I have just sent the following as a comment to Simon Carswell in the Irish Times, today, in response to his article ” State takes the pain as NAMA tries to keep banks afloat”

“Simon ,  You are saying, or at least implying, that the State is borrowing funds to bail out the banks.   “The State might be paying €54 billion for the loans, but this represents just the upfront cost…” And..”..the Government is borrowing €54 billion at a very favourable rate of about 1.5 per cent..”  

The State needs a bail out

The State is neither paying money nor borrowing money to bail out banks! Smoke and mirrors has the nation confused.  

The State is Not borrowing from the ECB…Later, the banks might do so, using NAMA bonds as collateral.  The State is borrowing from the Banks !!…Taking 54 billion or so of bank’s assets against State IOUs!…Do you not see that as a Borrowing deal? If  it is not a lending-borrowing transaction, why is the State issuing “bonds”, and paying interest?
 I have been pleading in BrianODoherty.ie for some journalist to ask the Minister the question: What does the State intend to do with the money- cash- it receives through NAMA as it gradually liquidates the banks’ property? Maybe 54 billion euros of property, over some years..(and more in my view) ! Will the State immediately hand back the cash, and take back some of the bonds?..or will it keep the cash for a little while- say ten years or more- and use it to finance the government budget deficits, thereby saving the taxpayer the need to shell out 54 bn in extra taxes? (And, it will be borrowing courtesy of an enormous subsidy from the banks…1.5% interest, compared to normal Irish government borrowing rate of 4.5% (= c. 30% of the principal sum over ten years !)  

That is, the special interest rate alone which the State is insisting on will mean something like 15 bn. of income foregone by shareholders over ten years.  Its about time that we showed some gratitude and sympathy for these shareholders, ordinary middle class Irish people, whose assets we are raiding in this time of State near-bankruptcy!.  

“

I hope he publishes.

The fact of the matter is that the State is in “pain”  because the regular tax base has been destroyed, by bad government policies of the last decade, and extremely poor political opposition, lacking any better policies. All of them, and supported by a willing media and a silent or misguided academia, allowed an enormous property bubble to develop,  persued an “industrial” policy based on tax scavenging of other nations’ tax revenues, and placed too much reliance on foreign mobile industrialists for our future economic welfare.  We were naive, and stuipd, and even ignorant, and some of us were greedy, too.

Now we are, as Colm McCarthy let slip, nearly “bust”, and the tax base is wrecked. So, to maintain a minimum of traditional services, so as to not scare the populace, and to stave off social revolution, we need, desperately, to raise an extra five to ten billion in government revenues annually for many years,  over and above that which has already been indicated must be found from extra taxes and cuts. The taxpayer will not provide such extra sums. So, we can’t even tell him about it. And the international debt markets will not provide such sums to Ireland, indeed no more than the occasional billion or so here and there, and then only at an interest rate of 4.5% currently, which reflects their perception of Irish sovereign risk.

So, along comes NAMA. Its not “nama”, it MANNA, from heaven…A scheme whereby the State can raid the banks assets, to use them for its own purposes, and then pretend that the banks are baddies and deserve their fate !…More annon.