Nama...

What is nama? I really don’t have a clue so I am going to use this blog to educate myself. I have tried reading about it here and there but a few lines in I are so bogged down by all the jargon that I simply move on. Right so I know that NAMA stands for the National Asset Management Agency.
It is in response to our financial crisis and the collapse of our Irish property bubble. In the boom years bank lend out millions to property investors, these loans were secured on assets usually property. When the property bubble bust and house prices decreased the property investors could not pay back their loans usually because their housing estates or the likes could not sell. The capital that backed these loans was usually property so if they banks repossessed the properties they were still not making back their money due to the decrease in value. Banks were in serious financial difficulties due to this and a bank collapse could ruin our already weak economy the government have had to step in. They will take these bad loans of the bank and repay them at a reduced price 50%-70%. By doing this the bank will own a stake in the banks. I think that is it in a nut shell. By introducing NAMA it will free up money for mortgages and small to medium enterprise, it will restore the banks balance sheet to a good level and restore the banks credit rating. The government will sell these properties when hopefully the market will be improving and Nama will make money for the tax payer. As with everything there is some disadvantages to Nama, the customer will have to pay higher interest rates and extra costs, the banks will be short of money when they transfer them to Nama and while the loans are in Nama the developer/builder is expected to make repayments on these loans to cover the interest being charged on the government bonds, again if the builder can't pay the interest now how will he pay it next year in Nama, again the taxpayer to the rescue here. There is hot debate on Nama, some people feel that the tax payer will pick up the bill here and the huge investors and developers who have made millions in the boom will get off. Others feel that it is the only option in our current economic down turn. If our banks to collapse it would ruin our economy. If the banks do not have money, people can not get business loans or mortgages which would not allow our economy to grow.
All in all, after writing this blog I do feel that I do have a better understanding of Nama but a basic one at that, there is so much information out there. Everyone seems to have their own opinion on it which makes it difficult to conclude your own one but i do feel that although we may be still paying for Nama in years to come it may be our only option now. The government have control of our banks may lead to better managing of our banks and hopefully stop this from happening again. All the articles i have read are so text heavy that is hard not to get bogged down in these masses of information and technical jargon.