BANKS TO LEARN OF NAMA DISCOUNTS TODAY - What to pay for the banks' property and land development loans - that is what kept the bankers and the Department of Finance up last night. Bank chiefs were summoned to Merrion Street after office hours to go over the details of NAMA, the National Asset Management Agency. They specifically went over what the state is going to pay for the distressed assets.
Career banker and former Bank of Ireland chief financial officer John P Bourke says that without doubt, the Government is going to have a very substantial economic interest - maybe over half - in the banks between shareholdings and levies and whatever it charges for the help it will give the banks. He says the state - which means the taxpayer - is going to have a substantial interest in them. However, he states that it would be his hope that the banks retain a degree of free market enterprise.
Mr Bourke says that with the best will in the world, state enterprises do tend to get somewhat bureaucratic. He says it happens all over the world. The banker says that it would be better if the financial institutions were not actually run by the state and reporting to the state. He says it would also free the politicians from a lot of pressures.
The banker says that when all the NAMA processes are finished and the banks have taken their write-downs and the state has injected more capital into them, the banks should be back to running as normal and should have returned liquidity through the European Central Bank by cashing these bonds. He says that in previous property crashes worldwide, a market usually re-emerges at a lower level some two or three years since the onset of the crash. He says it creeps up from there and things come back to where they were - or nearly where they were - after five to seven years. 'That is the normal time pattern. History may or not repeat itself,' he states.
Mr Bourke says that what is forgotten in all the NAMA debate is that money was not necessarily lost - it just changed hands. The developers paid for fields and sites and the sellers of these got the money. He says there is a lot of money out there that people are just sitting on waiting to invest. He also points out that the state took a lot of this money, through stamp duty and capital gains tax. However, he says this money will not be invested until a working property market returns. He says there is no real market there at the moment, expect perhaps a forced market. When it does return, the developers will come back in looking for bargains, which they will probably get, he states.
He says that if the banks were left to themselves to sort the problems out, he doubts if liquidity would return and the banks would not be in a position to return to normal and be normal high street banks as once they were.
***
US FED SAYS US RECESSION OVER - A year after the Lehman Brothers collapse, the US Federal Reserve chief Ben Bernanke has said the recession is likely to be over. But Bernanke said the recovery would be slow and it would take time to create jobs. Mr Bernanke also said he saw 'encouraging' signs of activity in the US banking system as banks wind down their dependence on government emergency support. Similar warnings came from the Bank of Canada and Bank of England, whose governor also said the bank could cut the interest rate it pays on commercial banks' deposits. These comments came exactly a year after the collapse of Lehman Brothers investment bank, an event that set off the US economy's worst recession since the 1930s and helped spark a global financial crisis.
***
MORNING BRIEFS - Data supported hopes that recovery from the worst downturn in decades was advancing. The US Commerce Department said retail sales climbed 2.7% in August after falling in July. It was the biggest monthly advance since January 2006. And elsewhere, readings on manufacturing in the New York region and on national producer prices also came in stronger than expected.
*** On the currency markets this morning, the euro is trading at $1.4667 cents and 89.11 pence sterling.
