NAMA borrowing myths nearly exposed tonight

Tonight on Prime Time Donal O’Mahoney of Davys and Karl Whelan, the finance professor who would nationalise the banks…nearly fell upon the truth about the funding in NAMA…but unfortunately Miriam intervened and forced a change of topic. Karl said that the government would have to borrow to fund NAMA and asked what’s the difference between that and adding to the national debt in a normal way. Donal answered that the State was receiving tangible assets for its NAMA borrowing…Then Miriam intervened

The truth, folks, is that the State is borrowing, not to fund NAMA – that pays its operating costs from positive interest cash flow and has no other money to lay out..but to fund its normal budget deficit !…over the next ten years or so.

That is…be clear about it…Nama or not…its irrelevant…the State needs 50-100 billion extra funding over the coming years for its normal activities and cannot tap either the taxpayer or the international debt market for these funds: it can only tap the Irish banks ! NAMA, the bad bankers, the evil shareholders who deserve to be wiped out, etc…all that is just the smoke and mirrors.

Of course this is my hunch and I might be wrong…We await details (of the Terms of the bonds).  But why is it that we are being spun the idea, promoted by politicians of all hues, that the State has done a deal with the ECB to bail out our banks? We are led to believe that the State borrows (at a special cheap interest rate) from the ECB and then lends this on to the banks. Balderdash !. The ECB lends only to banks and lends to banks across the euro zone at the same interest rate, currently just over 1%. No special deal for Ireland and no lending to the government.  This is an ECB deal for the banks which the State is highjacking for its own purposes.

Also, if I’m wrong, why won’t the Minister tell us when and how he will redeem the bonds/ pay back to the banks the cash proceeds of their assets? The State will issue Bonds to the banks…They must buy these bonds back from the banks in the future ! Its a loan from the banks to the State, as a solution to the financial (including tax revenue) crisis that the State finds itself in. The Minister now says the bonds will be short term bonds: What he does not say is that he will not use the banks’ assets (cash proceeds) for himself, and maybe for ten years, before handing them back to the banks.

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