I am simply glad to see some movements of the ‘geological plates’ of Irish finance. Its taken a whole year to get to take even.

I know from my own point of view, a lot of other stuff beckons, which was put on hold, delayed or otherwise shoved aside starting about this time last year, when my s*** hit the fan.

I think I have come to terms better now with the scale of it. I am looking ahead more.

What has occured to me from this thread in particular - Is the fact that I have been involved in, and following the progress of this economic bubble to bust from the first quiet meetings about the Dublin docklands etc way back.

I have witnessed the entire thing and observed a lot of players as they partook. Although, I am sure I was missing the ‘window’ into the financial side of a lot of things.

I remember standing on a pile of rubble with a film crew doing a documentary about the old Sherriff St flats. Now there was quite a sight. You really had to walk around it to believe it. A lot of that has changed.

Property investment receives a lot more attention nowadays. Not least, at blogs like this one. But there was a time when financial investment and re-development was not on the public’s radar at all. That is what has changed in 10 years. We have more eyeballs now on things.

That was the vacuum into which Sean Fitzpatrick and Fingleton moved into. I can remember it like it was yesterday. There was nothing happening in Dublin. It was dead, empty. The Fitzpatricks and the Fingletons filled the emptiness. Anything seemed good, because there was nothing there before.

Ireland/Dublin was a nation/town which had been desperate for some action for so long.

But I wonder if any of the ‘architects’ (I mean financiers, planning officials, governments) of the whole escapade have anything to say now. How we could have managed the roll out better.

I know in my opinion, the pay back was very poor compared to what it should have been. I am less sure though, how to re-address that. How do we define pay back. It is far from straightforward. The green movement has offered some clues, which are very welcome to myself at least. What we need is better clues and more.

Do we need more political intervention, better planning, better finance or a combination. My mind is still un-resolved as to where the ‘failure points’ really were.

Best of luck to everyone in the financial world anyhow. I hope we can work out of this.

yes, seems to be getting a lot of legs on it this morning too. Lenihan speaking about it right now, EBS CEO was on earlier as well. Negotiations to start next week seemingly. Think it’ll go along the lines of Bradford and Bingley in the UK, all the deposits and good assets to the new EBS/IRNW entity, NAMA takes the construction and development loans, and the residual company winds downs the original legal entity.

If we cannot deal with a ‘feather-weight’ walking zombie like DDDA today?

These vehicles we set up seem to become like orphans as soon as the government minister or whatever Taoiseach set them up in the first place is long gone. They seem to roam the land as kind of independent beings, with everyone afraid to ask the silly question, where did you come out of? What is your function supposed to be? All of these organisations like the DDDA are set up specifically to solve the very precise mission for a certain moment in history. Of course, what happens is times change. We are not in 1997 or 1998 any longer. Ireland was a far different place then, I know.

But these government bodies are still around like ghosts of the past. I would almost rather, if government bodies set out will a looser objective, which isn’t related exactly to the time of its creation. Then we wouldn’t face the problem of government bodies that are going out of date from the moment of inception. The DDDA is an example, of an attempt to set up a body that would grow and evolve over a long period. But it seems to have gotten out of date too fast and is now struggling to prove some uncertain purpose for itself. I know people who work for the DDDA seem very certain of what it is they do. But I am not so certain myself anymore.

This should apply to NAMA also. What is to stop it wandering around the landscape unsure of itself, long after these current times, are water under the bridge?

Regarding the elite who caused all this.
“I think at the end of the day, the reality of the situation will be brought to bear on them, just as much as it is bearing on everyone else”.
The only justice we will ever get is to make sure the elites take the financial consequences of their actions, rather than on dumping them on us through NAMA. This is Ireland. There will be no custodial sentences or almost none. That is why NAMA is so important. With NAMA there will be no justice at all.
Our elite are now more corrupt than Italy’s. Our civil service is going the same way. Soon we will be living in a rainy Rome - but our ruins will be ugly and very recent. Some people in the media are waking up though. This article by Matt Cooper is excellent. The last 4 paragraphs on the bondholders are especially good.
http://www.timesonline.co.uk/tol/news/world/ireland/article6926806.ece
There is still hope.

What I mean is, myself, Frank McDonald, Peter Bacon, a whole shower of thug-like builders no doubt and many within the small construction/development community in Ireland were focussed on the Docklands and on housing 10 years ago. But no one else was. A few people in the banks may have been interested, and seen what was coming down the tracks.

I have been told by others that Fitzpatrick, Desmond, Haughey and others involved in the planning stages of the Docklands masterplan could see this coming down the tracks. They could see some kind of vision.

That was ten years ago. Some key individuals felt very important within a small group or community. But that was it. It was all quite private and to be honest the average joe soap in the street could not give a tosser what was en-visioned. I know at the time, there had been much rumblings about a new plan for the Ballymun area. A couple of things seemed ‘on the cards’. But nothing on the scale of the madness that subsequently came about.

In other words, I believe most people involved imagined the Dublin Docklands would take a few decades to build out. The DDDA would have been set up to see things happen over a much longer time frame. Where the DDDA would have had more time to think and figure things out gradually.

Sure people expected progress. Sure people were encouraged when progress of investment and building began. But nobody anticipated the space at which things really did happen due to easy credit flows etc. Everyone was taken by surprise and even shock to be honest.

Now, regarding the next 10 years: The whole country has eyes on development this time. People understand better what is at stake in a wider sense. That wasn’t there 10 years back.

It is not a small bunch of builders, planners and financiers this time. All bumping into one another in a small tight space. It is not a ‘family’ who all no one another and scratch each others backs. It is a very different starting point today. I don’t know how that will affect progress and plans. I don’t know. It is a very different starting point this time around.

Now Frank spends a lot of his time studying the moves of stakeholders involved with the upcoming conference on climate change in Copenhagen. This is another example of how times have changed. When the Dublin Docklands development association was formed, there wasn’t the same worldwide awareness of the climate change issues.

Ireland was a country 10 years ago, much more focussed on its own problems. We were not part of this larger global effort to decide our planetary future well bieng.

The rest of the developed world seemed to be doing okay and racing ahead of Ireland. All that seems to have changed. Anyhow, it is useful maybe to look at things with the long view. Where will we be in another 10 years compared to where we are now?

I do have some ideas or notions. But if the last 10 years have taught me anything. Nothing stays as it is, things improve, things dis-improve and faces and places do change.

I cannot disagree with anything you have said above. In fact, I think you could be very close to the truth. It is unfortunate that those in positions of influence at the top, remain so dis-connect-ed from the reality outside their ‘world’. Here is the catch though. I don’t think they have a snowball’s chance of pulling it off.

I think at the end of the day, the reality of the situation will be brought to bear on them, just as much as it is bearing on everyone else. It may take a while, but it will happen. In the meantime I will keep my eyes open, but I certainly don’t want to spend much more time having to watch and analyse their every move.

I respect the efforts made of a small band of very genuine and well meaning groups of informed economists. However, what they did was to make a stand on behalf of themselves and their profession. I would not like to confuse that with a political rally, which it is was not.

Once one crosses the boundary between informed academic expressed opinion and politics, all the rules change. I respect the economists for what they endeavoured to do. They took it to the edge of where they could possibly go, while staying inside that crucial line between professional-ism and politics. I have a lot of respect for that.

Anyone can beat a drum and get into politics. We need our informed external voices though, in order to keep things in some degree of perspective. I have read in the newspaper today again about a meeting of the cabinet (today) on the subject of the Dublin Docklands Authority. Now there is a battle ground on which politics has an important and crucial role to play.

I am old enough to remember a time, perhaps back when Peter Bacon published the initial reports on affordability of housing. It was a time before public internet based discourse (how times have moved on) and I listened one evening to a presentation by the DDDA explaining how their remit was to provide affordable options for natives of Ringsend etc to buy homes and live. Oh, how things do change.

Brian Lenihan is working hand in glove with the banks. Both of them believe that Irish property would have had a soft landing if it wasn’t for Lehman’s collapse. Why should he clear them out? He believes that the government, developers and bankers were all victims of outrageous foreign misfortune. Politicians are a key part of this triangle. FF/PDs are just the political wing of the banker/developer complex. Lenihan is being wrongly depicted as the slave of the banks when really he is their partner and leader. Vader can choke the banks boards and management any time he wants - he doesn’t even have to use his hands. Expect a token gesture to show he is in charge (which he always has been) in the near future.

Finally, remember the correct standard of proof for the NAMA lobby:
No assertion by the NAMA lobby should be believed unless it is in writing, legally binding, irrevocable and available for inspection.
No commitment by the NAMA lobby should be believed unless it is legislated for, implemented and is being policed by an independent expert of huge experience and unimpeachable integrity.

This especially applies to the “deal” with the ECB.

What has actually happened is that the employees who legged it out the door, and the employers who were left by themselves inside the door - neither of them have a project to do anymore. They have shot one another in the foot. All for a short brief couple of years, when it seemed to be the really clever thing to do. To go and disperse, and trade at arm’s length between one another. Madness.

These kinds of companies are not overly depended on the Irish market whims and can continue, while still adding value back in Ireland, no matter what the economy can consume at one or other point in time.

I am probably biased against employees coming from the construction sector.

A lot of wonderful new things happened for sure in the last ten years. As a nation we began to develop a healthy interest in the worthwhile things in life - green spaces, attractive surroundings and a better environment. That has happened so quickly, more quickly than many would have predicted.

However, while all the wonderful things were happening in construction, the bill to society was mounting ever higher and higher. What made it very difficult was the fact we were aiming for all of these wonderful, sustainable, environmentally friendly new developments. Everything seemed for the good. It was hard to be the ‘damp squib’ and say, hold on, at what price?

I have a real feeling in the construction sector at least, in terms of design services we might have wiped out a lot of worthwhile businesses. That is why there is no demand for credit today. Because the better employers got so fed up of competing in the Irish market for labour resources and all kinds of resources they simply gave up on it.

We spend a lot of time these days talking about shovel ready projects. I don’t know who is going to bother to be honest. Employers in the construction industry - I mean the real businesses who make the machine work - got a raw deal during the boom. They couldn’t control their own expenditures. Wages, salaries simply spiralled.

The other really inefficient thing that happened, was the opposite to Ronald Coase’s idea in ‘The Nature of the Firm’, where people come together to lower transaction costs. In the construction industry, a daft thing happened where nobody wanted to work for the multi-million euro companies at all. But at the same time, everyone wanted their own business card and to sell specific services to the multi-million euro companies.

Hence, we have no ‘top-down’ companies left in the construction sector any more who could work through a recession and prepare the shovel ready projects. That is why there is a stand still in construction and a non-consumption of finance. No one is left, no one is interested. The recession climate cannot support the massive dispersal of the workforce into small individual firms who traded one another. It was madness. It couldn’t have happened without abundant credit.

In other words, if you were a large employer who were trying to compete in the minds of your employees with this notion one of them, or all of them might decide to leg it out the door and sell you back the same services at double the price, through their own company. Somehow that happened, and somehow we have to patch it all back together again into one more lean and efficient unit.

“In other words, employees got things their own way a lot of the time during the Celtic Tiger and employers had to do a lot of pandering to employees to attract them to work.”
I agree to a point. Particularly the tax giveaways and social partnership that reinforced the view that net pay only ever goes up (never stays the same, never goes down) and that it goes up quickly (more quickly than inflation).

We are now going to have to give Anglo and Nationwide to their bondholders and haircut AIB’s. The country simply can’t afford to waste any more money defending the honour and the finances of our failed golden circle establishment. A policy of, “No rich interest group left behind,” will ruin our economy for a decade.

how long do you think it’ll take to flog the Newbridge apartments at those prices? My guess is they’ll all be gone by Tuesday morning. The term “priced to sell” has never been more apt. And that’s why its stupid to use them as a benchmark.

Re UK banks. So you’re admitting the UK banks weren’t fixed “long ago”?

Thanks for that. I was very curious to know some of your opinions as to what the banking culture is like. I am not familiar with the culture myself, despite casting some assertions etc about it further up the thread. Your assessment is very educational to me.

I always feel though with the emphasis on ‘greed’ as a prime cause of economic turmoil in Ireland, it avoids us having a deeper debate as to what went wrong. I mean, for example, if I am a journalist and I want to sell newspapers or books, a start with a quite basic story - how greed got the better of us and flesh that out as much as is required to reinforce that basic story.

While the greed might be a useful ‘hook’ upon which to hang the story of banking in Ireland, I am not so approving myself of the use of ‘greed’ as a lense through which to view the rest of Ireland’s population. I think it greatly distorts the reality. The reality is, we wanted more competition and organisations to compete (credit card companies for instance) to offer us financial ‘products’. Be they for personal use or otherwise.

But why stop at financial products? Why not look at the position of the average employer during the Celtic Tiger? For arguments sake, someone who is running a very viable business and trying to build up a strong presence in the market. The individual employer was also competing with other employers. The other employers despite the fact they were ‘flush’ with money, didn’t have good viable business models, but didn’t go out of business.

In other words, employees got things their own way a lot of the time during the Celtic Tiger and employers had to do a lot of pandering to employees to attract them to work. I hired a student 2 years ago. He phoned me on his second day of employment at 9.00am and told me over the phone, he wanted better pay and better hours.

I told him good luck. With all of the debate now about greed, some stories are not being told at all. Like the story of the employer who ran a good business and had to compete for a workforce which really didn’t know what end of them was up.

You can add in that with their stupidity, they are greedy. Some of the greed borders on criminal (in cases of window dressing, hotelling of loans, bypassing credit committees to give personal authorisation of loans).

Thanks for the contribution interesting.

I believe this debate about insiders and outsiders is mis-leading a small bit.

I mean, as I tried to explain above, whether you work for a bank or a property development company, the trouble isn’t the fact that someone is an ‘insider’ per se. But rather someone who was an insider for a significant period of time, began to define their job as one of competition with other banks or other property development companies.

Their creativity and talent became funneled in that general direction and nothing else was important. I suppose we could call it tunnel vision. It would be real helpful, if in banking and property circles we could get a sudden injection of a different point of view. It would go a long ways towards breaking the stalemate. But that individual or individuals need to come in at the top, where they can affect change now.

But we have to be very clear about what we are looking for. It is not an ‘outsider’ for the sake of it. Because many of the insiders know an awful lot about running a company in a certain way. What will happen though, is it will take so long for the human resources transformation to take place, that the recession cycle will have passed on in the meantime. In other words, we may well have ‘wasted a crisis’ after it all. That is what the old guard is no doubt hoping for.

I have a lot of respect for the old guard btw. I am no doubt in a minority there. Even though I think the ideas of the old guard are out of date, I can at least see the context in which those ideas were born and developed. As consumers we asked for greater competition in all areas of the economy and society. Competition is what we asked for and competition is what we got. It appears as though competition itself has to be ‘guided’ to keep it on track. I use the word ‘guided’ in an attempt to convey an interference which is arms length but present, and does affect the right kind of direction.

http://www.irisheconomy.ie/index.php/2009/11/17/the-banks-after-nama/#comments

Fergus Murphy, CEO at EBS Building Society, which provides one in five Irish mortgages:
“The sins of the few have polluted the whole sector,” Murphy said. “The dirty linen was washed in public, heads have rolled, there has been accountability and there probably needs to be some more.”

Is this the first time anywhere a banker has said the changes in personnel have not gone far enough? Where does this leave Brian Lenihan’s claim to have transformed the culture of Irish banking, made on The Front Line some weeks ago? Even the bankers don’t believe it! Why should they as almost every job has gone to an insider?

It is easy to ‘harness’ people when you organise them in that fashion. You only have to look at the interest in the Ireland - France football match to see that Ireland is still a nation with a lot of competitive energy left in it. There is something about competition that focusses and combines the concentration of so many people together, in a way nothing else can.

Organisations are often assembled together to create a common competitive purpose, and no greater ajenda than that. In the absense of competition I wonder are human beings able to manage at all. I suspect, many would simply lie down and die, or worse.

As for the “firesale” in Kildare, if properties were released on to the market in the same numbers as in the boom a 66% fall in the Dublin commuter belt would be the least of it. The banks, the developers and the government have hugely rigged the market.

With the news that the Greek banks have been warned about the continuance of ECB funding another NAMA lobby lie is revealed.
There is no long-term secret deal with the ECB. NAMA is a great, shining lie. Everything we were assured of has been shown to be untrue.
The most recent exposure was the appointment of the internal candidate to AIB. The case for NAMA has collapsed.

http://www.bloomberg.com/apps/news?pid=20601085&sid=a4OK1qJLrwEQ

“Instead of having the banks sending out hate mail to distressed homeowners, threatening court action and inevitable foreclosure, the government should force the banks to go and say to these people, for example, “we are going to reduce your monthly repayments from €2,000 to €1,000 but we are going to take ownership of 50% of your house.” For the mortgagee this is preferable to losing the family home.”

Cearbhall, I understand now. Thanks for explaining it to me. I suppose my question is why can’t we set up this arrangement to begin with, and allow people to pay rent at affordable rates. If they overpay their rents, they can earn equity. If they lose their job, they can use up equity instead of paying rent. This kind of a proposal may work in some situations. If you decide the leave the property for good, you leave with some equity as opposed to nothing. This might appeal to some younger people who are unsure what to do.

I like your idea of converting debt back into equity. It is like the ‘retrofit’ approach to finance. There is no need to stop at 50% though, in some cases. I would convert the 100% into equity and issue the mortgage holder with equity renumeration for the part of the mortgage paid down. Then enter into an ‘affordable rent agreement’ with the occupier, and allow them the earn back equity in the scheme as time goes on, as they can afford to pay.

My understanding is that institutional investors would be interested in buying into such plans, as the ‘affordable’ nature of the project, would ensure a steady income at modest rates over the long haul.

I see your point about 50% debt to equity is linked back to an entire plan, to create competitiveness and keep the economy underpinned on a much wider scale. You have explained that very well in writing I have read before.

A word on competitiveness

In fairness, we ourselves create the context in which banking institutions operate. It is ourselves, the consumers who demanded free competition and better deals for credit etc, to begin with. We are probably seeing our own chickens coming home to roost.

I mean, how many people in towns around Ireland refused the easy credit they obtained in the boom years? How many people protested that money was too easy to borrow?

It was competition in the marketplace which created that situation. Students benefitted from loans, young people bought cars etc. Entrepreneurs sought to start up businesses.

Yeah, the mortgage thing spun out of control. What the banks will probably try to do is sit on their fist rather than come up with some ‘work-out’ solution. A work out solution such as the 50% debt to equity plan.

Why don’t bank propose solutions?

The banks are not going to waste one single iota of resource deployment in trying to fix the problem. It doesn’t work for them on any level. Banks are comprised mainly of human resources who only know how to operate within a competitive environment.

You would have to helicopter in a different management ethos, a different DNA strand at this stage, in order to change the culture sufficiently to underpin a real plan such as 50% debt to equity.

Banks have their own business-centric point of view, which stresses attributes such as lean-ness and competition in the market-place, between rival banking competitors.

In other words, banks are caught in a kind of prisoner’s dilemma with other banks and they all have to obey strict competition guidelines as set out by the EU. There is a stalemate in other words.

This is the market place, this is the wonderful world of free competition we all talk about. You have to see the bank’s point of view, it is operating within those pre-set conditions.

Now, supposing we impose a new element in the game. Rather like in Formula One racing driving competition, where they alter the terms of agreement between teams, the basis on which they compete each season. This is certainly something we could do. But we are still working within the same basic structure of competitive players.

Banks will still want to ‘race’ one another no matter what. That is what they do. That is what motivates them.

We could do more if we national-ised the banks. Maybe we might do more damage too. Because every think tank and concern group who has an opinion would want to rush in and ‘fix the bank’. Myself included no doubt.

Maybe we would end up doing more long term damage than good. That is not to say that in principle the ideas of Cearbhall O’ Dalaigh and many others, are not bang on the nail, in terms of identifying problems and proposing solutions.

You have a similar cat and mouse problem with property development. If you allow too many concerned citizens into the arena of property development - I mean, via planning authorities and local development plans etc - I notice, that you can lose chunk loads of competitiveness in a very short period of time.

You can go from okay competitiveness and okay products on offer, to very over-designed, over-featured products on offer with poor market uptake and overall very poor competitiveness.

Competition in other industries

I understand the competitive instinct, because working for a property development company is the very exact same. It is about running a business and gaining back every last cent, to remain competitive relative to other players in the game. So one property developer is not going to stick out its neck and give away a square inch of extra floor space, in case it might give away something its competitor would not.

It is unfortunate I suppose, but nothing short of hypnotism or brain transplantation, would change it. In the future, if we can build institutions which are comprised of people who have attended several different ’schools of experience’ we might have some chance.

The kinds of skills in competition that served property development companies so well, when they sought to struggle up from the bottom, renders them a little bit too one-sided in their view of the world, when they do reach the top. I fear it is a lot like that in banking. People who move up the ranks within banking probably understand competition better than anyone else. But that is a very limited and one-sided way to view the world.

The reality of the matter today is that banks and property development companies are struggling to develop new models. But all they have to draw upon in terms of human resources is a collection of people with very well developed competitive natural instincts. That will not be good enough. The process we are seeing at the moment is the old guard in banking and property development grinding away with their mental machinery in vain.

Don’t get me wrong, I agree with you. We should be doing something like this and we should be moving to a long-term fixed mortgage market. Teaser rates are part of the sub-prime problem we have, not part of the solution. At some stage (probably towards the end of next year?) the ECB will try to raise rates. So the window to do this is quite short as long-term rates will start pricing this in early next year.

But the solution of banks, government and most of the population is to play the short-end and hope for the best in the long run.

We replace debt with equity, as a means to avoid the coming wave of residential mortgage foreclosures.
Instead of having the banks sending out hate mail to distressed homeowners, threatening court action and inevitable foreclosure, the government should force the banks to go and say to these people, for example, “we are going to reduce your monthly repayments from €2,000 to €1,000 but we are going to take ownership of 50% of your house.” For the mortgagee this is preferable to losing the family home.

The same action could be taken in relation to any asset backed economic activity that has a high level of debt and convert a portion of it to equity. This is surely preferable to the ‘dead end’ of foreclosure which in itself will only lead to more problems. Once the home owner is no longer choking on debt and has some spare cash at hand consumption will begin to rise again.
To me, this makes a lot more sense than shovelling billions into bank debt that we know absolutely nothing about. In the course of the past year, with taxpayers having been forced to accept liability for the bankers gambling debts and the transfer of billions in taxpayer’s money to those same bankers we have no hard evidence as to the actual profile of any of these individual loans.
It’s interesting to hear what Bo Lundgren, the man who successfully sorted out the Swedish banking crisis in the 80’s, has to say how they handled the banks debts.
http://celticmeltdown.webs.com/swedensbankcrisis.htm

If the Irish banks were not immune from the consequences of their actions, as a result of having panicked the government into making the Irish taxpayers liable for their debts, they would have worked out equitable and just solutions to this whole problem long ago.

In relation to your comments on AirGrid Brian, you may find this story interesting:
http://www.timesonline.co.uk/tol/news/world/ireland/article6907745.ece
.

also, can we not confuse receiver-related sales with the general market? This is exactly what NAMA is intended to do - stop fire sales (which is exactly what a receiver does) of property in a disfunctioning and credit restricted no-bid market. Where these apartments are trading in 6-9 months time will be a better gauge of how far the market has fallen.

“Britain’s banks were fixed long ago”

Seriously, can you stop this crap? You can tell me the British way of repairing their banks is, in your opinion, a “better” way or whatever, or that they are in a better condition than the Irish banks, but given that Lloyds are about to undertake the biggest rights issue in UK history, given that RBS are going to have over €300bn in assets guaranteed by the UK government, and given that both banks are about to be broken up by the EU, its quite clear that the UK banks are anything but “fixed”.