President can still pull off a ‘financial Dunkirk’
THE NAMA Bill is essentially perhaps the most financially toxic piece of proposed legislation that has ever been presented to the Oireachtas.
Judging by the Dáil debate it is apparent that the nature, depth and extent of the banking sector’s perilous financial situation is just not properly understood by our politicians and even by some of their advisers.
My previous letter (November 7) clearly shows how the NAMA experiment will result in losses on loans recoveries of not less than €11.65bn. No one has been able to fault that analysis.
Huge denial in government, departmental and banking quarters still persists. Such stubborness and obduracy will cost the country enormously.
Irrefutable facts and correct analysis clearly show that the negative financial consequences of NAMA for the Irish people will be on an appalling scale. There was a much sounder alternative to the NAMA bill – a transparent, well structured, correct solution to the banking sector’s crisis. It would involve immediate, robust and adequate recapitalisation and pre-privatisation of the banks. It would require a writedown of their bad loans by about €40bn to realistic recoverable amounts and recapitalisation by writing down existing bondholders in the banks by about €20bn (in appropriate proportions) and injecting new state capital of about €20bn.
Both these elements could have been drawn up, negotiated and put in place expeditiously. This alternative is transparent and would have had the inbuilt advantage of motivating the banks to clean up their acts and earn their way back to market/shareholder independence over five or six years while a state investment trust company held a majority shareholding control following the recapitalisation.
If Finance Minister Brian Lenihan had shown courageous leadership and steered this correct course, it would have enabled him, without political embarrassment, to bypass the NAMA concept and move urgently to the robust recapitalisation and pre-privatisation of the banks, thus preventing stagnation and creation of a property market swamp and consequent long drawn-out economic decline, in addition to the enormous losses on loans recoveries exceeding €12bn (more probably approaching €20bn) that the NAMA model entails.
The country is facing a “financial Dunkirk” and it demands courage, leadership, decisiveness and all-party support as well as national co-operation from all our citizens to follow the right path.
President McAleese has the opportunity now to invite the minister to bypass the costly, inadequate NAMA concept and move swiftly to recapitalise the banks. Proper recapitalisation means proper liquidity.
Peter Mathews B Com, MBA, FCA, AITI
Mount Merrion
Co Dublin
This story appeared in the printed version of the Irish Examiner Saturday, November 14, 2009
Peter,
have you ever thought that we are gone past the stage of learned arguments on NAMA. Fianna Fail will destroy this nation to support their property developers.
We now need prestigious figures like your good self camped outside the Dail and asking all citizens to join them in bringing down this government.
The crowd that would initially replace them in government would perhaps perform not much better, but at least their failure to fundamentally change NAMA, would perhaps lead to a sea change in the political structure of the nation.
We need new leaders to radically alter the current imbalance.
We need rid of this government
My congratulations to Peter Mathews and Richard O’Rourke. You won the argument. I believe that at the very least you may have shamed the NAMA valuers into taking a tougher line. That alone would save us a lot of money. Certainly you have made a major contribution to the debate. You have also helped make sure that our leaders can’t claim to have not been warned. My thanks again.