Righting the NAMA Wrongs

August 9, 2010 2 comments

My analysis piece in Friday’s (Aug 6th) Irish Examiner ANALYSIS, page 13, can be read by clicking on the link below:

Righting the NAMA Wrongs

Categories: Opinion

Minister’s reply on guarantee

August 4, 2010 1 comment

Madam, – In response to Minister for Finance Brian Lenihan (July 31st), I would say either he doesn’t understand matters or else he’s being deliberately misleading.

This is the kind of confused thinking and manipulative talking that’s been promoted since he and the Government chose to introduce the far too extensive, far too long-lasting two-year (now further extended) blanket bank guarantee scheme and the hugely costly Nama Project.

Mr Lenihan asserts that “Merrill Lynch also recommended a blanket guarantee of Anglo Irish Bank, including, incidentally, subordinated debt”. This statement is simply untrue. This can be checked by re-reading carefully all the notes, draft preliminary analysis, memos and records presented to the Oireachtas Public Accounts Committee in relation to Merrill Lynch’s advice. In regard to the report to Minister Lenihan by the Governor of the Central Bank on The Irish Banking Crisis – Regulatory and Financial Stability Policy 2003-2008, the conclusions are clearly set out on pages 134–136. In the matter of the guarantee, nowhere in the conclusions, does the quotation “it is hard to argue . . . in the absence of decisive action”, cited by Mr Lenihan, appear.

It does appear that Mr Lenihan has made an inductive reasoning mistake which can easily happen, such as confirming that the sun rose today because a cock crowed at dawn!

Mr Lenihan concludes “I agree with Mr O’Toole that governments should be sceptical. But they most assuredly should not be reckless.” Of course governments shouldn’t be reckless. But his Government had been notably recklessly complacent for years leading up to the crisis. If they hadn’t been so recklessly complacent for so long, the emergence of the full-blown credit bubble banking crisis and the ensuing panic would have been avoided.

It was such reckless complacency, the dereliction from duty by the Government and the supervisory and regulatory bodies to maintain regulatory and financial stability policy, that led to the September 29th panic and the sub-optimal decision to introduce the blanket guarantee for all the banks.

That panic decision, while understandable (to use Prof Honohan’s word) was not excusable. That’s the point, but Mr Lenihan has missed it entirely. – Yours, etc,


The Rise,

Mount Merrion, Co Dublin.

Anglo’s paper profit

July 23, 2010 4 comments

An elaboration on NAMAWineLake’s point 4 in the previous article:

Anglo had on its Balance Sheet euro 2.4bn “face value” (i.e. euro 2.4bn was the nominal value of bonds originally issued meaning that when the bonds were originally issued Anglo raised euro 2.4bn cash and at the same time entered into the obligation to those bondholders to pay back those bonds in full at the bonds’ redemption date, that is, at the end of the term of the Bonds.

So, after original issue of these bonds, Anglo was carrying the liability on these bonds (i.e. euro 2.4bn) on its balance sheet.   Now, because Anglo is now a totally collapsed bank seen to be a basket case Bank, which made loans that will never be collected in full, all investors, from shareholders to bondholders are very well aware that they will never get their money back because ther just arren’t enough assets on Anglo’s balance sheet which can be sold or realised to raise the cash to pay them back.

Thus, the Bondholders know that essentially the Anglo Bonds they hold are worthless!  But because of the confusion and also because the State Guarantee (which expires at end Spt this year) gives the “false” impression that bondholders should be fully covered by the guarantee, the Management of Anglo offered to the bondholders to buy back from them (the bondholders) their nominal/face value bonds totalling euro 2.4bn for euro 600m which is euro 1.8bn less than the face value euro 2.4bn.

And now Anglo Management are trying to play up the absurd notion that they have thus been successful in achieving a Profit of euro 1.8bn on what they called a Liabilities Management Exercise Event!!

What I’m saying is that the truth of the matter is that the Bondholders should congratulate themselves that before the expiry of the guarantee, they were able to sell back to Anglo their worthless bonds with a face value of euro 2.4bn for euro 600m cash!  If, in the true and best interests of the taxpayer, the correct decision which is to close Anglo, was announced, then the euro 2.4bn bondholders after Sept this year would get nothing clearly demonstrating how Ango’s board and managment has stupidly missed out on saving the taxpayer a further euro 600m, which instead  was stupidly paid out to the euro 2.4bn bondholders.

Categories: NAMA Tags:

Response to NAMAWineLake blog

July 22, 2010 3 comments

see post Banker Mathews at the Oireachtas again

The blog at the link above was emailed to me and I’ve responded below:

Dear Namawinelake,

Your opening comments are definitely a little chilly, so I’m putting on my mental “jumper” to take away the chill!

Let’s consider the following:-

It’s becoming clearer in every forum where Deputy Frank Fahey makes remarks about the Banking Crisis and NAMA,  that his difficiculties in understanding the concepts and operational characteristics surrounding NAMA increase his frustrations, thus inducing him to making generalised, banal, unfounded, unsupported comments which he repeats and repeats and repeats, as if believing that, by constant repetition, they become true e.g. NAMA is the ONLY solution to the Banking Crisis…So he keeps repeating his unsupported ARTICLES OF FAITH always protesting that the OECD, the IMF, the ECB (yesterday the ESB! sic!), and the EU say so and that makes them so!!

Read more…

Categories: NAMA, Opinion

Oireachtas Joint Committee on Finance and the Public Service

July 21, 2010 1 comment

July 21st 2010

Categories: Opinion

Oral presentation to Dáil Joint Committee

May 17, 2010 Leave a comment
Categories: Opinion

Oral presentation to Dáil Joint Committee

May 9, 2010 2 comments

Chairman: I welcome Mr. Peter Mathews. He will make opening remarks which will be followed by a question and answer session. I request members to be concise and to the point in their questions as we must finish around 3 p.m. We do not have much time. I request everyone to switch off their mobile telephones. I draw everyone’s attention to the fact that members of the committee have absolute privilege but that privilege does not apply to witnesses appearing before the committee. The committee cannot guarantee any level of privilege to witnesses appearing before it. Further, under the salient rulings of the Chair, members should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable. I invite Mr. Mathews to make his presentation. Read more…

Categories: Opinion