NAMA

 One of these is NAMA which will function as a bad bank, acquiring property development loans from Irish banks in return for government bonds, primarily with a view to improving the availability of credit in the Irish economy, the other is an indigenous species of plant also called Nama. Which would you trust with the security of your national economy? Neither? Well then you might have some sense, lets find out why.

Basically the existence of NAMA came about after the collapse of the Irish property market, banks had loans against property whose market price plummeted, que investors who could not afford to pay back the loans, and in turn a sharp decrease in the value of these loans. If the banks recognized the true value of these loans, they wouldn't be able to meet the statutory capital requirements as laid out by international legislation. To cut it all down, this led to a credit crisis where Irish banks had serious liquidity problems and could not issue new loans which are essential for economic growth.

This is where NAMA steps it, when the Irish banks take these bad loans or "Toxic Debts" off their books they need more capital, this is where NAMA offers equity in the form of bonds ( at  a discount on the loans usually 70% of their total value) which the banks can then sell to raise funds. 

Criticisms :

On 7 October 2009, Professor Joseph Stiglitz, winner of the Nobel Prize in economics and former chief economist of the World Bank, speaking at Trinity College Dublin criticized NAMA. He said, "Countries which allow banks to go under by following the ordinary rules of capitalism have done fine. The US has let 100 banks go this year alone, as did Sweden and Norway in their crises." As well as commenting that in Ireland, "this bank bailout is a simple transfer from taxpayers to bondholders, and it will saddle generations to come. The only thing that might give you solace is that, as chief economist of the World Bank, we see this type of thing happening in banana republics all over the world. Whenever a banking crisis happens, the financial sector uses the turmoil as a mechanism to transfer wealth from the general population to themselves. I’ve been very disappointed to see that it has happened, not only in banana republics, but in advanced industrialized countries."

 As it turns out all the critics were right, the purpose of NAMA was to avoid nationalization of the banks, yet within the last week AIB joined the ranks of the nationalized banks alongside Anglo Irish Bank, 90% of AIB is now owned by the government. NAMA it seems has become a scapegoat for developers and banks as they continue to shift the responsibility of this crisis onto the taxpayers.

This ultimately puts the burden on future generations or Irish people as it will be a long time before the country can even begin to pay off the enormous amount of debt the economy is in.