A developer building apartment at Heuston Station in Dublin advertises a rent to purchase plan to try and convince people to get back into buying property

Almost buried by the coverage of the draconian emergency budget in Ireland last week was the announcement by the Minister for Finance Brian Lenihan that he was setting up a so-called Bad Bank.  

He's not calling it that, of course. It's being called the National Asset Management Agency (NAMA), which sounds a whole lot better.  But believe me, the kind of assets we are talking about here are not going to be much of an asset to anyone for a very long time.

So Ireland becomes the first country in Europe to try to deal with the banking crisis by setting up a Bad Bank into which all the toxic loans of the Irish banks will be dumped. 

The idea, as you know, is that once our main banks are free of this burden, they will be able to resume lending to business in the normal way again, credit will be freed up and the Irish economy will start to pick up.  Well, that's the theory anyway.

But of course it's not that simple.  It never is.  There are a whole load of big question marks hanging in the air over this new agency that are deeply worrying. 

First up, to be fair to Lenihan, it is true that the new National Asset Management Agency will not be working like a bank, taking deposits, issuing loans or making investments, so it's probably not fair to call it a Bad Bank or any other kind of bank. 

What it will be doing is buying in the bad loans that are currently weighing down the books of the main banks here, and then managing those loans over the next 15 years. The bad loans will be bought in by the agency at a discounted rate, which has yet to be negotiated between the banks and the agency. 

The amount of money involved, in the context of the Irish economy, is huge.  The experts put it somewhere between €80 and €90 euro, most of it for property in one form or another, land banks, sites, housing developments, office blocks, construction hardware and so on.  

Since these are the same experts who failed to predict the mess we were getting into to start with, you will not be surprised that they can't be more precise than that.  What's €10 billion between friends? 

The reason they can't be more precise, they say, is that some of the property loans are borderline rather than all out bad loans, so it's hard to know what to include in the sum and what to leave out. 

Not all of the €90 billion (heck, let's call it €90 billion and be done with it) is toxic, although if the agency tried to flog off all the sites and apartment blocks together a lot of it probably would be. Which is why the agency is being called an asset management agency, because it will manage these assets over time and try to maximize their value when they are eventually sold on. 

What we do know is that many of the developers involved in the mess have loans that vary from being slightly impaired to downright disastrous. Rather than distinguish between the different bits of an individual developer's loan book, the new agency is going to take on all the loans involved in individual portfolios, which is why the agency will be taking on €90 billion in loans. 

Of this €90 billion, the experts say, around €40 billion is seriously toxic stuff, unlikely to be of much value for a long time and then only worth a fraction of its present book value. 

Incredibly, around 30 percent of the €90 billion are loans that the Irish banks made to (mainly) Irish developers and speculators for property OUTSIDE Ireland.  So it's for parcels of land and buildings everywhere from Bulgaria to Boston that are now worth a fraction of the loan that paid for them. 

Quite a lot of it is in Northern Ireland, more is in London and there is plenty of it in New York, Florida and other places across the U.S.

Ah yes, there was no stopping these Celtic Tigers and Cubs. They wanted to buy the world!  And the Irish banks threw the money at them. 

A few hundred million for a bit of the skyline in the Big Apple or Chicago?  No problem.  

Now that it's all gone belly up who is picking up the pieces?  Why it's the ordinary Irish taxpayer of course, because NAMA will be funded by increasing the national debt and eventually we all pay for that.

There is one bit of good news about all this, I suppose.  Many of the American banks have been left holding bits of traded paper that are now worth nothing and never will be worth anything. 

In contrast, the assets that NAMA will be managing are real, tangible stuff, acres of development land and shells of buildings. They may not be worth much now, but in 15 years time after a recovery they will be worth something, perhaps half what they are valued at currently in the banks loan books.

There is a view here that, managed right, the NAMA concept might not be such a bad idea after all.  And this case is made stronger by the fact that the NAMA is not taking over just the €40 billion in property loans which are causing real difficulty, but the entire €90 billion in loans across complete development portfolios, loans for land, for construction and even investment in existing property, loans that are not all bad at all.

Having portfolios of different quality loans will make it easier for NAMA to get a fair price eventually for those loans and achieve maximum benefit for the taxpayer.  That "eventually" could be a decade or more away, and that is why the existing main banks here could not cope.

They could not carry that level of impaired loans on their books and still be able to loan out money to business as usual. If the banks had tried to close out the loans and cover their losses from future profits elsewhere it would have taken years - years in which their ability to lend would have been reduced.  Which is why the Irish government acted and set up the NAMA.

One crucial part in ensuring that the taxpayer here will not be badly burned is the amount NAMA is going to pay the banks for their property loan books.  The banks are hanging tough and saying the discount on the book value should not be more than 20 percent. 

But given the way property prices here have fallen, at least twice that would seem more like it to me.  The discount needs to be at least 40%.  If that happens it might work. 

Another problem in this is that once the deal is done and the assets are transferred to NAMA at the discounted price, then the banks' losses have been realized and have to be written into their accounts right away.  The NAMA plan will force the banks to incur the losses on their property loan books all at once. 

And all those lost billions will come off the banks' books and off the value of their shares.  The losses are likely to be so great that the banks will be unable to absorb them and will need more state funding to stay afloat. 

Lenihan says the state will become the majority shareholder in the main banks if necessary, and most people here think he would not have said that if he did not believe it was going to happen. 

Meanwhile, we are being assured that the developers who borrowed all the mad money will be relentlessly pursued by NAMA to get the loans paid back, that NAMA will be tougher than any bank. 

Remember, the loans are not being dissolved, just transferred.  And we are being told that these developers and speculators will be stripped of everything possible to get the money back that they never should have borrowed in the first place.  

They will be hanging on to their asses instead of their assets in the future!