Bile on the Seanad Floor

Even a stopped clock is right twice a day. In his Seanad NAMA speech Dan Bile doesn’t even manage that.

In describing the NAMA business plan as “exercise in public confidence” he feels it is acceptable to be vague about the details of a 54Bln gamble. The principle that “money flows in the economy again and that our banks and financial institutions become viable entities” overrides all.

But nowhere in the BP is it shown that money will flow or that the banks will be made viable. He is also cavalier, a lá Henry Kissinger, about the matter of a billion here or a billion there being inconsequential – at a time of painful cuts in public services whether NAMA makes a profit or loss of 5Bln is a minor detail in his financial fantasy.

He then expresses concern that opinions are strongly held on the biggest financial gamble in the history of the State. He cannot see that “it is intrinsically wrong and evil” to bet the last 54Bln of the States capital on a further turn of the property roulette wheel and then to cede control of that bet to private capital in order to facilitate a statistical convenience.

The only Pavlovian response I see is his panting after the trappings of ‘office’. There are strongly argued criticisms of NAMA and of the SPV none of which he bothers to engage. All we get is an airy ‘Jaba the Hutt’ wave of a hand saying that it will be ‘alright on the night’.

He criticises the opposition for having “no clear, consistent, cohesive, coherent alternative” while failing to see that his pet scheme is not  “clear, consistent, cohesive, coherent”. When faced with a range alternatives, one of which, in the majority opinion, involves driving off a cliff, he reacts like the typical male driver. Affronted that his authority is challenged, his reaction is ‘I’m in charge and I know what I am doing so pipe down in the back there.’

We are existing under the protection of the ‘Bank Guarantee’. The sky has not fallen in. It is not going to, anytime soon. Yes, we need to start making changes so that we can get back on a sustainable footing. But we need the agreement of all the people for the difficult road ahead. He does not have it and is not even looking for it. This from the ‘Chair’ of the country’s famously most democratic party is rich in hypocrisy and self-delusion.

It seems that his lust for ‘office’ allows him to reject the Celtic Tiger tripartite approach as easily as he has abandoned the fiscal commonsense he so famously brought to the Greens.

This hypocrisy is expanded on when he, of the party that says we are at the end of the growth era, says that it is acceptable to bet on inflation of 2-3% for the next decade. Unless of course he is expecting ‘stagflation’.

His ‘Government’ is not listening to his amendments let alone anyone else’s. The risk sharing is pathetically inadequate. The ‘social dividend’ is gone. The SPV weakens oversight and control and was not on the table when he promoted NAMA to his membership. The BP did not stand up to 10 minutes of scrutiny and cannot be made profitable under any consistent set of assumptions.

Towards the end of this ‘aria’ of delusions he writes that if “the winners are those who have contributed to the nature of this problem and those who are disproportionately benefiting from wealth in this country, then we will have failed as a political system and as legislators to ensure those occurrences do not happen”.

And that, ‘Danny Boy’, is exactly what you are bringing about.

1 Comment

Eamonn76November 6th, 2009 at 00:47

“What is failing to be addressed in the debate is that there is no clear, consistent, cohesive, coherent alternative”.

Dan must have missed this article in The Irish Times from Professor Karl Whelan:

“The idea that the only possible way to deal with banks in difficulty is to overpay them for their assets is, frankly, ridiculous.

Around the world, there are a series of well-established procedures for dealing with problem banks and none of them looks like the Government’s current Nama proposals.

Banks that are insolvent can be liquidated, or taken over by other banks (with governments making up the shortfall) or nationalised. Banks that are undercapitalised are required to get outside equity investment from private investors or the government.

Asset management agencies have been used elsewhere to allow banks to get impaired assets off their balance sheets and move on with their core businesses. However, where this method has been used to minimise losses to taxpayers, it has involved buying assets at realistic low prices rather than Nama’s “best of all possible worlds” approach to pricing.

Brian Lenihan has argued that there is no point in considering a scenario in which property prices continue to fall because in that case, apparently, we’ll all be bankrupt. This argument ignores the future competitive benefits of cheaper housing and lower rents for businesses and appears based more on a lack of willingness to consider “appalling vistas” than on concrete economic analysis.

With the Government guaranteeing almost all debts of the Irish banks and with AIB in particular appearing to be insolvent without Nama’s overpayment, there is a strong case for temporary nationalisation of at least one bank and a combination of tailored restructuring measures for the others. Any temporary nationalisation could be combined with a search for new private investors and new management.

Unfortunately, in parallel with its pro-Nama spin, the Government has engaged in a sequence of anti-nationalisation arguments that are as honest as their claims about free money from Europe.

One way or another, the State guarantee obligates the Government to get our banks recapitalised and the fact remains that any plan that starts out by deliberately overpaying for assets cannot, by definition, be the cheapest solution for the taxpayer.

Other scaremongering comments ignore the fact that a number of troubled financial institutions around the world have been nationalised without unleashing the plagues of frogs and locusts suggested by the Minister for Finance and his stockbroker supporters.

It is noteworthy that in the US, the Troubled Assets Relief Program, which had originally been based, like Nama, on the idea of overpaying for bad assets, was altered to be a programme of equity investments by the US government.

These investments now look likely to provide a return to the US taxpayer. Despite what the Government tells us about Nama, it is not too late to adapt the legislation to reflect a similar change of strategy here”.

Dan also said:
“However, if one takes the public debate involving the 45 or 46 economists who do not like NAMA, were one to place them into a room and ask what they would have instead, the likelihood is you would get 45 or 46 different responses”.

Invite them to a conference Dan. Ask them to come back to you with an agreed proposal within 2 weeks. NAMA as is will lose €20 Billion. I guarantee the economists will come up with a better plan than Peter Bacon.

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