Monday, November 1, 2010

Just Like That.

How do you get rid of €1.8 billion just like that? Well you dont get goofball comedian Tommy Cooper. Instead you get a goofball finance minister and hey presto the National Pensions Reserve Fund is down by €1.8 billion. The Sinn Fein budget proposals calls for a multi-year investment strategy to reflate the economy using money from the National Pension Reserve Fund. Can anyone seriously tell me that throwing away €1.8 billion in a flash is a better option than using the money to invest in the economy. Yet against all common sense I am sure the Govt. will say it.
As noted on the NamaWineLake blog and taken up again on Lenihan has engaged in another bail out of AIB shareholders and subordinated debt holders for reasons that are hard to fathom.
Brian Lenihan made a statement of October 30 that "AIB's upcoming €5.4 billion will be fully underwritten by the National Pension Reserve Fund Commission (NPRFC) at a fixed price of €0.50 per share."  The catch as noted by Karl Whelan is "Unfortunately, the shares closed on Friday at €0.337."
So the way things are being set up the Fund is going to drop an impressive €1.8 billion when those shares are bought. So what would be the alternative. IS there an alternative. Well one possible option layed out is " Cancel the underwriting, nationalise the bank and appoint an assessor to value the shares. If, for instance, the shares were valued at their closing price on Friday, this would cost us €364 million. Which sounds better? Losing €1.8 billion or losing €364 million. Is it worth €1.4 billion to retain a tiny private ownership share?"
Which again would be the SF position. Get these banks nationalised. Grasp the nettle and stop trying to keep them in private hands via huge, unwarranted state subventions for no benefit to the state.
How can Brian Lenihan agree to just provide a 1.8 Billion subvention simply to avoid nationalisation. They are totally in hock to the bond holders and the developers as noted by Martin Ferris and Pearse Doherty. And the property developers and bond holders are no fools. There advise is good advice. Good for bond holders and good for developers. Indeed the only fools here would appear to be the Min. of Finance and his team who despite all their pro-market fawning have only succeeded in driving interest rates over 7%.
They have brought us to the Greeks level of debt. The way things are going we'll end up fire saling every single asset which will be bought for next to nothing by investors. That may well be the end game here.  

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