Sunday, May 17, 2009

The Plot Thickens

Last weeks Sunday Tribune led with a story on the country's property developers seeking to limit the reach of the recently established National Assests Management Agency (NAMA). Today's Sunday Business Post suggest that may not be necessary as NAMA has agreed "not to force up to 20 of the country’s top developers into receivership or liquidation".

NAMA was set up by Finance Minister Lenihan "so that bad loans can be taken off the bank balance sheets, freeing them up to lend to business and individuals in support of economic recovery".

The Agency also intends to take some of the good assets from developers and sell them on as well as the bad loans which are likely never to be repaid.

The problem with this approach is that announcing that gives the developers a lot of time to transfer their good assests out of the reach of NAMA.

Last week I was at a meeting in attendance was a official from one of the ancillary service providers to major developers. He told me later that he knew that some of his clients were frantically looking at legal ways to transfer their good assets into legal trusts that NAMA couldn't touch!

This nugget plus the revelation during the week that the designated boss of NAMA knows nothing more about the operation of the agency that "what he read in the papers" make it look increasingly likely that the NAMA plan to deal with the mess of the bursting property bubble will be a total failure and leave the taxpayers with a monstrous bill that will takes decade to pay.

I think at this stage the most logical thing to do it review the bank guarantee. I feel that the Government should only guarantee the deposits up to say €250,000. Then start looking at establishing a good bank using the money designated for the existing banks into this new bank. The already existing infrastructure of both the Credit Unions and An Post could as well as an efficient web presence could act as a interim solution.

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