Celtic Meltdown

            Dermot Desmond Slams NAMA

 

16th September 2009 - Financier, Dermot Desmond, has slammed Government plans to set up NAMA, calling it a "quango" that will do little to tackle bank liquidity, which, he says, is the real problem.

 

He said that NAMA will cause "untold long-term damage to Irl. Inc  while nationalising the banks "is a great sound bite - but is equally not a solution".

 

Writing in The Irish Times today, Mr Desmond said that Ireland needs "at least three" actively competing banks, "otherwise good businesses and good projects will be starved of funds with the consequential loss of jobs".

A lack of liquidity, and not property, was the problem in the Irish financial system, he says. "Setting up a quango to be Ireland's primary property lender is a sleight of hand to distract from the real need, which is liquidity," he writes.

 He adds:

"Ireland must at all costs avoid a comfortable duopoly or, worse still, a group of nationalised banks which quickly become a monopoly".

 

 

Swedish Finance Minister comments on NAMA ..............

Former Swedish Minister for Finance Bo Lundgren, the man hailed as a hero after saving the Swedish banks in the early 1990s has warned that the Irish taxpayer is being forced to take on too much risk under the government’s ‘bad bank’ plan. When he was interviewed on RTÉ radio on 12 April 2009 he said, ‘the problem with bad assets are, if not worthless, they are worth a lot less than the nominal value and to be able to price them in a way where the taxpayer doesn’t lose a lot of money in the end, it is difficult.’
Lungren noted the Swedish did not buy any toxic debts.

In an Irish Times article on 17 April twenty of Ireland’s leading academic economists argued that the Government got it badly wrong in creating NAMA and it was not the way to clean up the banking mess created by the property bubble.

In introducing this bad bank proposal, Finance Minister Brian Lenihan said, "Our sole objective is to ensure that house - holders can get credit for home loans and consumer credit, that small and medium-sized business can fund their enterprises, that deposit-holders have confidence that their money is secure and protected, and that international investors are satisfied about the stability of our banking system."

If the sole objective was to free up credit for house holders and consumer credit, then he should have bailed out the Irish taxpayers, by financing the write-down of mortgage debt, and not the property speculators and bankers.

  • The government created the bank guarantee and it failed to work.
  • They recapitalised the banks with €7 billion and it failed to work

But none of that support has worked, because Irish small businesses are going broke from lack of credit and finance, our unemployment rate keeps soaring and there is no consumer demand.
As a result of the 50 per cent collapse in residential house prices, most Irish households have no equity in their properties, all the gains of the past five years have been wiped out and anybody who bought a house since 2006 is in negative equity. So the owners of these properties have no collateral with which to raise finance.

The reduction of the face value of all residential mortgages would immediately create that collateral for every household, allowing people to raise finance, which would boost consumption and in turn give the economy its first lift on the road to recovery, thereby providing some economic activity prior to getting our exports going again.
If instead the money is given to the banks, we will have a situation similar to Russia. The banks will go back to their old ways of leverage and risk which will make themselves millions.

They will say they cannot lend to consumers because they are already burdened with too much debt and are in negative equity.

So what is to become of Ireland?

From this current vantage point in the Spring of 2009: I see a possibility that in the next five years 'vulture funds' will descend on Ireland and (with the active collaboration of our banks) will asset strip the country and plunder the wealth of a generation.

It ain't going to be any 'soft landing' but an almighty mess and before the current government wakes up to what is going on it will be too late and the country will be broke.

And of course they will then say "nobody told us what was happening."