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Deckard

Ireland To Pay Eu54 Billion To Rid Banks Of Bad Loans

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http://www.bloomberg.com/apps/news?pid=206...id=ah73GDbwTXfg

Sept. 16 (Bloomberg) -- Ireland plans to spend 54 billion euros ($79 billion) buying real estate loans to purge the country’s financial system of the toxic assets that are crippling what was once Europe’s fastest-growing economy.

The government’s new National Asset Management Agency, or NAMA, proposes to pay a 30 percent discount on the 77 billion- euro book value of the loans, Finance Minister Brian Lenihan said in a speech in parliament in Dublin today. The current market value of the debt is about 47 billion euros, he said.

“We are here to help the economy and the people by putting our financial system back on track,†Lenihan told lawmakers. “NAMA will ensure that we avoid the Japanese outcome of zombie banks.â€

In what may be the biggest financial gamble in 87 years as a sovereign state, the government will become the owner of loans for property developments that are plunging in value. Ireland is suffering the worst economic slump of any developed nation since the Great Depression, according to the Economic & Social Research Institute in Dublin.

The strategy is designed to keep alive Bank of Ireland Plc and Allied Irish Banks Plc. In April, the government said NAMA would take on about 90 billion euros of loans.

ECB, IMF Backing

The price NAMA is paying for the loans will determine how much lenders must write down assets on their balance sheets. Some may need to raise extra capital and the government is committed to making that happen, Lenihan said.

“We still don’t know who needs capital and who doesn’t,†said Oliver Gilvarry, head of research at Dolmen Securities in Dublin.

Irish Prime Minister Brian Cowen told parliament that NAMA will help solve the country’s credit problems. He said it had the support of the European Central Bank, while Lenihan said the proposals also were backed by the International Monetary Fund.

Enda Kenny, leader of Irish opposition party Fine Gael, called the plan “economic madness.â€

The agency will pay for the loans with bonds that the banks can exchange with the ECB for cash.

Last September, Ireland guaranteed about 440 billion euros of deposits and some debts of the banks. It has also pumped about 11 billion euros into Allied Irish, Bank of Ireland and the now nationalized Anglo Irish Bank Corp.

Allied Irish will transfer 24 billion euros of loans to NAMA, while Anglo Irish will shift 28 billion euros of loans and Bank of Ireland will move 16 billion euros, Lenihan told lawmakers. The remainder will come from two smaller lenders, EBS and Irish Nationwide, he said.

Bank of Ireland rose 8.8 cents, or 3.2 percent, to 2.87 euros in Dublin trading and Allied Irish declined 6.4 cents, or 2.4 percent, to 2.63 euros.

The government will introduce a levy if NAMA posts a deficit when it is wound up, Lenihan said, adding he doesn’t expect the agency to lose money.

30% off ?

You are having a larf, aren't you ? :lol:

Gotta love this bad bank mark to fantasy concept, what could possibly go wrong? :rolleyes:

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Well worth noting tho' that the people of Ireland were aware of the NAMA proposal prior to it becoming a reality....and had the opportunity to demonstrate against it....(sky/bbc news last night)

Ho hum...were taxpayers in the UK ever asked by the Gordonment for permission to use their money to bail out the banks?

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The government will introduce a levy if NAMA posts a deficit

If it posts a deficit!!!!

They are buying turds and trying to make out they won't lose money.

Unless there is a huge demand for turds a deficit is guaranteed.

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If it posts a deficit!!!!

They are buying turds and trying to make out they won't lose money.

Unless there is a huge demand for turds a deficit is guaranteed.

Only in Ireland eh? That's why I love the Irish.

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is it conditional on a yes vote in the referendum

:lol: wouldn't surprise me...

and BTW, is this not QE for all intents and purposes?

The agency will pay for the loans with bonds that the banks can exchange with the ECB for cash.

and right in the heart of the Eurozone !

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The agency will pay for the loans with bonds that the banks can exchange with the ECB for cash

Eh? So this is a cash bailout of Ireland by the ECB? :unsure:

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Eh? So this is a cash bailout of Ireland by the ECB? :unsure:

nah, nothing like that - don't be so dramatic :rolleyes:

stealth QE innit?

sssshh... keep quite and no one will notice

the Euro can only get stronger from here, makes sense

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nah, nothing like that - don't be so dramatic :rolleyes:

stealth QE innit?

sssshh... keep quite and no one will notice

the Euro can only get stronger from here, makes sense

:lol: I've just noticed you highlighted the same bit as me. I'm sure no-one else will notice though. 'Specially the Germans. It won't be all over Der Spiegel. I'm sure they'll get away with it.

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:lol: I've just noticed you highlighted the same bit as me. I'm sure no-one else will notice though. 'Specially the Germans. It won't be all over Der Spiegel. I'm sure they'll get away with it.

I suspect the Germans have been brainwashed by Merkel into believing that a bad bank is in fact a very good thing for their economy, and by extension for the EU... <_<

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Anyone feeling lucky this morning ?

Wanna take part in the resurgence of the celtic tiger?

AIB to raise capital after NAMA rescue

Sept. 17 (Bloomberg) -- Allied Irish Banks Plc will seek to raise about 2 billion euros ($2.94 billion), after taking losses on loans it’s selling to Ireland’s so-called bad bank.

The country’s second-biggest lender may raise capital from investors and asset sales, Dublin-based Allied Irish said in a statement late yesterday. Allied’s American Depositary Receipts rose 26 percent on the New York Stock Exchange to $9.82.

:lol:

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nah, nothing like that - don't be so dramatic :rolleyes:

stealth QE innit?

sssshh... keep quite and no one will notice

the Euro can only get stronger from here, makes sense

I don't see how they can use QE - isn't the ECB the only one who could sanction such action?

From what I can gather, the Irish government are just taking on the bad debt and forcing the taxpayer to fund it. The hope being that it will put a floor under asset prices, to encourage the banks to start lending again, I presume. IMO, it will be like pissing in the wind, at the taxpayer' expense, but I suppose it is their last role of the dice to fight credit deflation.

I still don't see how these plans tackle the route cause though. Even if it does work and prices start rising again (through credit inflation), what are they going to do a few years down the line when they are back to square one again? Another bail out paid for by the taxpayer? Debt fuelled, inflationary growth has got to end.

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I don't see how they can use QE - isn't the ECB the only one who could sanction such action?

Based on the Bloomberg article, the ECB agreed to exchange NAMA bonds for cash - that's QE in my book.

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RoI got 30% discount from the banks: (NYT LINK)

Finance Minister Brian Lenihan told parliament on Wednesday that the government would demand a 30 percent haircut for parking commercial property loans with a nominal value of 77 billion euros in a state-run "bad bank."
Controversially, the government is paying above the market price for the loans, which Lenihan put at 47 billion euros, fuelling criticism among economists, opposition politicians and the wider public that the plan leaves taxpayers in the lurch.

"I think a 30 percent discount is being extremely generous," said Jim Power, chief economist at Friends First. "I would have thought the appropriate discount to be about 60 percent but realistically I was hoping they would go for about 40-50 percent."

You're right; it is a crappy deal!

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Surely it's Irish taxpayers on the hook rather than QE? (Independent.ie LINK)

NAMA will be paying the banks by way of government-backed bonds, which can be cashed in with the European Central Bank. Mr Lenihan made it clear he expected the banks to use to massive cash boost to do their part to restore the beleaguered economy. "The banks should be extremely grateful for the continued support and forbearance extended by the citizens," he said.
Some 36pc of the assets are land, 28pc in development property and 36pc in associated loans. But only 40pc of all these loans are producing cash. :o

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Anyone feeling lucky this morning ?

Wanna take part in the resurgence of the celtic tiger?

AIB to raise capital after NAMA rescue

:lol:

What could go wrong? Hey, I made a four-figure capital gain when I helped Lloyds raise money to plug the first bits of that HBOS-shaped hole: why not do it all again?

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Surely it's Irish taxpayers on the hook rather than QE?

Both at the same time, exactly like in the UK - just replace BOE with ECB as lender of last resort.

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Based on the Bloomberg article, the ECB agreed to exchange NAMA bonds for cash - that's QE in my book.

Reports in Irish papers a few weeks ago said the ECB had "advised" the gubmint not to overvalue the loans. I expect the ECB has authority to mark down the value of the offered bonds.

Watch this space for "Frankfurt sold us out" malarky.

Edited by okaycuckoo

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No discount mentioned in the article, so I'm assuming at face value

Agreed -- there's nothing to suggest that the NAMA bonds are not actual Irish government bonds (as opposed to being instruments derived from the loans being bought).

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