMA and says nationalisation if it transpired, would again damage our international reputation and push up the cost of borrowing be between 1.5% and 2% in the years ahead.
If NAMA is scuttled then the cost to the Irish taxpayer could be even worse than many now fear.
We face a huge dilemma, one made more difficult by the massive loss of trust in those we once thought walked on water.
If the banks hate Auntie Mae so much it must be doing something right and perhaps we can take some comfort from that snippet even if it is only well founded speculation.
