I have heard Frank Fahy this morning referring to the NAMA “borrowing” as something that should not be included in the National Debt. This is the first time I have heard government spokespersons acknowledge that NAMA is a scheme in which the government “borrows” assets from the banks. Indeed,all of the media “Business reporters”, as well as dozens of acadedmic economists and finance professors have commented for months on NAMA without acknowledging this fundamental reality. Some well promoted commentator-superstars, such as David McWilliams, even go so far as to suggest that Ireland will have to borrow €54 bn in order to “bail out” (i.e. give to) the banks. “Highway robbery” David calls it; “Immoral and unfair” according to Brian Lucey. Others row in behind. European Central Bank short term loan facilities for Euro-zone banks are referred to as “NAMA money” which its not. The public is totally bewildered. Hysteria-prone journalists such as Vincent Browne become apoplexic.

The reality is that it is the government which borrows from the banks: the flow of cash, or near-cash, is from banks to the government, receiving on behalf of the taxpayer. The government is Not borrowing from the ECB, nor is it guaranteeing the banks’ later borrowings from ECB, if any..Efforts to obsfucate that fact, by calling the transaction a state “purchase” of banks’ assets, and by insisting on the red herring of “risk sharing”, and by refusing to explain why the state must pay 1.5% interest to the banks (- a rip off in itself-), or threatenting nationalisation as the option – a disaster for the state as surely Gilmore-Bruton-Burton- Gang of 46 must realise by now- these are all disinformation tactics which have managed to fool nearly all our professional economists, but which have now been exposed by our EU masters. Indeed the government has deliberately given the impression that it negotiated ECB facilities for our banks, as part of the NAMA process…whereas in fact these facilities have been in place for all euro zone banks for over a year and have nothing necessarily to do with the Irish scheme. (In fact, outrageously, the government is trying to grab that ECB bank liquidity scheme for itself…at least by proposing to pay the banks only 1.5% whereas, in reality, our government should be paying nearer 5%).

NAMA represents a borrowing of c. €47 bn euros in cash or property from the banks by the State. Apart from the prospect that some of this cash will be invested in two really troubled banks – well politically connected Anglo Irish and Irish Nationwide- the major use of these funds will be to support the governments own finances…or, one could say–to bail out the taxpayer from further cuts, taxes and borrowings. The benefit to AIB and BOI is that it enables them to clean their Balance Sheets in one go…but that perceived benefit should now be revisited by those banks. (Can you imagine what a mess we’d be in if the main banks pulled out of NAMA??!!)

Now that the EU has refused to go along with the misrepresentation any longer, the NAMA scheme must be revisited and perhaps substituted by a newer concept, and hopefully one which does not involve a deliberate mugging of 150,000 innocent shareholders. Maybe these are harsh words…”deliberate mugging”… but who do you think is being made pay for a few billion euros which may be invested in some banks and tens of billions which will go into the governmment coffers over the next few years?…The answer is: those who provide the most valuable part of the governments €47 bn of borrowings..i.e. the 150,000 shareholders of AIB and BOI. (Further, they are to be paid 3% less than they should be paid for this loan to the State–a very substantial loss in itself over ten years- and the government has threatened to refuse them a full legal tax write off on any write downs which they must take on asset values as a result of the government insisting that the assets must be valued at a distressed market current value. On top of that the government requires, not 1.5% but 8% ! on its investment of preference share capital into the same banks, as well as almost free options to take 25% of their ordinary equity !)

This is a Loan to the State. Let’s show some respect to the lenders. At least lets give them back the profit we make on their money…eventually. (A good way to do this would be to hand back our right to take free equity from them – i.e. hand back our warrants over their ordinary shares)

* Little or no risk to taxpayer
* NAMA is MANNA for the State