I just e-mailed the below to the five TDs representing my constiuency (Limerick East). I suggest anyone opposed to the NAMA legislation do similar. We need to voice our opposition to those charged with representing us.
The below may be used in full, or in part, by anyone wishing to contact their TDs. You can find a list of all TDs email addresses here.
Dear Sir / Madam,
As a resident of your constituency, I’m writing to ask you to oppose the forthcoming vote on the National Asset Management Agency (NAMA) legislation. I believe this legislation is bad for Ireland and the Irish taxpayer, and will end up costing us more than we will gain from it.
NAMA is to be charged with relieving the banks of this country of the impaired loans they are holding, in the hope that this will allow the banks to recommence lending to businesses and consumers. Unfortunately, this is based on assumptions that I believe will not unfold as the Government expects.
Firstly, in purchasing the impaired loans, a price will have to be agreed. It has already been stated that NAMA will purchase the loans at above-market prices. However, the market for the properties has collapsed, meaning finding the current market price is difficult enough, without trying to estimate a future value for the assets. Since prices haven’t yet stabilised, current market prices are likely to be biased towards the inflated valuations of the last number of years, without giving full consideration to the (very likely) scenario where valuations fall below a fair value before recovering to a fair market price. The amount paid for impaired loans can only have one winner - either NAMA purchases the loans at a discount, allowing it to profit from the sale of the assets; or, NAMA purchases the loans at a premium, allowing the banks to minimise their losses (or possibly make a profit) but increasing the loss incurred by NAMA and the Irish state.
Secondly, the assumption that banks will recommence a similar degree of lending as that leading to the property bubble is nothing but a dream. The banks caused their current grief by not adequately vetting borrowers before lending them money. This goes for both business and consumer lending. Does the Government really think that, once freed of their current basket of impaired loans, the banks will swiftly commence populating a new basket?
Lastly, with rock bottom interest rates being held by central banks, and quantitative easing occuring globally, inflation, possibly hyper-inflation, is just around the corner. We are meant to believe that the leaders of our various fiat currencies are connected enough to see the inflation coming and quickly stamp on it before it gets out of hand. I, personally, see much higher inflation rates before the excess liquidity is absorbed back into the central banks. This will only serve to give the illusion of profit in the NAMA portfolio, since our media report only the simple “facts” of economic situations. In fact, we will have lost money on these assets due to the erosion of the purchasing power of our money through inflation. This simplified situation doesn’t even consider the cost of running NAMA.
The major correction currently underway consists of two parts. First, over-indebted people are reducing their debt load; and second, house prices are returning to a fair value. Over the last 10 years it became increasingly more difficult for the average person or family to purchase their average home. This could not continue forever. And, because people are now spending less, the consumer economy is contracting, causing job losses. This enters an infinite loop of spending decreases, job losses and debt defaults which will not be fixed quickly. This problem has to work itself out. By preventing the necessary business closures and bankruptcies (through legislation like NAMA), we are only prolonging the pain and pushing the recovery date out further.
I hope the above gives you some food for thought. Please don’t accept the Government’s estimates at face value. Rather, look at the overall trends, and notice that NAMA can only be a good deal for the Irish taxpayer if the loans are purchased now at a steep discount.
Regards,
John Madden.
