The NAMA penny begins to drop

I am listening to Green Minister, Eamon Ryan talking about the great breakthrough which the Greens negotiated with their government partners–by achieving “risk-sharing” in NAMA.

Eamon is a nice guy – I gave him a vote last time- but he seems clueless when it comes to economics and banking..like most political commentators, actually, including spokespersons for the Labour party.

He refers to the banks getting final payment “at the end of a ten year period”. That’s the first time that the ten year period (which I have been assuming) has been “announced” by government. So…what happens the money in the meantime?  NAMA will have raised tens of billions of euros in cash form from the sale of banks’ assets…When do they pay it over to the banks?

That’s the whole point, which many commentators seem unable to accept… NAMA is a scheme for lending banks’ shareholders assets to the State, until such time as the State pays real money for them! In the meantime, the State will use this money for normal budgetary purposes, such as building roads, paying salaries, etc…and, because it comes from the banks shareholders, it does not have to be borrowed directly by the State, or raised as extra taxation ! You see, as the Chairman of Bord Snip said yesterday…the State is Bust !  It needs to borrow, but is banging up against a borrowing limit- and borrowing would be at an interest rate three or four times higher than what the State is offering the banks shareholders. Alternatively,  it needs to ask the taxpayer for more taxes…and you can imagine what the response to that will be.

So, the State is helping itself to 50-90 billion of bank shareholders’  assets, at a special interest rate which the ECB arranges for private banks (not for governments !)… The State is taking the banks assets, and the special arrangements for banks which the ECB operates, for itself !…Its a highjacking of private assets for public deployment—Its a bail out of the government !

One of the most disgraceful aspects of this is that the unfortunate bank shareholders (in AIB and BOI) are being blamed for this…They are vilified by commentators…demonised…compared to greedy billionaire bankers in the US and UK…We are told the “risk” in highjacking shareholders assets is resting too much on the taxpayer…so shareholders must not only lose their assets, (and maybe 25% of their equity and a proper flow of interest for ten years), but they must also be prepared to somehow guarantee that the government will sell these assets at a profit !

There’s so much spinning of untruths and misrepresentation regarding NAMA, in official circles, and by State-salaried academics and media commentators, that I suspect there is a particular agenda.

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