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Posts tagged ‘AIB’

AIB ‘will not repay €3.5bn cash it owes’ to the State

Sent in to me this morning:

Thomas,
The total hypocracy is unbelievable …… 3.5 billion being wiped off in exchange for worthless shares while thousands of families are being forced out of business and homes …….

AIB ‘will not repay €3.5bn cash it owes’ to the State

Pension Reserve Fund likely to convert the debt into more shares, says Goodbody

111709_1028_AIBBroke1.jpg

In a note to investors, Eamonn Hughes of Goodbody said he thinks  AIB’s €3.5bn of “preference shares”, which are held by the National  Pension Reserve Fund on behalf of the State, will convert to equity in  the bank. A decision on how and when that will happen will be made  before May 2014, he said.

Despite the name, preference shares are a type of debt owed by banks to investors.

In the case of AIB, the debt is part of the €20.7bn taxpayer-financed bailout of the bank.

The National Pension Reserve Fund is supposed to be paid interest of 8pc  per year on the investment; however, to date, the interest has been paid in shares, not cash.

Goodbody said it expects the entire €3.5bn  to convert into equity because of a punitive clause that will trigger a  25pc “step up”, or increase in the amount owed, if the debt has not been repaid by May next year.

INSTRUMENT

That looks unlikely, according to Goodbody, and its “base-case” scenario is that the instrument will convert into AIB shares.

Converting the preference shares into equity means that instead of being owed €3.5bn by the bank, the State’s hope of recovering the investment rests  on the value of the lender itself rising dramatically.

It would not mean the State has to put any fresh money into the bank, however.

The National Pension Reserve Fund bought preference shares in AIB and Bank of Ireland in 2009 as part of the bank bailout.

Bank of Ireland is likely to raise €700m to €1bn in order to finance paying off its €1.8bn of preference shares, Goodbody said.

However, Eamonn Hughes does not believe AIB will be able to tackle its preference shares before the “step up”.

Goodbody first outlined its view on the capital needs of the banks including AIB in a note that was circulated to clients in May, but the note has never been published.

Its view was reiterated yesterday after  rating agency Fitch said it thinks AIB and Bank of Ireland could  potentially require more capital when the lenders financial strength is  assessed in so-called “stress tests” next year.

AIB And ‘Fraud Of The Highest Order’

scam

This bank [AIB], which is still trading in the US/Ireland and is still accepting deposits and making loans, appears to have some pretty fishy underpinnings.

So begins a an alarming if somewhat baffling blog post by Trading analyst Reggie Middleton posted on Monday night.

In which he claims AIB is falsifying it’s true value through the misuse of one word.

And may be the next bank to be “Cyprus’d”.

Vincent Lebraun explains:

The trouble with this high-level fraud is that it’s so “out-there” that people won’t be able to understand how serious this is.

In the charge document registered with the Irish Company Registration Office, it says that it is in respect of “all present and future liabilities whatsoever” of AIB.

And the charge itself is over “eligible securities”.

However, in AIB’s 2008 annual accounts and the files to the U.S. Securities & Exchange Commission, document 20F (page 223 – 2), it states that the charge was placed in favour of the Central Bank and Financial Services Authority of Ireland over all of AIB’s ‘right, title, interest and benefit present and future in and to certain segregated securities.’

Using the description ‘certain segregated securities’ is completely different to the description all ‘eligible securities.’ This is fraud of the highest order, and it’s so simple (yet so complicated) that they were hoping no-one would notice.

And we don’t have to take this guy’s word for it: he has both documents posted on his site (although he initially posted an Anglo document but has since rectified it and posted the AIB one)…

Anyone?

article source: http://www.broadsheet.ie/2013/04/03/aib-and-fraud-of-the-highest-order/

Comment:

You have been warned get you money out to-day!

AIB piles pressure on homeowners by raising variable mortgage rate

BAILED-out AIB is to hike its mortgage costs for customers on variable rates from September.

Its move was followed within hours yesterday by Bank of Ireland and its subsidiary ICS, both of which are increasing mortgage rates for new borrowers.

The AIB move to raise its variable rate for new and existing borrowers will mean additional payments of €60 a month for a homeowner with a €200,000 mortgage.

Around 70,000 will be affected by the rise of 0.5pc. Owner-occupiers will see their standard variable mortgage increase from 3pc to 3.5pc.

This comes despite the European Central Bank cutting its key lending rate to banks at the beginning of this month.

Every 0.25pc rate increase pushes up the monthly cost of repaying each €100,000 borrowed by about €15.

Borrowers

This means that a family with a €300,000 mortgage faces monthly increases of €90 from September 3. Over a full year this will cost an extra €1,080

full article at source: http://www.independent.ie/national-news/aib-piles-pressure-on-homeowners-by-raising-variable-mortgage-rate-3182231.html

Has Queen Elizabeth II been NAMAed?

On 2007's Memorial Day Weekend on Arlington Pa...

Image via Wikipedia

By namawinelake

Probably not, but a development on her property apparently is subject to a NAMA loan It seems that Ascot Racecourse in England had obtained a GBP 200m (€230m) loan from Allied Irish Banks (AIB) to develop a grandstand at the world-famous horse-racing venue. The grandstand is a major building development which incorporates shops and restaurants and its development in 2004-2006 is outlined here. Britain’s Independent todayreports that the loan was “among all the dreadful dross that has been dumped on to NAMA” but also claims that it is being paid off early – a winner for NAMA.

full article at source: http://namawinelake.wordpress.com/2011/09/27/has-queen-elizabeth-ii-been-namaed/

What now for NAMA 2 and NAMA 3?

 

By Namawinelake

To date, NAMA has acquired €71bn of loans for which it has paid €30bn. Up to last week, there were some €17bn of additional loans to acquire from the banks. That changed yesterday.
The €17bn of loans remaining to be absorbed by NAMA comprised two elements:  sub-€20m exposures at Bank of Ireland and AIB which were estimated to be worth a total of €12bn at nominal value and secondly €5bn of loans in respect of Paddy McKillen and other NAMA objectors. The €12bn of smaller loans at AIB and BoI are commonly referred to as “NAMA 2”, the €5bn of objectors’ loans would be regarded as part of the original “NAMA 1”. NAMA 3 was the codename for dealing with problem non-NAMA loans at the banks and certain categories of lending such as tracker-mortgages and non-NAMA commercial property lending were cited as examples of what might be included in NAMA 3.
Yesterday, the Labour/Fine Gael Programme for Government cements the commitment made by both parties in their respective manifestos. The document says “we will end further asset transfers to NAMA, which are unlikely to improve market confidence in either the banks or the State”. And last night on RTE’s “This Week in Politics” the following exchange took place:
Sean O‘Rourke (RTE presenter): You say that you will end further asset transfers to NAMA, which are unlikely to improve market confidence in either the banks or the State , in other words nothing else is to be moved to NAMA. Is that the idea?
Pat Rabitte (Labour party negotiator) Neither the transfers envisaged under NAMA 2 or NAMA 3 will happen. Because that’s not helpful in the overall crisis situation that we’re in.
This would all seem to hammer the nails into the coffin of NAMA 2. And a further implication is that the €5bn of outstanding loans in NAMA 1 will also remain with the banks as these loans, which include Paddy McKillen’s reported €2.1bn of loans as well as others, are understood to be “cherry assets”. Absorbing “cherry assets” and making an even bigger hole in the banks’ balance sheets is hardly going “to improve confidence in the banks”.
So what now for NAMA 2 and NAMA 3? It seems that the smaller land and development loans that would have been in NAMA 2 are every bit as toxic as the larger loans already absorbed by NAMA which have attracted average haircuts for AIB and Bank of Ireland combined of over 50%. If NAMA 2 is not to happen how will AIB and BoI instil confidence that the value of these sub-€20m land and development loans are adequately provisioned? What I believe is likely, is that the banks themselves will set up internal transfers which will seek to value and ring-fence these supposedly toxic loans. And that too would appear to be the solution to NAMA 3, an internal good bank/bad bank split where the valuation and management of troubled assets takes place internally in the banks themselves. From this distance it is difficult to see how such an internal transfer and split into good bank/bad bank is very different to NAMA valuing the loans and then managing those loans. It may prevent the crystallisation of losses at the banks today but the markets will still suspect the toxicity of these retained loans. So we end up with a bit of a dog’s breakfast with an expensively-run NAMA plus we have good/bad bank splits plus suspicion about the values of loans retained by the banks.
I wonder if the apparent change in policy towards NAMA 2 and NAMA 3 is akin to the FG commitment on quangos – merge certain quangos to reduce the headline number but overall they still employ the same people and cost roughly the same – and is just juggling the same loans but avoiding the optics of the unpopular NAMA expanding its remit? I also wonder what the EU/IMF will think of the policy as it is a term of the bailout agreement that the sub-€20m exposures be valued and moved off the banks’ balance sheets. Our lenders have already advanced €15bn and can’t be very happy at this and other recent developments such as the uncertainty of the commitment of the government to recapitalise the banks.

source URL: http://wp.me/pNlCf-18r

Comment:

What we see here is nothing more than accounting gimmickry and double speak or fork tongue  as the Red Indians said about the white mans promises. The new boys are now looking down the black hole and still cant see any light and are contemplating a few more tricks to con the general public into believing that it is still a good idea for the taxpayers to pay for a dead horse
they should close down Anglo Irish and Allied Irish and even Bank of Ireland and create a entirely new commercial bank ASAP
and of course stop the bull**** spin

New NAMA Bill represents lunacy

NAMA SPV structure

Image via Wikipedia

New NAMA Bill represents lunacy apex in policy response to the financial crisis
 By namawinelake

source http://wp.me/pNlCf-Z2
NAMA’s valuation methodology for sub-€20m loans after the abandonment of loan-by-loan due diligence and valuation. The %s used are illustrative.
A couple of weeks ago on here I bemoaned journalism standards in Irish media and it is a topic with which I introduce an analysis of an aspect of the NAMA (Amendment) Bill published yesterday evening. Now I suppose you can forgive Caroline Madden at the Irish Times for getting some of the facts wrong in a piece created for the online version of that paper a couple of hours after the NAMA Bill was published. She (still) writes that “originally Nama was to acquire all land and development loans valued above €16 million from Bank of Ireland and AIB, but this was increased in September to €20 million” though she thankfully changed the line “it was estimated at the time of EU/IMF agreement that the additional loans to be transferred to Nama would amount to about €16 billion” – at least it now says €16 billion and not €16 million. For the record, here are the thresholds that have applied to NAMA:

So the “original threshold” for BoI and AIB was €5m and that was raised to €20m at the Big Bang announcement by Minister for Finance, Brian Lenihan on 30th September, 2010 and then reduced following the arrival of the IMF in November, 2010. But that is a detail, though I still believe that professional journalists should be more careful with the accuracy of their reporting and indeed editors should ensure that reporters are sufficiently briefed on a subject’s context before writing any old shyte on that subject. But there is a more serious criticism of established journalists and their reporting of the new NAMA Bill.
There seems to be a focus on the Bill enabling NAMA to take over loan exposures of €0-20m at AIB and BoI. Emmet Oliver’s piece in the Independent today would be typical of that penned by the Premier League of finance reporters. But as stated on here numerous times, there never was a threshold for any NAMA loan enshrined in legislation. The NAMA Act defines in some detail eligible loans and there is a NAMA regulation that further expands on the topic. There were two ministerial directions in October 2010 aimed at accelerating the transfer of loans. But never has there been a mention of thresholds, be they €5m, €20m or anything else. NAMA simply decided for its own operational reasons to impose thresholds on AIB, Anglo and BoI (by the way, with respect to Anglo the claim was that there was practically no sub-€5m land and development exposure there – before Christmas there were suggestions that NAMA might revisit their assessment of Anglo’s sub-€5m loans).
The principal reason for this NAMA Bill is to enable NAMA acquire these smaller exposures without valuing them on an individual basis, either before or after acquisition. This will plainly accelerate the acquisition of these loans. According to press reporting NAMA will use the experience gained in the past year of undertaking due diligence and valuing larger-value loans to produce haircuts that will populate the matrix shown at the top of this entry.
So why doesn’t this new method of operation by NAMA make sense, let alone justify the claim on here that it is lunacy?
(1) THEN – NAMA was set up to provide certainty to the value of a certain class of lending in Irish banks which was underpinned by a type of property which had collapsed in value. NAMA was supposed to value each loan on an individual basis and in so doing the banks would exchange a generally toxic class of loan on its balance sheet with nice crisp NAMA bonds which could be exchanged for cash at the ECB (in simple terms). NAMA found appalling loan documentation and NAMA’s initial estimate of the average discount (haircut) to be applied to the loans being acquired increased from 30% in September 2009 to 58% today. The EU gave approval to the NAMA project on the basis of it undertaking individual loan due diligence and valuation (either before, for the larger-scale loans or after for the smaller-value loans)
NOW – NAMA is to acquire €13-17bn of sub-€20m loan exposures on a “portfolio basis” and apply a general haircut based on the agency’s valuation experience of large-value loans. Banks will be paid for the loans with consideration that comprises NAMA bonds (90.1%) and NAMA subordinated debt (9.9%). Although details of the new NAMA subordinated debt have not been released, the existing subordinated debt is issued on condition that it will not be honoured unless NAMA breaks-even over its lifetime. So banks replace uncertain loan values with approximated values and will apparently risk 9.9% of the consideration not being paid in 10 years time. So much for certainty, either for the valuations or for the consideration.
(2) THEN – NAMA was to protect the financial interests of taxpayers (or citizens as Vincent Browne would correctly claim) by ensuring NAMA only paid what the loans were worth plus a small state-aid premium in the shape of the long term economic value premium. NAMA would claw back any overpayment and at the end of NAMA’s life a levy could be applied to banks if a loss was made.
NOW – NAMA is acquiring loans on a portfolio basis without individual valuation. NAMA is applying haircuts to the smaller-value loans based on the experience of valuing the larger-value loans. There are those who have claimed that smaller-value loans would have fallen more in value than larger-value loans. I tend to agree with that view because (a) I am personally aware of many €1-3m transactions where a field was bought outside an urban area (especially provincial towns) for the purpose of building 5-15 properties and today I pass many of these fields which have practically returned to agricultural use with a value some 98% off the value at peak with development potential (b)  there was a mad dash at the peak of the boom to lend money for property development and many “amateurs” decided to participate and I expect these “amateurs” will have made poorer purchasing decisions than the larger-scale “professionals” (c) I expect loan documentation for smaller value loans to be of a poorer standard than the higher value loans if banks were giving priority to higher-value transactions. So I believe there is a good case for arguing that haircuts to be applied to smaller-value loans should be higher than those that applied to higher-value loans. I might be wrong of course but it will now be NAMA that takes the downside risk (if NAMA undervalues, then it seems that NAMA must pay an additional sum to the banks at a subsequent stage).
(3) THEN – NAMA was to share some risk with the banks by holding back 5% of the purchase price (the subordinated debt) which would only be honoured in 2020 if NAMA broke-even.
NOW – NAMA is apparently paying nearly 10% interest on these subordinated bonds (10-year sovereign bond rate, 9.05% this morning plus a 0.75% premium) so over 10 years at present levels the banks will receive over 100% of the value in compound interest if bond rates remain at present levels. NAMA is proposing now to pay 9.9% of its consideration in subordinated debt (up from 5% at present)
(4) THEN – If NAMA made a net loss over its lifetime, a levy would be applied to the NAMA banks to recoup the loss.
NOW – of the the NAMA banks – AIB, Anglo, BoI, INBS, EBS – only BoI has a  prospect of continuing outside State control (and I would have said that with an imminent preference share dividend of €214m due on 20th February, 2011 and a challenging €1.5bn capital raising target by 28th February, 2011 that the chances are high of the State increasing its stake from 36.5% today to over 50%). So if NAMA makes a loss how will the State subsequently apply a levy to the banks. INBS and Anglo should be no more than a distant unpleasant memory in 2020. EBS is being sold today but what buyer will want to take on a substantial contingent liability? AIB is likely to be put up for sale but again what foreign bank will want to buy AIB if it has a large contingent millstone around its neck. And as for Bank of Ireland, well let’s see if it remains outside State-control in the coming weeks. All in all, this levy provision looks nonsensical though it is confirmed in the present Amendment.
(5) THEN – NAMA was to undertake valuations and due diligence on a individual loan-by-loan basis and not depend on the banks’ own valuations
NOW – although bank employees may face 10-year stretches in jail for providing inaccurate information on sub-€20m exposures (the same standard term for murder in the State by the way), we must remember the recent claims by NAMA that the banks seriously misrepresented the value of their eligible loans to NAMA in 2009. Indeed these recent serious claims are presently being investigated by the Financial Regulator, Matthew Elderfield because there may have been misrepresentation to the stock exchange. NAMA claims that it can’t act on the inaccurate information provided by the banks because (conveniently) the information was provided before NAMA formally came into being at the end of December 2009.
(6) THEN – NAMA was to manage the loans itself to ensure the cosy relationships that had built up between banks and developers did not compromise the future work-out of the loans in a way which financially disadvantaged the taxpayer. Of course it was always the case that NAMA was only going to directly manage the larger value loans itself (the top 170 worth some €50bn at par value) and the remainder was to be managed at the original institutions under the aegis of outsourcing specialist, Capita.
NOW – It seems that these smaller-value loans are to be managed entirely by the original banks.
So in a nutshell what this Amendment does is put a highly approximate value on €13-17bn of loans at the banks, allows the banks to continue to value the loans forces the banks to accept uncertain consideration, exposes the taxpayer to higher losses and puts a high store of trust in the banks providing accurate information (which they didn’t in 2009). Lunacy.
Although the NAMA Bill was referred to by the Taoiseach and then Fianna Fail party chief, Brian Cowen, last Saturday at his resignation speech, as one of the two vital pieces of legislation needed before the dissolution of the present Dail (the other piece of legislation being the Finance Bill which now looks practically certain to pass by Monday next), the NAMA Bill is not likely to be dealt with this side of a general election. It seems that it will be March 2011 at the earliest before it gets enacted by which time, it is likely to be either Joan Burton or Michael Noonan at the helm at the Department of Finance (though it could theoretically be Pearse Doherty, Brian Lenihan or a Green party deputy). Because Michael Noonan became the FG finance spokesman last summer after the failed heave by former finance heavyweight, Richard Bruton against party leader, Enda Kenny, we don’t know a great deal about Michael Noonan’s stance on NAMA. Joan Burton’s stance is fairly well established and it would seem difficult to reconcile her support for NAMA transparency and value for money with the provisions as presently drafted.
And I leave you with the depressing fact that regardless of the name on the Minister for Finance’s office door come March 2011, it will still be the same civil servants that effect the implementation of policy.

comment:

The wolves are minding the flock!

Cowen can’t answer a simple question

Listen to this http://news.bbc.co.uk/today/hi/today/newsid_9197000/9197192.stm

Crises what crises?

  

Brian lenihan and Brian Cowen

Just over the wires , Brian Cowen has acknowledged that talks are now in progress what an idiot

We all know this and have known this since last week the real problems are the banks and the huge derivatives losses that they continue to hide .I have said it and say it again Bank of Ireland Is bankrupt so is Allied Irish Bank and I would not be surprise to find Irish Life and permanent also in the Dog House. This Bail out will necessitate to total nationalisation of these banks. I expect the impaired loans of these banks will be incorporated into the national debt and then the IMF with the EU will bailout Ireland and then can expect to get an avalanche of spin about the two Brains heroic efforts to save the nation and they should be rewarded with some medal or other.

Bare-Faced Lies comming from the Goverement!

The cover of Irish electronic Passports as of ...

Image via Wikipedia

http://www.bloomberg.com/video/64569080/

It is a demonstration of lack of creditability in our own politicians when we have to resort to scouring the internet to get to the truth about our countries financial position.

We are being openly lied to, yes bare-faced lies, Lenihan and Cowen are living in a fantasy world of their own and the bunker mentality is obvious to see by all !It is akin to the last days of Hitler in the bunker in Berlin  Cowen and lenihan will not hear of talk of surrender to the Europeans

They have betrayed our people and have brought us down the road of destruction and they should be brought up on charges of economic terrorism

Lenihan and Cowen are in denial and we the people are paying the price for having absolute incompetent people in Government .This government has destroyed the good name of Ireland and they are no better than the mafia.

The country has been driven into the ground and the lies coming from Cowen and lenihan are an Insult to the people of Ireland. The Bailout is coming and no amount of spin is going to change that fact

Whatever Cowen and lenihan eventually call it ,we will be depending on the kindness of strangers and as far as I am concerned the government are a bunch of traitors !

On Newstalk radio program this morning Lenihan conceded that the IMF were on their way and will be here in Ireland tomorrow along with the EU and god knows who else to “see the books” meanwhile In a blow to Ireland, LCH Clearnet Ltd. raised the margin requirement for Irish bond trading to 30 percent of net positions, making it more expensive to buy Irish securities.

This Minster is totally incompetent and should be removed along with the rest of the political vultures infesting the Dail

Irish Bonds are now junk along with the Bank shares and Irish bonds slipped for a second day yesterday , pushing the 10-year yield up 5 basis points to 8.51 percent. The extra yield over German bunds rose 6 basis points to 567 basis points. The Dublin consultations with the ECB, European Commission and IMF tomorrow will “see if the state is able to cover the needs of the banking sector,” Belgian Finance Minister Didier Reynders told reporters today. “If that’s not the case, there will probably have to be a European intervention.”All of this is political waffle and in the end it all means that we are going to have to be bailed out !

listen to Morning Ireland  http://www.rte.ie/news/player.html

They have sold us out !

The crisis comes to pass

Posted: By Gavin Sheridan

of  www.thestory.ie 

We have warned time and time again that Ireland was facing a massive fiscal crisis, both on here and on Twitter. We took a look back through the archives to see what we might have called right over the last number of months:
September 11, 2009: ‘A floor in the market’
We questioned just how much nonsense Finance Minister Brian Lenihan spoke in September 2009, where he argued that Ireland had neared the floor in the housing market. Of course, NAMA set its floor in November 2009, and prices have fallen ever since – leading to yet more losses for the taxpayer. We quoted him:
“If a flood of property is dumped on the market, it will be utterly unsustainable. That is one of the reasons we must establish NAMA and try to establish a floor in the market. We are very near it on the basis of the figures and data we have about the yield from property. The yield is at an all time high relative to the assets, which is a clear objective economic indicator that we are approaching the trough. We must banish our devils, the suggestion that we have further to go. That is part of the problem and the reason for the illiquidity in the housing market.”
There is no doubt that everything said there was a fiction, and it was patently obvious at the time.
December 24, 2009: Morgan Kelly on how we got here
Morgan Kelly published a paper at Christmas 2009, in which he outlined the looming bank crisis and the coming massive mortgage crisis. It was universally ignored. We highlighted it at the time:
I can’t really add much to Mr Kelly’s excellent analysis. What it says to me is that the next 12 to 18 months are going to be among the most difficult, if not the most difficult, time this country has faced. I encourage everyone to read the entire document.
I will emphasise his conclusion:
Despite having pushed the Irish state close to, and quite possibly beyond, the limits ofits fiscal capacity with the NAMA scheme, the Irish banks remain as zombies whose only priority is to reduce their debt, and who face complete destruction from mortgage losses. The issue therefore is not whether the Irish bank bailout will restore the Irish banks sothat they can function as independent commercial entities: it cannot. Rather it is whether the Irish government’s commitments to bank bond holders when added to its existing spend-ing commitments, will overwhelm the fiscal capacity of the Irish state, forcing outside entities such as the IMF and EU to intervene and impose a resolution on the Irish banking system.
February 4, 2010: The Coming Crisis?
It might be news to some people, but the purchasing of Irish bonds by Irish banks was highlighted a long time ago. We highlighted along with many others that Irish banks were buying Irish sovereign bonds and using them as collateral at the ECB. We also emphasised that Ireland was in as worse, if not a worse state than Greece – just that the markets had yet to pay attention to Ireland:
If you thought all of the problems had been sorted, then think again. There are really big problems coming down the road, and very few people seem to be talking about them. So let’s look a little closer at the potential fiscal problems Ireland, and our banks, face.
Everyone is talking about Greece right now, but to me Ireland is no different. It is probably worse. So with these deadlines looming, what is happening? Over the past number of weeks you might have noticed various headlines to do with NAMA delays. Why is this important? Could it be that unless the banks can transfer these junk ‘assets’ from their books, they could face funding difficulties on non-ECB markets?
I could well be wrong, or even cynical, but my feeling is that banks are desperate to get this stuff off their books, in order to be better able to fund themselves after the ECB shuts the discount window. If they don’t get them off their books, and onto the backs of the taxpayer, the banks could simply end up going to the wall, or simply being nationalised.
If you’ve read Morgan Kelly’s excellent analysis of the Irish credit bubble you will be aware of the Irish banking system’s over reliance on international money markets for funding. When the financial crisis hit in September 2008, these money markets froze and Irish banks struggled to get day to day funding. This is what ultimately led to the bank guarantee, and to the opening of what’s called the ECB discount window.
Banks all over Europe were struggling with funding, so the ECB essentially enacted emergency measures to help fund the banks. Irish banks were one of the biggest beneficiaries of the discount (the interest rate charged by the ECB is sometimes called the discount or repo rate). Ireland’s banks have effectively been kept on life support by the ECB since 2008, as McWilliams also noted last year. Essentially Irish banks were buying NTMA-issued sovereign bonds with short-term lending, presenting that as collateral to the ECB and then borrowing cheaply from the ECB. Summed up here – 25% of our deficit in most of 2009 was indirectly funded by the ECB.
When you combine the shutting of the discount window, with the delays in NAMA transfers and ultimately our own State borrowing (indeed we have already borrowed €6.5bn so far this year – 33% of our bond issuance for this year was done in January) and with the likely writedowns of not 30% but 50% on the loanbooks, we are facing a serious crisis. And of course the other factor is the ECB raising interest rates at a time we need them to stay low.
My questions is this: how are we going to pay for all of this?
February 22, 2010: Delay and Pray
This actually sums up how the Irish banks, especially Anglo, have been dealing with our property developers. Rolling over interest, not writing down the loans, not crystalising the losses, doing repayment deals with developers – to drag it out – extending and pretending.
Here it is in a nutshell: NAMA is one massive “Delay and Pray”.
Given that our banks are insolvent, that they are facing massive liquidity issues with the imminent closure of the ECB discount window, they cannot keep the pretence of extending and pretending up forever – and NAMA is, or was supposed to be, the answer to their prayers. You could also argue that Bank of Ireland recently changing its fiscal year was part of this tactic.
The Government would take the crappy loans from the banks (rather a lot), and through some financial voodoo, the losses would still not be crystalised, and rather ingeniously – the debt would not appear as sovereign debt for Ireland, or as debt for the banks, but would instead be dumped into this NAMA bad bank.
And NAMA has one sole purpose – keep the pretence going that someday, somehow, the value of the underlying assets will return to peak prices. Delay and pray. Do not write down the loans. Do not accept the reality of the losses. Do not pass go.
Not only is it unlikely that this will happen, it is almost impossible. Morgan Kelly wrote in December that it could take 50 years for the underlying assets to return to 2006 prices. Last week, in the High Court, we saw development lands being written down by 60% to 98% (in terms of valuation, not borrowing). These figures are the reality of the lands that NAMA is taking charge of. And we are overpaying already. How long do you think it will take rezoned agricultural land bought for €13m at peak, revalued at €600,000 in 2010, to return to €13m? The answer is: it won’t. So much land was rezoned that there is no necessity for rezoning for a further 70 years in many counties. Add to that the 300,000 vacant properties. Add to that little demand. Add to that zombie banks unable or unwilling to lend.
This is the reality of NAMA. Delay and pray.
It logically follows that where the banks lent money with no obvious collateral to back the loan, and where the supposed value of derivative is now zero, the bank sustains a massive capital loss.
However the banks are simply delaying and praying until NAMA takes over the loans, and then NAMA continues the praying.
We are in for one hell of a fiscal mess.
If you hear spin that no one saw this coming, don’t listen. There were plenty of commentators and plenty of warning signs. Unfortunately many people chose not to listen.

Comment:

I too have been warning about this now for the last 20 months and it is  with great sadness that I now see come to pass, my worst fears although I believed we would have been past the worst by now the establishment of the greatest fraud in Irish history (NAMA) has in fact help postpone the worst effects of the now oncoming second phase of this financial disaster yet to be faced by Irish people.

The Current economic terrorists in the Department of Finance have successfully placed private debts of a Golden Circle on to the hard pressed shoulders of the Irish people and they have helped these same gangsters whisk away their ill-gotten gains all across the world .They have also compensated some of them by promising to pay them a salary of up to 200,000:00 Euros a year .This is sheer madness!

Why is nobody doing anything about this crazy stuff? Anywhere else in the world these gangsters would be in jail!

We the Irish people have seen out rights enshrined in the Constitution trampled all over because of political expediency, we have been lied to and robbed by people whose job was to protect the and uphold the constitutional rights of all the citizens of Ireland. Instead they have blatantly placed the financial welfare of a select few above the welfare of the nation and are in the truest sense traitors

They have betrayed the trust of people of Ireland and must be removed from office

A general election is desperately needed now and only candidates that promise to bring these traitors to justice should be voted into office.

Sadly the established political parties are remaining quite on this particular point and there are no calls coming from them to prosecute their colleagues in the Dail

Last night on Front line Pat Rabbet hinted that he would consider going into power with the Green Party

These are the same gutless gangsters that have sold out on every one of their own core values just to stay in power with the current government. Let this be a reminder why we need to have a complete change in the political system unfortunately none of the established political parties want to bring about this change, as it would be akin to asking Turkeys to vote for Christmas they are part of the dysfunctional political system we are saddled with and cant wait to get their hands on the lucrative perks and pensions heading there way by default  .

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