Here is a response that my good friend Christopher and myself agree is an appropriate response to the
“Recovery through Reform”
Document published by Fine Gael
1. The capitalization of 2 billion is totally inadequate for such a new bank.
2. The plan says that our main banks do not have foreign CFD and interest rate swap exposure.
This assertion needs to be audited by the Dail finance committees as it cannot be true.
3. The new bank, if there is one, should be owned by the state not the ECB. After are the are the guarantors.
4. The main banks assertion that the legal challenges to NAMA will fail are wrong. NAMA with its power of seizure is unconstitutional. (Article 43 section 2)
5. If NAMA precedes it will basically be a “Private Office of Public Works” and will require a staff of thousands to insure, protect, police and maintain the largest property portfolio in the State. The current office of public works is in a shambles!NAMA’s job will not only be legal and financial it will also be steward and trustee. Why people are not getting this point is beyond me. Who is going to fund all this staff and administration, particularly if it will take decades to off-load the properties? For these reasons I think NAMA needs to be closed down as an option before the issuance of the bonds to fund it bankrupts the country and once it is generally acknowledged just how expensive it will cost to set up and run in the first place!
(It is another Anglo disaster in the making. NAMA saves the developers by giving them above market valuations and letting them off the hook while the good guys with solid performing assets are going to be shafted to fund NAMA. This is a total scam and nobody is screaming, WHY?)
6. We agree with the document that the original banks are the best people to unwind the “bad” assets
The folks who took the risk should be the first to pay.
7. We cannot see how the “Banking Guarantee” can possibly be removed in 2010 as to do so could cause a new run on all banks and I do not see how an alternative “spine” can be in place to offer a reasonable alternative.
I hear from sources close to lenster house that moves are already underway to extend this.
8. In summary we believe that the banks should be nationalized with the following policy objectives:
A. Those who took the risk should be the first to pay
B. Performing property developers should not be treated the same as non-performing developers;
a clear distinction must be made.
C. Major property developers both residential and commercial should be made to perform according to “Market Forces”. Assets that are not paying should be placed on the market to give true value. Any security offered by these developers should be used to mitigate losses to the banks. Only by placing assets on the market can the business of real estate return to normal. The concept of NAMA is simply delaying the inevitable.
D. The government will have to keep the bank guarantee in place as long a required. The threat of removing it simply forces a panic into finding a bad solution.
E. Mitigating losses to the taxpayer.
F. Honouring the private property rights enshrined in the constitution.
G. Reasonable salaries are paid to executives.
H. Administration of the banks should be sub-divided into two divisions. A commercial division and a property division. The government should back bonds to finance the commercial division before the real estate division. Lending emphasis must move from real estate towards supporting businesses and job protection and job creation. When the “real economy” starts moving it will support the real estate market which in turn will support the more efficient sale of the property portfolio held by banks. The whole issue is one of synergy. The Government is still focused on real estate which is going to take a decade to recover. If the emphasis is not changed through superior understanding the real estate “straight jacket” will bankrupt the country to such a degree that recovery will be impossible because the Government will have borrowed too much and squandered it all again.
I. Regulation of the banks should be removed from the central bank and brought within the framework of the Dail. The past incompetence of the Central Bank has destroyed its credibility. This requires the removal of the culpable officers from their positions within the institution.