According to this morning’s RTE news Michael O’Flynn, head of O’Flynn Construction, wants developers more involved in the proposed National Asset Management Agency.The agency, as you will know by now, will compel the Irish taxpayer into buying the banks' bad loans, in the form of “bonds”, at a higher price than the loans are actually worth due to the fall in value of the speculative assets they were taken on.
For instance, if a loan to a developer was €60m, NAMA (the taxpayer) will buy it for €40m… yet if the assets for which the loan was raised was sold today they might only fetch €20m (these figures are examples only). So, while the banks will still get €40 for their toxic loan, the developer will continue to owe €60 to NAMA, we are assured.
NAMA is a taxpayers’ bail-out for the banks which, as has been said often enough on Gombeen Nation, contributed to the Monopoly-money inflation of the “boom” by lending carelessly, increasing lending multiples and repayment terms, and giving interest-only loans which further fuelled speculation – already encouraged by reckless Government tax breaks and shelters in the property sector.
The Irish banks, by the way, were "among the world’s most profitable” (Sunday Business Post, Feb 05, 2006) coming up to the boom’s peak, with pre-tax operating margins of "about 50%" as compared with 32% for US banks and 35% for British banks. So their shareholders will have very good reason to applaud the setting up of NAMA, as it will ensure the banks' survival and their dividends.
But now the poor old developers are feeling left out. O’Flynn is already part of a small group of them who have consulted the Government via the CIF on the setting up of NAMA. He feels - according to the RTE report - that “it would be wrong to penalise developers by excluding them from the drafting of a solution to the current problems… [for while] developers had to accept some responsibility for the serious mistakes that led to the property crash, they should not be excluded from the recovery”.
"Some responsibility"? You don't say? And should we really expect those who made this mess - the Government, the banks and the developers - to be capable of cleaning it up, anyway?
Amazing, when even NAMA is optimistically talking about a 15-year period before the bad loans it takes on can be redeemed at 2006 values, and economist Morgan Kelly forecasts that “Irish property prices could remain below half their peak value “for the next decade or longer” (Irish Times, Sept 3rd) the developers are looking ahead to the next bubble, and hoping to cash in on a “recovery”.
NAMA is wrong on one premise, and one premise alone. That is: nobody willingly pays more for a product than the product is actually worth.
Unless they are Irish taxpayers, of course, and they have no choice in the matter.
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6 comments:
Hi GM, Very good post. I think I saw it in an earlier blog of yours, it's like reverse socialism and it is.
It's maddening if I default on my loans I get hauled before the courts, could lose my home and this is also a country that imprisons people for non payment of debt. Nobody will bail me out. Yet the banks screw up big time and I'm expected to bail them out. Only in Ireland...
People are channelling their anger in the wrong direction- Lisbon. A No vote won’t topple the government (wait till next election) and we already savaged them at the local election). Lisbon doesn’t bother me- despite notices of min wages of €1.84 etc. Millions of people in long established democracies, more sophisticated than our selves (France, Netherlands etc) will not stand by and watch the many social legal etc benefits that make the EU one of the best places on earth, to be whittled away.
However NAMA is not necessary, the European central back can step in etc, to help us clear toxic debts, do whatever they do etc. NAMA is an “Irish solution for an Irish created problem”, i.e., created by helping the rich…now we’ll solve it…by further helping the rich and stuff the poor VERY WORRYING. Well I hope people don’t go on a stampede to vote against Lisbon- because NAMA should have people rioting on the streets-we care about the poor bankers and developers when operations at Crumlin hospital are cancelled and Sligo cancer services are closed down? Anna
I feel sorry for the opressed developers: After the travellers, the homeless, immigrants, asylum seekers, the taxpayers, the lesser spotted Dodo, etc etc etc etc etc etc they must be one of the most opressed groups in our society...
hello there mrGM ITS HEARTH BREAKING to see irls great builders being treated so badly such a shame really,not enough credit given to auctioneers, banker, civil servants ,unions and airlingus for having made irl the greatest little democracy in the west OOH I FORGOT THE PAEDO CLRGY and BERTIE the suicide counciller with no bank account, allthis scapegoating builders for the bizzare shenanigans in FF IRL is so unfair UP DEV
Thanks all for your comments.
That's it: We've got to get out there and take the streets to stage a big demo in support of the developers! See you all at the top of Parnell Steet Saturday afternoon!
I'll be the shifty fella wearing a tatty old anorak.
Hmm it seems like your site ate my first comment (it
was super long) so I guess I'll just sum it up what I submitted and say, I'm thoroughly enjoying your blog.
I as well am an aspiring blog writer but I'm still new to the whole thing. Do you have any points for beginner blog writers? I'd definitely appreciate it.
My blog :: work from home job
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