Today, the Irish Times publishes two feature articles on letters it claims “to have seen” – here and here. It has been established that there are definitely three letters from Jean-Claude to Brian on 15th October 2010, on 4th November 2010 and 19th November 2010. There remains a mystery over the existence of a letter on 11th or 12th November 2010 – Minister Lenihan alluded to it
The letters are threatening in that they tied the continuation of the ECB continuing to provide liquidity funding, to Ireland seeking a bailout programme. In other words “apply for a bailout with close scrutiny of your finances and actions, or we will withhold cash and your banking system and economy will collapse” This is outrageous.
Full article at source :http://namawinelake.wordpress.com/2012/09/01/leaked-at-last-the-ecb-extortion-letters-to-brian-lenihan-in-octobernovember-2010/
This morning the Irish Banking Federation (IBF), which represents more than 95% of mortgage lending in the State, released mortgage lending date for quarter one of 2011 – the data is here and the press release is here. The figures paint a picture of a property market that is seizing up. Superlatives come in abundance : €577m was advanced during the quarter which is 96.91% down from the peak in Q3, 2006; the average investment mortgage is now €144,000 which is 56% down from peak and indeed 24% down from the previous quarter which is indicative of fire sales or tightening in lending criteria; just 15 mortgages a day were advanced to First Time Buyers (FTBs) during the quarter. The numbers are pretty bad. Of course the stress test and bank restructuring announcements were made at the end of March 2011 so any positive effects of these announcements will not be captured in the figures released today.
As for the outlook, there is a commitment by the incoming government to ensure there is €10bn of new lending per annum in the economy over the next three years and NAMA has flown a kite that it may part-fund purchases of property from its portfolio. The economy remains decidedly weak though the ESRI broke ranks last week and suggested GDP might grow by 2% in 2011. The Allsop/Space auction on 15th April, 2011 laid bare the extent of the decline in Irish property prices with achieved results suggesting we were (unscientifically) 60% off peak actual prices. Generally falling wages, stagnant population due to emigration and the market-distorting effects of NAMA, restraint on repossessions and bank foreclosure sales are all making for a dysfunctional market at present and it is hard to see any significant recovery in lending figures in quarter two.
The IBF numbers are significant though in their implication on the rental market. If potential buyers are sitting on their funds or are unable to get loans, then renting is really the only alternative which might strengthen demand and stabilise prices. Recent data from DAFT.ie and the CSO suggests that rent levels are stabilising.
And here are the numbers. First up, loan volumes (that is, number of new mortgages advanced) – RIL means Residential Investment Loan.
Next up, the value of new lending
And lastly the average of each loan advanced. You CAN’T equate this with average house price because we don’t know the proportion of the purchase price accounted for by the mortgage (was 100% and more during the peak, is typically 70-92% now).
Commenting on the data this morning, IBF Chief Executive, Pat Farrell, stated: “The economic situation remains challenging and prudence remains the order of the day. For customers that means manageable borrowing and for financial institutions it means prudent lending.”
There is no reason for anybody to take out loans and commit themselves to years of misery especially when we don’t know what new taxes the government are going to invent .baring in mind we expect to have a new property tax and new water charges imposed on all of the hapless homeowners in the country .Perhaps they will introduce a new window tax and what about a shower tax ,maybe even a new tea tax !
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With reports of a file about to be sent from the Gardai to the Director of Public Prosecutions on Anglo Irish Banks (and how is it that FG leader Enda Kenny claims to have knowledge of the detail of the file – do Gardai brief politicians on investigations?) and talk of there being five people in the frame for criminal prosecution in respect of activities at the failed bank, it brings home to us the criminal dimension of the financial crisis, though it should be said that the two year investigation may not result in any criminal charges whatsoever.
A month ago, NAMA came before the Committee of Public Accounts and the NAMA CEO, the owlish Brendan McDonagh, faced some intense questioning on aspects of the operation of the secretive agency. The transcript of the hearing is now available and it shows that Fianna Fail deputy Michael McGrath had a bee in his bonnet about the banks and whether they had misled NAMA in 2009 by providing loan details which informed the draft NAMA Business Plan in October 2009 (which showed an average discount or haircut of 30% off the par values of the loans that NAMA would pay the banks). Michael’s point was that the haircut now estimated to apply to the banks is 58% (October 15th, 2010 estimates) and this near-doubling in the discount might mean that the banks set out to misrepresent the value of their loans so as to obtain an advantage. The relevant exchange is here (the emphasis is mine and the Chairman was Fine Gael deputy Bernard Allen):
Deputy Michael McGrath: I will be brief. I welcome the delegation from NAMA. I would like to pick up on the point made by Deputy O’Keeffe on the quality of the information it got from the banks in 2009 and which fed into the draft business plan in October 2009. Some of the information must have come from fantasyland because if one considers the reality NAMA found when it went in and did a loan-by-loan analysis and a detailed probe, some serious questions need to be answered about the intentions behind some of the information it was given.
For example, in the draft business plan it was anticipated at that time that €77 billion worth of loans would be acquired and that €62 billion of that would be repaid by borrowers over the lifetime of NAMA, 40% of the loans were performing and the loan-to-value ratio was 77%. We know the reality is entirely different. The level of performing loans is 25% and the loan-to-value ratio, as Mr. McDonagh mentioned, is closer to 100%, something which is a matter of fact and which did not change because of the deterioration in the economic environment. How could they have gotten it so wrong?
In his response to Deputy O’Keeffe, Mr. McDonagh referred to a lack of systems but I would take a far more cynical view, namely, that the banks were concerned with trying to extract the maximum possible price from the taxpayer for the loans which we were acquiring.
Mr. Brendan McDonagh: In terms of that, I do not disagree with the Deputy. The reality of our detailed loan-by-loan analysis showed up what it was. People sitting on the boards and senior management in those companies had responsibilities. I recall that when the Minister went into the Dáil on 16 September 2009 and introduced the NAMA Bill there were Stock Exchange statements by the two major banks into the market telling it that they expected their discount to be even less than 30%. The reality has turned out to be different. The Deputy is completely right. There are questions to be asked and answered.
We went in, found what the situation was and reported on it. The discounts are much higher than what could have been anticipated. Based on the information provided at the time, and given what we have been dealing with in terms of the banks over the past ten months and the due diligence which is coming through, they are finding out things about borrowers and loans that they should have had at their fingertips before. They did not have this and there are huge systems failures on the back of that.
Deputy Michael McGrath: I think it is much more than that. If NAMA had not taken such a rigorous approach in going in and analysing every single loan individually and had taken the information it was given at face value, it would have dramatically overpaid for the loans it was acquiring.
Mr. Brendan McDonagh: Absolutely.
Deputy Michael McGrath: That would have been at the net expense of the taxpayer. It seems to me that there was a clear pattern of false and misleading information being fed into NAMA by the main banks in Ireland during 2009. That has to be investigated. I do not know who has the function to refer that information to the Garda, the National Bureau of Fraud Investigation or the Office of the Director of Corporate Enforcement, but it needs to be done. Some of the data would have changed with the deteriorating economic environment. I can understand the percentage of performing loans changing, for example, and Mr. McDonagh referred to that in his opening remarks. However, getting the loan-to-value ratio so wrong across the board should have rung alarm bells that there was something more going on. It needs to be investigated by the Garda and the Director of Corporate Enforcement. I do not know whether NAMA can make information available to them but there is a clear, systematic pattern of false and misleading information being fed into NAMA and that cannot go unaccounted for.
Mr. Brendan McDonagh: I do not disagree with anything the Deputy said. The first port of call in terms of looking at that must be the Financial Regulator, who has responsibility for supervising and knowing what goes on within the banks. We will provide whatever assistance we can to anybody. I can assure the Deputy that we have established the facts and will make that information available to any regulatory authority, if appropriate. This is where we are now. Other people have questions to answer on what was done in the past.
Deputy Michael McGrath: Is that process under way? Has the regulator looked for information on all of the details that were provided to NAMA?
Mr. Brendan McDonagh: Absolutely. The European Commission is working hand in hand with the Financial Regulator on the auditing of every single loan evaluation that is happening. The regulator has access to all that information and what it does with that is a matter for it.
Chairman: In view of Mr. McDonagh’s comments, the committee should write to the regulator now, make it aware of the comments and ask it to inform the committee of the appropriate action it proposes to take.
Deputy Michael McGrath: Absolutely. I recognise that it is a very serious charge to make but the evidence is overwhelming that the information being provided to NAMA was fundamentally false and misleading.
Chairman: We will do that.
Deputy Michael McGrath: The regulatory authority needs to investigate and involve, as appropriate, the Garda and the Director of Corporate Enforcement. I welcome the Chairman’s suggestion.
Now it seems that the Committee is unhappy with NAMA for a number of reasons. At the hearing itself NAMA was asked to identify developers being transferred to the agency and it refused – it wouldn’t even name the Top 10 stating that it was NAMA policy to generally accord developers the same level of confidentiality they would have enjoyed at the original financial institutions. I think NAMA would have been on more solid ground if it had put a stop to leaks that characterized its existence in the earlier part of this year. The Committee also wanted details of NAMA’s payscales and NAMA declined to provide the information on the day and subsequently wrote to the Committee to say that, in common with the established practice of the NTMA, it would not be revealing salaries, even to the Committee. The Committee chairman, Deputy Bernard Allen, characterized the letter it received last week as telling it to “get stuffed” but the actual text of the letter is in fact pretty neutrally worded.
But what the Committee is most unhappy about is their impression that they were “misled” by the response of the NAMA CEO to questions about the banks. The Committee is now reported as saying that after Mr McGrath asked Gardaí to investigate the matter, that Mr McGrath was “set up” (Deputy Ned O’Keeffe) and the Irish Times says “the committee is to recall Brendan McDonagh in January 2011 over media reports that he has “backtracked” on comments made to the committee last month”. The Independent reports “Ned O’Keeffe said it had now been reported that NAMA had no evidence to back up these claims — and that Mr McDonagh’s comments had been misinterpreted”
My own impression is that NAMA’s defence of its draft Business Plan produced in October 2009 has been a sorry episode for the agency. It seems that it sought to blame everyone else except itself for the disparity between the estimates then compared with today. The banks in particular have been demonized – perhaps justifiably, but it was NAMA’s business plan and it seems that there was little validation of the figures incorporated into it. And whilst the discount on the banks’ loans has grown from 30% to a 58% estimate, the estimate of NAMA’s operating costs has dropped 40% from €2.6bn to €1.6bn. Surely the infernal banks weren’t responsible for NAMA getting its operating costs so wrong. And the suggestion that banks sought to defraud the taxpayer by over-valuing loans also looks suspect because NAMA was always going to involve an intensive valuation process overseen independently by the EU. The NAMA CEO’s nodding in agreement at Deputy McGrath’s suggestions at the Committee hearing might have portrayed NAMA in a favourable light to the Committee and the general public, but to others it just shows an abnegation of responsibility for NAMA’s own business plan. And indeed it is noteworthy to see the NAMA CEO try to pass the parcel for any misinformation provided by the banks to the Financial Regulator.
In any event, it will be interesting to see the fireworks in the New Year when the NAMA CEO is recalled (and the NAMA Act does confer that right of demanding attendance on the Committee).