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Na To Nama Insanity...

Nama will bankrupt us for generations...

The Government isn't just passing bad laws, it's putting us all in an economic strait-jacket..
.

First, it's necessary to use this space to defend the banks. Over the past week, much of the criticism thrown at senior bankers was unmerited, and it would be unfair not to acknowledge that. It's a dirty job, defending those greedy bastards, but someone's got to do it.

I can promise that normal service will be resumed shortly (within a few paragraphs, to be honest -- at which point we'll try to understand why we're now up to our chins in the rising tide of faeces that is Nama).

The bankers got a bad rap because one bank, Permanent TSB ("The Bank That Likes to Say Feck Off"), increased interest rates. Other banks acknowledged they have similar intentions. Screams of horror issued from the media and politicians. Oh, dear -- it seems the banks are refusing to operate as social utilities. As though they believe that nothing is more important than their profits. Imagine that!

"The public won't wear the fact that we're bailing out the banks and that the banks in turn are really screwing mortgage-holders and businesspeople," said Fianna Fail former minister John McGuinness, the little dote. Enda Kenny called on Brian Lenihan to intervene.

Frankly, I'm a bit shocked at people like Kenny and McGuinness. Can they really be so naive as to imagine that these banks have some function as social utilities? How quaint.

Criticising bankers for operating totally and exclusively in the interests of their own profit is like slagging the Terminator for blowing people's heads off. The premise of the Terminator is that he's a machine designed, built and programmed to kill, and for no other purpose. Senior bankers are programmed to relentlessly squeeze money out of the rest of us, by any means necessary.

Private banks have no social function (beyond perhaps a bit of sponsorship, for PR purposes). No doubt there are individual bankers who would take pride in having a social function -- good for them. And when promotion time comes around they're sent to the end of the queue. Those who thrive and reap the gigantic bonuses are the greediest, the most single-minded, the most ruthless.

Private bank directors are not just encouraged to put shareholder dividends and bank profits before everything else, they're legally obliged to do so.

Of course, in a sane world, banks would be public utilities. But Kenny and McGuinness and a lot of other people give the impression that they don't believe in the overriding rule of capital and the free markets. It's currently a populist position.

Last autumn, as it became obvious the banks were insolvent, there was a brief moment when things might have been different. The private banks might have been left to the tender mercies of the free markets. We might have seen the emergence of a true public utility bank, designed to service the rest of us. Here's Soapbox last November:

"If I was one of the Brians, I'd buy a premises in each county, and 26 safes and 26 laptops and I'd open my own State bank. Call it the Provisional AIB. Or the Continuity Bank of Ireland. Get credit moving. Why bother giving money to the banks in the hope they'll lend it on to businesses that need it? Cut out the middle-man. We know the banks are failed financial entities, run incompetently by overpaid gobshites."

Others suggested a State bank could be set up through the Post Office structure. Good idea.

But, said the bishops of the free market, international investors would be aghast, they'd refuse to lend us money. I doubt it. Not if the Government explained thusly: "The banks, as free market entities, must retain their independence. Meanwhile, by setting up a State-backed bank, we will provide a safe haven for depositor and investor funds, and also the credit facility necessary for economic survival and development."

Investors want a safe, profitable place for their money. Which is why they abandoned our crappy, insolvent banks. A sovereign bank offered the best value, greatest efficiency. It made sense.

A State bank, however, was simply beyond the understanding of the likes of Cowen and Lenihan and their advisers. It was like telling Catholic bishops there was a warehouse of condoms around the corner, which would protect us from a blizzard of sexual diseases. It might be the sensible thing to do, but their religious sensibilities wouldn't allow them even consider it.

I watched, on Vincent Browne's TV3 show, a senior economist break into a fit of giggles when he was asked about setting up a State bank. He looked just like a 1950s bishop being asked to consider condoms.

Besides, the idea of a State bank has a smell of socialism off it. Better to sink into national bankruptcy than even consider any such radical ideas.

Similarly, when the "bad bank" idea flourished, sensible economists urged temporary nationalisation of the main banks. It wasn't about appropriating banks, it was about temporarily neutralising the bankers who always act in their own interests, whatever the effect on the common good.

Some of the most right-wing economists on the planet endorsed the idea of temporary nationalisation -- it was a capitalist solution to the problem of zombie bankers screwing up any rational attempt at unravelling the banking chaos.

Again, to the likes of Cowen and Lenihan, nationalisation had a socialistic smell to it.

They really are desperately incompetent. We're being Namafied by a Government that is ideologically bankrupt, intellectually crippled and operating from an electoral mandate that's way past its sell-by date.

Nama (An Bord Bailout) is taking €90bn in construction loans from the banks. Happily, we have the timely Liam Carroll debacle in the High Court to indicate the market value of such loans. From the Carroll case, academic economist Brian Lucey calculates that the €90bn in loans are now worth about €40bn. And Brian Lenihan will probably pay about €60bn or €70bn for them -- a gift of up to €30bn of our money to the bankers.

Why? Because the banks want money. And investors won't give it to them. And Mr Cowen and Mr Lenihan believe they can saddle us with that debt, blind us with jargon, tell us there's no alternative, and we'll meekly accept. And the banks might even use some of that money to provide credit to business -- but they're not obliged to, and they probably won't.

The politicians say they believe that the loans they're buying, at a price of maybe €70bn, will "in time" be worth more than their current €40bn market value. As the property collapse ends (which, they suggest, will be any day now), property prices will rise again. And, eventually -- in maybe 20 years' time -- those bad loans may be worth €70bn. So, we'll get our money back.

Insanity.

Some of us think that property prices can go down a lot more. It's more likely that property prices are still heading down towards a sustainable level, and won't rise again for a long, long time. Which is fine with those of us who wouldn't at all welcome another property bubble.

But the banks and the developers and their buddies in Government hope and pray for that bubble.

And Mr Cowen and Mr Lenihan are betting about €30bn of our money on such a new bubble. It would be bad enough if this zombie Government was merely passing bad legislation that could be reversed by a later Government. What they're doing is stitching us into an economic strait-jacket for a couple of generations.

And that's why your grandkids will be sending you Christmas greetings by internet video link from New Zealand.


Report by Gene Kerrigan - Sunday Indepandent

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