Nyberg Report on Banking Sector

Central Bank and Financial Regulator ……..take a bow

http://www.financialregulator.ie/press-area/press-releases/Pages/FinancialRegulatorPublishesAnnualReport.aspx

http://www.financialregulator.ie/publications/Documents/2007%20Annual%20Report%20of%20the%20Financial%20Regulator.pdf

http://www.centralbank.ie/data/AnnRepFiles/Central%20Bank.pdf

A thoughtful, insightful and very polite Finn whose credulity is obviously being strained by his observations of
(1) a deliberate and wilful suspension of disbelief:

“5.5.2. …A great number of persons in very responsible management and watchdog positions insisted that, until the end, they had no idea that a serious and acute problem with lending and funding exposures in the banking system even existed. In the stated absence of this knowledge, little was done to prevent the crisis. This is true of politicians (whether in government or opposition), central bankers, regulators, department officials and bank board members as well as influential analysts in the media, academia and financial enterprises.”

(2) the suppression and punishment of any dissent:

“5.5.5. Secondly, there was a conspicuous lack of timely critical debate and analysis by bank analysts within institution and among the public at large….Doubters (the few that identified themselves as such to the Commission) in the main grew unsure over the years when nothing
seemed to go wrong. It also appears that some stayed silent in part to avoid possible sanctions. The Commission suspects, on the basis of discussions held with a wide number of people, that there may have been a strong belief in Ireland that contrarians, non-team players, fractious
observers and whistleblowers would be informally (though sometimes even publicly) sanctioned or ignored, regardless of the quality of their analysis or their place in organisations.”

(3) deliberate minimisation of responsibility – and no accountability whatsoever:

“5.5.7. Thirdly, many institutions in the broader financial sector seem to have operated in silos….”

and (4) the Irish penchant for not seeing a rule without considering ways to bend it or break it:

“5.5.9. Fourthly, adhering to either formal or traditional, often voluntary, constraints and limits on banking and finance, does not seem to have been greatly valued in Ireland during the Period.”

So are people going to declare that these problems and features were confined to banking, banking supervision and financial regulation in this period, that they have now been addressed and that every other area in the Irish public sphere presents absolutely no evidence of these failings?

The problem is that many people holding positions of power, authority and influence will like us to believe such BS – and the perpetuation of this BS is the principal reason Ireland is struggling to recover from this largely self-inflicted down-turn.

“Bank loans seem to have expanded so rapidly because neither banks nor borrowers apparently really understood the risks they were taking. Many banks were increasingly led and managed by people with
less practical experience of credit and risk management than before. Property-related lending was seen as “really the only game in town” for growth-oriented banking. The purchase of second or more
properties by individuals was seen as “a no-brainer”. Rapid loan growth could not be funded by retail and corporate deposits; consequently, banks turned to the wholesale market. The long upswing in the property market, accompanied by relentless media attention, eroded the risk awareness both of banks and their customers in Ireland. Banks, citing the long sequence of good years, generally saw little problem in expanding their lending by allowing credit quality and risk management to gradually erode. Likewise, households and investors had seen their incomes and wealth increase markedly for a number of years; easy access to credit further encouraged belief in a never-ending
boom.”

Peak oil and climate change are going to be far worse.

Despite Lenny’s belief, we didnt all party, but for those that did, the following comments rang true in my mind.
“..exent to which…Irish society were willing to let the good times roll on until the very last minute …may have been exceptional.” Typical Paddy, Put the weeks wages on a horse even though you know at the back of your mind it has 3 legs and the kids will go hungry.

@Eamonn
Low interest on deposits favour speculation period – while nearly all of the cream went to equity and bond investors.
Such a system is only sustainable if losses are distributed down the line as would happen under a functioning moderately capitalistic system.

Even so – credit production comes before interest income.

I cannot figure out why Banks monopoly to create credit remains unchallenged in this great little nation.

I think “Figure 2.11 Funding Gap – Excess of Domestic Lending to Residents over Deposits” shows rather a dramatic policy paradigm shift – a shift, when things were already good, to heavy gambling with borrowed funds, which policy makers could hardly claim they did not notice. This occurred in the context of USA banks doing somewhat similar and when theUSA was rapidly liberalising trade with billions of people with near zero income while we were voting “No” to the admission of 50 ml Poles to the EU – so much for the level of higher level thinking by policy makers.

@Sf: “Peak oil and climate change are going to be far worse.”

Yep. Though we might not be flavour of, anything, for daring to mention this. The first will strike like a waveless Tsumani. The second will leak in under the PC radar.

@ DoC: “I cannot figure out why Banks monopoly to create credit remains unchallenged in this great little nation.”

Easy. Regulated larceny. You fence in credit creation, the finance houses become geldings. What would that do for the ‘manhoods’?

The report is not telling me anything I was unaware of by end of 2005.

BpW

@Eamonn
Yes Eamonn – the world monetory system has become extremely confused as banks deposits created by private credit have the expected backing of treasuries / CBs.
I would favour a simplified financial system where a Treasury would produce extra money at say 1-2% a year and full deposit banks would loan out their own money at their own risk – it would be self regulating as money would be created or destroyed depending on the physical economic environment rather then the artificial monetory one.
Anyhow I digress as it ain’t going to happen this side of the coming dark age.
-getting back to your point – If people gained a positive yield on a paper sum it would prevent them engaging in idle speculation on any fancy unless they wish to lose money for the fun of it.
Therefore real materials in the physical world such as copper in useless houses would not be wasted on idle home nesting dreams.
This would be positive to global wealth rather then consumption but alas our masters wish us to be well feed slaves rather then idle austere crewmen.

On the much asked question here of guarantee vs nationalisation:

“As already mentioned, it is not obvious how an apparently solvent institution without any evident need for additional capital could have been subject to nationalisation….Nationalisation could therefore have been the early start of subsequent efforts to handle impaired assets in a way that would have minimised State costs and funding problems…

Would nationalisation of Anglo have been an alternative to the Guarantee rather (than) complementary to it? To the extent that nationalisation implies that the State takes on all the liabilities of the bank, the two outcomes would have been essentially the same in relation to the bank concerned.”

I agree with the sentiment that nothing much fundamentally has changed.

Well meaning people see virtue in whistleblower protection but even people with some sort of moral compass treat such people with disdain.

There is little evidence of community spirit; those who have got bubble gains will fight tooth and nail to keep them.

Being a spoofer combined with a brass neck still pays dividends.

The likes of RTÉ provided a platform for bubble cheerleaders and maybe now doomayers but what has changed?

Does it now understand concept of conflict of interest? – – a common problem.

Strange isn’t it when the public broadcaster presents itself as a property retailer? It helps that the sector is still unregulated.

http://property.rte.ie/

The safest option is still to keep the head down and go with the flow and at The Sunday Independent, check the weather vane!

The whole thing reminds me of the Leo Tolstoy story “How Much Land Does a Man Need?”

[from Wikipedia]

The story’s premise is that greed knows no bounds.[citation needed] It’s a morality play in which a man’s greed for land leads to his death. The protagonist of the story is a peasant named Pahóm, who at the beginning can be heard complaining that he does not own enough land to satisfy him. He states that “if I had plenty of land, I shouldn’t fear the Devil himself!”. Unbeknownst to him, Satan is present sitting behind the stove and listening. A short amount of time later, a landlady in the village decides to sell her estate, and the peasants of the village buy as much of that land as they can. Pahóm himself purchases some land, and by working off the extra land is able to repay his debts and live a more comfortable life.

However, Pahóm then becomes very possessive of his land, and this causes arguments with his neighbours. “Threats to burn his building began to be uttered.” Later, he moves to a larger area of land at another Commune. Here, he can grow even more crops and amass a small fortune, but he has to grow the crops on rented land, which irritates him.

Finally, he is introduced to the Bashkirs, and is told that they are simple-minded people who own a huge amount of land. Pahóm goes to them to take as much of their land for as low a price as he can negotiate. Their offer is very unusual: for a sum of one thousand rubles, Pahóm can walk around as large an area as he wants, starting at daybreak, marking his route with a spade along the way. If he reaches his starting point by sunset that day, the entire area of land his route encloses will be his. He is delighted as he believes that he can cover a great distance and has chanced upon the bargain of a lifetime. That night, Pahóm experiences a surreal dream in which he sees himself lying dead by the feet of the Devil, who is laughing.

He stays out as late as possible, marking out land until just before the sun sets. Toward the end, he realizes he is far from the starting point and runs back as fast as he can to the waiting Bashkirs. He finally arrives at the starting point just as the sun sets. The Bashkirs cheer his good fortune, but exhausted from the run, Pahóm drops dead. His servant buries him in an ordinary grave only six feet long, thus ironically answering the question posed in the title of the story.

@Livonian,

I’m not seeking to paint the Finns as paragons of virtue. I just think they seem to have learned lessons from the early ’90s banking debacle of broader import -and took them to heart. Their ability to tailor fiscal policy to the exigencies of Euro membership, I think, is evidence of that. Ireland learned nothing from the GUBU decade and the subsequent bout of fiscal rectitude. In fact Ireland’s rapid escape to ‘Celtic Tiger’ glory simply reinforced the ‘Specific Irish features’ that Mr. Nyborg highlights. They’re all still in place across the board – in particular the suppression and punishment of any dissent or analysis that might compel a formal questionning of the cosy, conventional wisdom.

It’s interesting to see Lenihan-era official Ireland asymptotically approach the notion that the September 2008 guarantee was a disaster.

@ The D of C,

You’re taking us off-piste, but you might find this comment on another thread of interest:
http://www.irisheconomy.ie/index.php/2011/04/17/paul-de-grauwe-on-austerity-and-the-implications-of-the-esm/#comment-141200

The issue of retail competition and utility service provision is worthy of serious consideration – and probably would be worth a thread of its own here if some of the grown-ups were interested. But this is unlikely as it is a bit ‘microeconomic’, given the interests of the relatively few principal contributors who bother to post here.

All this shows is that history is written by the winners.
How come nobody gets this:
Property is not a typical asset because:
1: Shelter is a human necessity
2: Whose value is determinded by the amount of money made available to pay for it.

Very unimpressive report overall. No names named and the average Irish Joe scapegoated again for trying to secure a place to live in the midst of a flood of credit.
If we paid for this we should ask for our money back

@ Mickey Hickey

Spot on! The one benefit of the report is that scotches, once and for all, the idea that it was any body’s fault other than our own. This will have consequences in public opinion which may be helpful for the hard road ahead, not in terms of what this feeble coalition may decide, but in following actions beneficial for the country that may be dictated to it

Sarah Carey says,

I’ve been wondering about this for years. It was the standard method of lending in the early 90’s when I worked briefly in the EBS. Can anyone tell me if the income multiplier was an actual regulation or simply a common practice? If it was a law, who abolished it?

You know what Sarah. A lot of people I listen to recently, frequently use a sentence which goes something like, the best guy I’ve come across, who seems to have some answers and who seems to have gotten to the bottom of it all . . . I grew up in an era when there seemed to be a lot of problem facing the world. In 1992 during my Leaving Cert year it was before ‘the mainstream’ had started to worry (or even think) about the planet, the environment etc. One of the topical news stories I remember studying for an oral examination in Irish or French, was about drug use in Olympic Athletes. I remember vividly watching Ben Johnson steaming up the 100 meter racecourse and passing out Carl Lewis. I remember it like it was yesterday. I remember trying to describe the aftermath to that particular train wreck in atrocious French and oral Irish to an examiner. It would be a useful exercise this year (or any year for that matter), if the RTE film crew were to visit some schools and interview some young folk for the archives. I wonder what they would talk about? Anyone know the French for . . . . bankers? Eugene McErlean commented on radio one day, about a skateboard teenager he saw in a DART journey one day, who sat down and pulled out a copy of Too Big to Fail. Some other parent phoned into to a radio show recently, that her husband said at the breakfast table that he had enough money in the chequing account used to run their family business to pay for something. The eight year old present at the table spontaneously said something like, That is the money to pay for Anglo. I’ll end this fairly nonsensical comment of mine by asking a question. I listened to a London School of Economics podcast before Christmas last. It was a guy called David Harvey who related the credit bubble of the recent past, to the labour strikes of the more distant past, which we all seem to have forgotten about in the present conversation. Having broken the worker in the 70s and 80s, and achieved competition in wages and salaries, the problem became, how to afford those same workers the credit they required in order to consume the goods they were producing. Fintan O’Toole commented in today’s newspaper about the culture of capitalism in Ireland, and the lack of sufficient braking power etc. I think it was Tom O’Connor economist on radio this morning who commented on the shortfall in tax take circa 2008, of €17 billion appearing out of nowhere being at the root of our problems today, thoug the banking crisis gathers most of the attention. Maybe we should bear that in mind? Somewhere amongst all of the opinions referred to above, there may be some measure of an answer or a truth. I still remember the photograph of the civil servants though, whose job it was to announce that €17 billion hole in the exchequer’s revenues. I think that photograph (perhaps from the Irish Times?) was a classic the day it was shot. Utter disbelieve. I do not know who at the Irish Economy blog at the moment, is following Mad Men television series. But there is an interesting plot line at the moment involving creative director Don Draper, who realised having lost the Lucky Strike cigarette account, his enterprise was in serious trouble. He published a letter in the New York Times, in which he announced that his advertising agency would no longer be seeking commission from the tobacco industry. I wonder, who it make sense for the Irish government and minster for finance to advertise a similar page in the newspaper proclaiming, we will be seeking no more easy money from transactional taxes? In a way, the transactional property tax in Ireland, was the Lucky Strike account that had propped up too much in Ireland, for too long. BOH.

Wonder what he’d make of the landesbanken?

It is interesting that there is no mention in the report regarding the complete absence of macro-prudential oversight by the ECB and only brief mention of the damage done from too-low ECB interest rates (from an Irish perspective).

@ Gregory Connor

The ECB did not have responsibility for “macro-prudential oversight” and still does not have. This was, and remains, a matter for national governments. Are you seriously suggesting that the ECB should set interest rates to protect us from our own stupidity?

As others see us!

http://www.guardian.co.uk/business/2011/apr/19/nyberg-report-into-irish-banking-collapse

@DOCM
If the first commandment of the ECB is that only 3% of the currency created can be money how are we going to engage in business when we are all in debt except the banks who hold the assets ?
Without a dramatic price increase in the Euro value of Gold the Euro is bankers wet dream.

@DOCM
You seem intent on placing all the blame on Ireland. I cannot understand why.
If the rules of he who does wrong must get punished were applied consistently in Europe then where would Germany be today?

Whats striking to me is that I believe at least some well meaning but not too bright economists in the ESRI and elsewhere not only lived with their head up their arse but also lived in the past.
The quaint world of sovergin debt and the banks fractionally multiplying this money is the world they inhabit.
Unfortunetly for the patient Hibernia – these physicians were a bit behind the times.
Even if they knew about the new monetory practises their generation were trained on a older textbook.

They believed the sov yields would give warning of impending trouble – but they did not , until at least it was too late.

But the euro debt cells were growing, multiplying…..
The Euro is a perfect parasite in many ways – not showing its true monstrous nature until the host is near death.
Its almost as if it was genetically engineered……….

http://www.youtube.com/watch?v=xXG-e9gFJvE

@ Gregory Connor

I must apologise for being so blunt but the myth of others being responsible for Ireland’s woes has such legs that being blunt, at times, seems the only response.

The system of macro surveillance in the euroarea was clearly deficient and this deficiency it is now being remedied, rather half-heartedly, by (i) the improvements in relation to financial supervision in force since 1 January 2011, including the creation of the European Systemic Risk Board (the chairmanship of which the ECB had to fight long and hard to gain) and (ii) the improvements in relation to the Stability and Growth Pact (to be finalised before end June).

Ireland was not in the forefront of efforts to maintain discipline in the euroarea. Quite the opposite, in fact. In such circumstances, how can we blame others for the things that have gone wrong?

The issue of the capacity of the country to emerge from the mountain of debt that has resulted from our errors is a different one. It has nothing to do with anything other than the view our creditors take of our capacity to repay. If we do not make every effort to pay our bills, which the state has done since its foundation, we will be in difficulty with the international financial markets almost indefinitely. It is as simple as that.

If, on the other hand, our creditors feel that we are making that effort but, in the process, are actually reducing our capacity to repay, they, being hard-headed states without sentiments one way or the other, may be willing to strike a deal. But we are far from that stage at present.

Our creditors will not be swayed by bleating from those in “permanent pensionable employment” about their inability to pay their bills when nearly half a million of their co-citizens have no employment of any description whatsoever.

@DOCM
“The system of macro surveillance in the euroarea was clearly deficient” would seem to answer your question “how can we blame others for the things that have gone wrong?”
Your arguments are somewhat circular and your insistence on Ireland paying more for whatever mistakes it may have made than Germany paid for starting WW2 seems very strange to me

don’t worry. The mighty IMF in 2006 knew what was coming. Good job their team had a senior German banking regulator to add to the weight of their warnings:

“The Irish financial sector has continued to perform well since its participation in the Financial Sector Assessment Program in 2000. Financial soundness and market indicators are generally very strong.

• The outlook for the financial system is positive. That said, there are several macro-risks and challenges facing the authorities. As the housing market has boomed, household debt to GDP ratios have continued to rise, raising some concerns about credit risks. Further, a significant slowdown in economic growth, while seen as highly unlikely in the near term, would have adverse consequences for banks’ non-performing loans. Stress tests confirm, however, that the major financial institutions have adequate capital buffers to cover a range of shocks.

• Good progress has been achieved in strengthening the regulatory and supervisory framework, in line with the recommendations of the 2000 FSAP.”

http://www.imf.org/external/pubs/ft/scr/2006/cr06292.pdf

Seriously, there’s nothing uniquely incompetent or evil about our little country – despite what our Troika and EU partners tell us. Nearly all economies facing rapid take-off face asset bubbles – us in 19th century, japan, asian tigers, Netherlands (twice), Finland in the 1990s…

Whats different here is the ability of the EZ powers to achieve the socialisation of this onto 2 Million Irish taxpayers…..

The EZ is becoming the “prison of the nations”

@Gregory Connor
+1
Add to this that Seamus Coffey has shown (from Central Bank figures) that almost half of the credit that came into Ireland came from ex-euro sources. It is not clear if that was non-euro EU money, or totally ex-EU.

Two things:
1. If it was non-euro EU money, it came through Mifid. That is the ECB’s area of responsibility. Totally and utterly. The ICB operates as the agent of Mifid in Ireland.
2. In either case, the money was not euro and not from within Ireland. The Irish Central Bank had no authority to restrict its flow.

Credit where credit is due…

Sorry
That comment was for @ Yields or Bust

@seafóid

To make such statement the author needs to know how much oil is left out there

anyways why is another thread being hijacked by resident oil drummers?
lets go back to discussing a report which blames everyone but names no one.

‘MISJUDGING RISK: CAUSES OF THE SYSTEMIC BANKING CRISIS IN IRELAND’

‘The superior man, when resting in safety, does not forget that danger may come. When in a state of security he does not forget the possibility of ruin. When all is orderly, he does not forget that disorder may come. Thus his person is not endangered, and his States and all their clans are preserved.’

The fools, the fools, the fools …………….

@ Hoganmayhew

FYI

http://en.wikipedia.org/wiki/Markets_in_Financial_Instruments_Directive

@ DOCM

If we do not make every effort to pay our bills, which the state has done since its foundation

Apart from the little matter of the Economic War. So much for the Irish education system.

The rest of your post’s not much better.

@ Livonian
I would dispute that it was a good idea to use a Finn for this report, it would appear to be a classic case of remembering much and learning little.

In Finland at the moment the extreme right wing is making rapid political advancements on the strength of Finnish dissatisfaction with bailing out supposedly “spendthrift” countries, in the face of facts to the contrary, not least of which is that bailout funds come with stiff enough interest rates to satisfy the most austere of EU members.

But of course it’s easier just to drip anti-Irish sentiment all over the place. Much easier than for example weighing up the realities of the financial crisis. I mean come on – “the Irish penchant for not seeing a rule without considering ways to bend it or break it” What was that? There’s a name for applying negative attributes to an entire naton with a broad brush, and the far right is no stranger to it.

Still, it’s an ill wind, and there are always those that seek to make capital on the misfortunes of others.

I came across a reference to Finnish economists Honkapohja and Koskela a few days ago either here or elsewhere. Anyhow I found them on http://www.repec.org in IDEAS, search on author. There is a good article on taxes and migration from 1999 as well as the Economic Crisis 1990s Finland which I have linked.
http://www.etla.fi/files/2057_dp683.pdf

The magnitude and damage are on a scale close to our present crisis.

@ DOCM

You say:

“The one benefit of the report is that scotches, once and for all, the idea that it was any body’s fault other than our own.”

All our fault?

From P. 94

“There was no euro-wide framework in sight for dealing with emerging difficulties and clear indications had been given to the Irish authorities that it was their responsibility to address the problem. The Government had earlier concluded that it could not permit any Irish bank to fail (which the Commission understands was also the advice from the ECB), given the potentially very serious adverse effects on confidence in the banking system in Ireland and elsewhere.”

Only following orders, guv.

Below is the most recommended comment responding to the conclusion of a report in The Economist on the Finnish election:
http://www.economist.com/blogs/newsbook/2011/04/finlands_election

“”Finland had the image of being a strongly pro-European party, and it will now be regarded rather differently.”

Not so. People mix up pro-European and pro-EU. The EU is a corrupt, anti-democratic, pampered institution that is consistently mismanaging Europe. Any pro-European has to be anti-EU.

We want an EU that represents and executes the will of the majority, not that of a tiny media and poltical “elite”. Among others this means that selfish and mismanaged countries such as Greece, Ireland and Portugal adhere to EU treaties and take responsibility for their past misdemeanours. It also means that the EU protects the integrity of its borders, rather than provide safe passage to illegal border crossers. And so on.

The only “amazing” thing is that people as educated and sophisticated as the Finns have been tolerant for so long to the abuse by the anti-European EU.”

Hits quite a few nails on the head, in my view.

@ Gavin

There have always been asset bubbles. They always end in a bust. The biggest losers are the ones who get sucked in towards the end. Our bubble has been disastrous for many groups, including the ordinary bank employees who are now facing the dole, the folk trapped in negative eqity in peripheral towns, people struggling to service enormous mortgage debts, and those who can find no foothold in todays’ shrunken economy.
Bank bondholders are emerging unscathed, as befits those at the top of the money tree, but I will bet they are feeling the cold winds in Cabra.

The global economy has been driven by a series of asset bubbles over the past 30 years. It’s a con game (Ponzi) even though many of the players don’t recognise it as such. The chief architect was Alan Greenspan, former chair of the US Federal reserve bank, and Bernanke is simply following suit. As long as headline inflation is contained, all sorts of skulduggery can be tolerated in asset pricing. The wild swings provide the opportunity for profiteering, as wealth is siphoned off from the real economy into the financial services ‘industry’.

Good accounts are provided in Yves Smith’s Econnned and John Mauldin’s Endgame, among many others.

Ireland and Spain got sucked into the property bubble which took off in the the US and the UK after the collapse of the dotcom collapse. Nyborg is rather shy about the remuneration issue, but he notes that the reward systems in our banks were easily gamed, or abused.

The reality is that senior bank staff were rewarded heavily, and in some cases were permitted to reward themselves hugely, for lending practices which were culpably negligent. Interlocking directorships and golden circles galore. As the biggest rewards went to the worst offenders, profssional banking and accounting standards were jettisoned. Money talked a lot louder than self regulation or professional ethics. So many respectable folk were involved that we can’t really look closely at it. Too embarrassing.

Nyborg also notes, I think, that much of the dodgy lending in AIB was located in the regional offices. You are probably right to feel that some managers saw themselves as public benificiaries. The government and CBI had been captured by the bank bosses, and all the signals were set to green. ‘It’s coming off a broad back’. So bankers had the moral rewards of helping people to buy (a pig with lipstick on) as well as the cash bonuses for enabling punters to join with them in the financial equivalent of a suicide pact.

As you say, the normal principles of trading were inverted. Without any prudential standards, credit was effectively free, and bonuses were related to the size of the deal, so bankers competed to drive up prices. It’s all a bit like going away on holidays and leaving the teenagers in charge of the gaff. Very early days for thinking about how to prevent another episode of this type, as we are only beginning to assess the consequences now. I think it’s fair to say that, like Fukushima, we will be dealing with them for the foreseeable future.

@ DOCM

So the ‘it’ of “the one benefit of the report is that scotches, once and for all, the idea that it was any body’s fault other than our own” is specifically the housing bubble? I’ll have a think about that.

I still think the bit I quoted with regard to “we held nationally the responsibility of dealing with it.” is not so clear, from the splendidly paranthetical remark: “The Government had earlier concluded that it could not permit any Irish bank to fail (which the Commission understands was also the advice from the ECB)” suggesting that the ‘dealing with it’ aspect of the bubble was done under ECB inlfuence.

So, to follow your line of reasoning, the government, if it thought Anglo should be let fail, should have said to the ECB, we hear what you say, but as this is a national responsibility, we are ignoring your advice in this case.

The Irish Times — one of the most culpable parties in all of this — writes, rather self-servingly, that “we are all responsible to a greater or lesser extent for the mess in which we find ourselves”.

Can we all agree that people who were too poor to buy property, even given the lax lending standards of the day, cannot have been to blame for the speculative frenzy of the time, by definition?

And can we not also agree that the people who could have participated, but chose not to, because they could see that there was a housing bubble, are also not to blame for the speculative frenzy?

And if the counter-argument is that ‘sure they voted for the government’, can we not also agree that the majority of people didn’t in fact vote for FF and the PDs?

Simon Carswell writes that Nyberg’s view is that “hundreds of thousands” of people are to blame. That seems exactly right to me.

@ Gavin Kostick

What can I say other than quote Mr. Nyberg (according to the IT – Harry McGee) at his press conference that a “government is responsible for everything that happens in a country”.

Is it not extraordinary that this has to be pointed out?

@DOCM
http://www.ecb.int/ecb/orga/tasks/html/financial-stability.en.html
Look under “Tasks of the ECB”.

@ DOCM

one of the principle stated purposes of the ECB is, together with the rest of the EuroSystem of Central Banks, “to systematically monitor cyclical and structural developments in the euro-area/EU banking sector and in other financial sectors. It does so in order to identify any vulnerabilities and to check the resilience of the system.” Did it perform this task to any successful degree v-a-v Ireland?

While you are right that it was our actions which created the bubble, the lack of any counter-actions, from either the ECB or the other Eurosystem central banks, was also a contributing factor. The ECB could not stop the Irish banks borrowing funds from abroad – but they, via the Bundesbank and the BdF, could have stopped German and French banks from lending so easily to them.

Voted Fianna Fail
Leveraged up to the hilt to buy multiple properties with no yield
Encouraged others to do so
Berated those that didnt

Guilty.

@Sarah Carey

Despite BOH posting a long and wide ranging comment above I’m not entirely sure your original question was answered.

The answer is the affordability metrics were never the law, or even close to being legal sadly it was market practice which meant that the basis of 3 times first earner and 1.5 times second earner were lost pretty quickly as we moved closer to euro entry in 1999.

Don’t be misled however despite the fact that these ‘affordability’ metrics may have served us well in the past it was definitely more luck than design as the coming of a lower interest rate regime with Euro entrance showed these metrics to be wholly flawed.

Even today applying 3x first and 1.5x second earners against average 2010 industrial wages (€36k per CSO) using a 90% LTV would give an average couple buying power (!) of c€180k. (Mortgage €162k)

Using today’s TSB variable rate (tracker no longer available and fixed rates prohibitive) for first time buyers over 20 years would cost €1,190 per month (rate quoted today by the bank is 6.38%) and monthly cost assumes no further rate moves.

Sadly the average market yield quoted on daft.ie based on q4 2010 was 3.9%.

This obviously looks at of step with the ‘real’ market yields as suggested by last week’s auction. Although it seems 90% of those buying last Friday were cash purchasers so perhaps the market was more surreal than real (who really has €200k – avg price – in cash not me !) anyhow it would suggest that house buyers using mortgage finance would be looking for yields higher than the average achieved last Friday at close to 9% Gross.

Nevertheless working off the 3.9% on the survey would suggest the €180k house could in fact be rented for €585 per month. Given these metrics who would buy?

More importantly it suggests that using these affordability metrics which allows buyers a certain amount of buying power is crazy without actually looking at the underlying yield on the property. Hence my comment above.

In this instance assuming (according to the economic theory at least) consumers should be indifferent between buying or renting, consumers could potentially putting themselves into significant negative equity on the day they get the keys with the house ‘costing’ them €180k but with a ‘value’ of €88k (€88k house with LTV at 90% – same mortgage deal as above costs €585 per month).

To enable the indifference theory to work buyers should either rent at €585 or buy at the same level. The market as survey by Daft.ie would suggest that couples walking into these deals today would be in negative equity to the tune of €162k – €88k i.e. €74k on day one – great start!

So despite what may look and sound conservative ‘affordability’ metrics they are a disaster and these numbers using published results etc show it to be the case. The only metric that banks lending cash into the property market should ever consider is the yield metric. It’s fundamentally sound providing banks look to the past rather than the future and it prevents banks betting on one’s earning power into the future and importantly should negate bubbles assuming supply demand dynamics are properly policed.

It also ensures the chances of negative equity are lessened and ensures house prices track rental inflation which we know over time tracks CPI +/- 1%.

Had the banks asked the right questions such as ‘please supply us with rental information for 3/4 houses in the same area as you were buying’ during the past 10 years as opposed to daft stuff about p60s and bonus payments, overtime, employer letters etc etc and instead concentrate themselves on establishing the true price of the properties based on the long run average yield in the ROI since records began of 7% we would not be having this blog conversation and Mr. Nyberg et al would not be generating the news. Fact.

Re Nyberg, there are racial overtone ‘groupthink’ slurs. It satisfies a political agenda, I heard Lenny in full throttle blaming the central bank, whereas we all know Bertie, Fingers, cronies went joy riding in their ferraris telling all naysayers to commit suicide. This anti Irish political agenda is hell bent on making the Irish population, citizens and taxpayers, stump up for the bill.

I’d draw another useful analogy, which if I recall correctly DmcW has used as well, this is that of the soldiers who fought the trench warfare campaigns of World War 1, who lost their lives in the campaigns http://www.harris-academy.com/departments/history/Trenches/Joanna/joanna1.htm

The budget is the instrument used by the government and Department of Finance to control the country’s finances. All of the facts and figures revenue raising information from the bubble was at their finger tips. The buck stopped at the Minister for Finance desk.

Even David Begg of ICTU claimed cautionary and critical reports on government bubble spending were made by ICTU over and over again only to be ignored. DmcW and others were vilified as dissenters peddling nonsense, the opposite was indeed the case.

Government and their armchair general croney gang of bankers and developers ensured the continuation of a free supply of lending to the troops in the trenches. The troops were made up in the main of first time buyers given the ammunition of eight times gross income on occasions for 100% mortgages. Local prudent bank management was replaced with Dublin whiz kid bonus incentivised managers hell bent on selling loans to most anyone they could.

At the top of the pile, the magic twenty or so of developers and speculators such as Quinn with permission to join the free for all, were given billions to invest anywhere at home or abroad. Anglo itself set up more subsidiaries abroad than it did at home. All depositors with cash to spare were targeted as fodder for the government sponsored property credit binge.

Not everyone, contrary to what Nyberg, would have us believe, took part. The vast majority who did, were first time buyers attempting to buy a house for their wife and future family, in a market made toxic by deregulation.

Nyberg doesn’t name names, it apportions blame to Irish people in a racist way. Insofar as it does this, its just another coverup to allow those responsible avoid responsibility.

Irish people know who is to blame. They acted in that knowledge in the last election.

@ Jesper

If the Irish CB/FR should have told the Irish banks to stop lending so much into property – would that have been a slight to property developers?

The report is poor. If Ireland alone was responsible then why ate Greece and Portugal fubard too?
Googled Nyberg and found out he was involved in some of those simulated ECB crises. It seems the response drawn up from those simulations was to contain problems and buy time. In this respect Nyberg is using this report to peddle the party line. I’d like to know if he was chosen on any recommendations (JCT perhaps). Maybe DOCM could throw some light on that.

When I was much younger and the house prices were going up, parents, aunties, uncles etc all bemoaned the fact that house prices continued to rise and expressed concern about “how my generation would ever be able to afford one”.

This wasn’t questioned, people without exposure to international property bubbles look around locally for their empirical evidence – the fact was cars, services, hell even sweets were noted as increasing in price over the years but never coming back down.

I know people can argue everyone is to blame and people should have looked logically at the outlay they were being asked to commit to for a house but so many really didn’t know any better.

@Paul Hunt
I particularly dislike this line:
the Irish penchant for not seeing a rule without considering ways to bend it or break it:
You can attack a country on the basis of it’s actions but to presume flaws in an entire population is bordering on …well…you know what I mean
People are the same the world over

@Paul Hunt
The priesthood used our weakness as a weapon against us.
I recommend you do your research about the strange events leading up to the Euro introduction.
It may enlighten you.
This goes very deep.

@ Kevin O’Rourke

“Simon Carswell writes that Nyberg’s view is that “hundreds of thousands” of people are to blame.”

4 million people are paying for it. Including over 1 million children.
One of the biggest things I learnt from the collapse is that neither corporate Ireland nor corporate Europe does accountability. It is always someone else’s fault. And always someone else who picks up the pieces.

@Eureka,

Mr. Nyberg is more polite and understated, but what he is seeking to communicate cannot be missed. Read Section 5.5 – the paras from 5.5.9 in particular.

@ Paul Hunt

Let me respond to your bemusement:

RE (1) I was at Beckett in The focus last night for which I indulged in was it Samuel Taylor Coleridge’s phrase “deliberate and wilful suspension of disbelief”. That was theatre. I didn’t indulge in that during the credit boom as I believe the government sponsored credit binge had the official sanction of government, Department of Finance and banks. But perhaps you are right, in future perhaps we should regard as Yeats did government shenanigans as ‘a circus’. At the time though, we did foolishly believe the store was being minded.

re (2) We need better whistle blower laws greater publicity given to examine the discovery of detail and facts surrounding this aspect of Irish society.

re (3) Its ironic Nyberg distributes blame to everyone’s ‘groupthink’ and no individuals are named. Perhaps they are afraid of the Calally effect of legal action against Nyberg on the basis of ‘wooly pass the buck notions’ that are throughout Nyberg itself.

re (4) Agreed. In the USA we have seen bankers in handcuffs. In Ireland Calally rule bending is the norm. When do we have the first prosecutions from the Garda Fraud Squad against eg the B&B Anglo money or other personal asset liability developer loans. When do we get proper investigations of the €600 million of deposits that got helicoptered out of Anglo shortly before its meltdown, who owned those assets. Was this developer money being protected against meltdown and probable seizure by the state. On top of this cesspool of corruption, we have the Nama scandal of employing developers to sort out their toxic loans, developers already in the hole for millions as they apparently escape scot free … scandal of bakers like Doherty walking away with €3 ml while AIB is in the hole for €12 bn losses. We can make laws overnight for bankers to steal taxpayers money and we can’t make a law to tax grab the morally unjust earnings of these guys. Bankruptcy for Anglo and AIB would have ensured these guys got nothing, it would have sanitised the Irish banking system and fiscal finances instead of perpetuating the free for all bubble which still perpetuates in efforts by Daly to turn NAMA into an Anglo lender…

One law for the financial class in Ireland, another for taxpayer victims.

Kevin O’Rourke writes,

And can we not also agree that the people who could have participated, but chose not to, because they could see that there was a housing bubble, are also not to blame for the speculative frenzy?

I would compare it to the Jackie Charlton days in soccer, when suddenly the real Ireland soccer supporters, who had held with their team through the lean years, were suddenly put out of the running for tickets and matches etc, because of the sudden influx of Johnny-come-lately’s. There is nothing worse and more herd-like, than a bunch of Johnny come lately’s, who jump on the bandwagon for the victory lap. To the extent where the wagon itself, is in danger of grinding to a halt, before the victory lap is even half done. On the other hand, one has to balance this, with cautionary behaviours to avoid elitism. The victory wagon cannot be a place for elitism, and chequebooks, credit cards and all forms of reliable credit are accepted on the victory wagon. In fact, after a while, people forget what the victory was all about in the beginning and just care about taking the credit cards. Like the Irish soccer supporters going into the Charlton era, I was in an ideal position to observe what was happening to us. I had struggled to be involved in a construction and planning industry in Ireland, before it was sexy to do so. Before the herd had trully arrived. If anything, my earliest memories of construction and planning in Ireland, were of the herd running distinctly in the opposite direction. I had a baseline to work with, from which to base some kind of an opinion. But as the boom in Ireland continued, and as Bertie would say, got boom-ier, I found myself, like the Irish soccer supporter in Landsdowne road, an increasingly more lonely figure in the terraces. I found myself surrounded by folk who seemed to be experts, and were deeply invested in the future of Irish property and speculation. I had no idea where this crowd had suddenly come from, and I found it quite weird. Furthermore, I had received a professional training in the property professions, but it was dangerous to give air to a considered view about anything. All the crowd wanted to hear was, hot much would we win by, and how many were we going to put into the net. For some reason, my experience that following the team, was about the ups and the downs, seemed strangely out of place in that crowd. The road was only going one way. Of course, now the terrace is draughty, cold and isolating as I find myself huddled up there again, keeping the attendance from falling to zero. There are still a few of the Johnny come lately’s around, who have ideas and are interested in advancing forward. Some who have hopes and dreams of future greatness. They seem like a reasonable bunch, and I think I a like them. Although, they still don’t put much stock in my words of advice or guidance. They have their own ideas, and that is not too bad either. I enjoy having the odd bit of friction with them. I am glad though the noisy rabble have evacuated the area. I am sure they will return in their own time, with their loud horns and bugles and brash un-qualified statements of opinion. These things are cyclical, and there will always be another big match to play some time. BOH.

http://designcomment.blogspot.com/2011/04/charltons-army.html

moral: concerned with goodness or badness of character or disposition, or with the distinction between right and wrong; dealing with regulation of conduct; capable of moral action.

What am I missing here?

Oh! “I did nothing wrong. I broke no law.” Perfectly true, (there was no law to break, was there?). Now, where did I hear that excuse before?

BpW

@Gregory Connor

It was not badly designed , it was perfectly designed for its purpose.

@Mr. Bond,

Agreed. And I also noticed the report of An Taoiseach’s intention to advance a constitutional amendment that would over-turn the Supreme Court’s Abbeylara jusgement and re-empower Dail Cttees. But he, or his government, have no intention of empowering Dail Cttees to hold government effectively to account or to ensure proper scrutiny, in an adversarial manner and using relevant external expertise, of government policy proposals or of government executive actions. In this whole banking fiasco the actions and inaction of government were as much to blame as anything done by the relevant stautory or commercial players.

While there are no procedures to hold government to account we’re simply setting ourselves up for a repeat performance down the road and the pig-headed exercise of executive dominance until then.

Nyberg puts out a meek and mild, understated report that threatens no one individually. Factual it is, can you imagine the response if he had not pulled his punches, named individuals and described them as the bunch of drunks, clowns or fools that ran the institutions involved. As to people being the same around the world, having been around the world I would say there are similarities but there are also distinct differences. One of the countries with distinct political and business cultures is Ireland. There is ample evidence to support the view that all of us with our inbred, navel gazing, parish pump and religious fixations, plus loose political and business morals have mismanaged our country since 1922. The money spent on a dead language and the opportunity lost is but one symptom amongst many of our inability to evolve.
What is admirable is family stability, our reputed sociability and general friendliness.

@Yields or Bust

If you are going to do comparisons like that you have to seperate out the interest element of a mortgage from the capital repayment.

@Kevin OR

Those that might have participated but didn’t are not only not to blame, they deserve thanks for not further inflating the bubble and an apology from those that sneered at them – who are to blame.

@grumpy

On an interest to rent comparison the negative equity is c€50k – still a loser.

No mention of Boston – as in Harney’s ‘we are closer to Boston to Berlin’ moment – which is ironic given the amount of subprime debt in the banks’ books.

No change of substance will occur. The culture is not geared for it.

@ Yields or Bust, Sarah Carey,

In working from memory so hopefully I’m recalling things accurately. I believe income multiples were a guideline, but a well established one. A lender couldn’t change to affordability without the approval of regulators. In advance of the move to affordability, lenders had been stretching income multiples and parental guarantees were more frequently required. In short, banks weren’t able to justify shoveling out enough money under existing practices.

The official nod sanctioned easier credit. Because this is a tangible action, it is something you should to untangle.

YoB – I agree that rental yields were mad and should have had red lights flashing. I’m not focused on yields here as I’m not aware of an existing guideline or a single action of credit easing.

@ Kevin O’Rourke,

The “we’re all to blame” is bonkers. It’s as daft as blaming Poland for providing construction workers. I don’t think I should be as much to blame as Patrick Neary. Though if someone offers me his pension, I’ll stand next to him.

If the EU/ECB are so much to blame for our banking problems, how come no other EU country is in a similar situation banking wise…why are we the only country to fall foul of the terrible EU and their evil machinations…it really is a puzzle

@Yields or Bust

Thank you for answering on income multipliers! ( I think back in the early 90’s it was even lower – 2.5 times the first salary and I remember my mother urging buyers to consider the effect of an interest rate rise or how illness would affect ability to pay….anyway)
But might I venture that the focus on yields for a home overlooks the fact that the yield is that you have somewhere nice to live and so normal investment rules don’t apply? I’m not saying that justifies paying any price, but it means people use affordability rather than return as the means of deciding what to pay?

@Paul Hunt

I think this is a crucial one 2) the suppression and punishment of any dissent
I saw that at work in companies where I worked. Once I saw a really good financial controller eased out because he was so boring and conservative and kept questioning certain transactions. He was seen as someone who just didn’t “get it”. I’m not convinced at all that that culture is part of the past.

@Brian Woods 🙂 thank you

On how many people are to blame – I’m one of those who bristles at the “everyone” and “group think”. I never borrowed a stack of money I couldn’t repay and I don’t think I’m alone. Didn’t we have a statistic at one time that said that 56% of Irish homes are owned outright?

@ Eoin

The difference between the extent of the problems in our banks, as opposed to the problems in some other random selection of EU countries could then be classified as our portion of the blame. in my opinion that difference is pretty colossal.

@Eureka
“It is indeed true in general human terms.
It is a feature of humanity and not especial to Irish
people.
People are people”
Erm, no. It’s not universal. I’ve lived and worked in a number of countries. The only place I’ve found comparable to Ireland for playing around with rules is India.

There’s a really important point being missed in all of this.
There was a very credible alternative hypothesis to suggest that house price inflation was justified – the unique Irish demographic.
We had our returning emigrants, new immigrants and one of the highest birth-rates in Europe to justify the belief that there was a reason for the house price increase.
The increase kinda made sense. It would be very hard for somebody from a country without our diaspora to grasp this. The Finns weren’t returning in their droves but the Irish were. Sorry this I can’t put this better

@Sarah Carey

@ Hogan
It takes different forms in different places. I have travelled too and have never been in a country that wasn’t corrupt. In some places it just takes a bit more looking to see it. Name your country

The Iron Law of Mortgages. It is immutable and shall be enforced by lenders – note, lenders. The strict observance of this law ensures that you, the borrower, may have a 0.9+ probability of surviving a ‘near-fatal’ financial accident.

1. Principle Residence Rule: Your principle res is where you live, have your kids, and possible grow old in. It shall NEVER be deemed to be an investment that may provide a yield or ‘flipped’ at a profit.

2. Fixed Duration and Rate Rule: You get a 30 yr mortgage at fixed interest. I know, I know. But that is The Law. Most people do move at least once. Take out a new loan. Seven year itch and all!

3. Transaction Costs Rule: TCs shall be paid from cash savings only. You are prohibited from ‘borrowing’ these funds, from any source. Lenders shall not advance any loans for TCs

4. 20/28/32 Rule: You shall provide 20% of purchase price from your cash savings. You shall not exceed 28% of your after-tax income on res property expenses (mortgage, house + mortgage protection insurance, local gov taxes). You shall not exceed 32% of your after-tax income on all outgoings directly attributable to all expenses in respect of personal borrowings (house, car, HP, cards, term loans, overdraft, bank fees, etc).

5. Maximum Loan to Value Ratio Rule: This shall not exceed 80%. See Rule 4.

6. The Maximum Loan Rule: The maximul amount of the advance shall not exceed two and one-half times your pre-tax salary. Such salary shall be verified by Revenue Documentation only. Minimum of three years of current, sequential documentation shall be provided.

6a. Extenuating Circumstances Rule: At the sole discretion of the lender, the purchaser may be advanced an amount up to three times their pre-tax income, provided the purchaser shall make a 25% cash down payment.

7. Two-Salary Rule: Only one salary shall be used to calculate the maximum amount of the advance. The use of two salary sums is prohibited.

Follow this Iron Law of Mortgages and you will never, ever, have a res property ‘bust’. You may have defaults, but these may be, at most, in 1% – 2% range.

Looks and tastes like cold porridge: but that’s life! Without the bust!

BpW

@Adrian Kelleher

You want to give the most independent central bank more independence ?

This was a set up by the usury class – pure con job.
They got sick of hybrid sovergin states and decided to cut their balls off.

@ Brian Woods
Great rules but
What happens if they don’t follow the rules?

Outside looking in says,

How can economists explain to the public that asset price inflation does not make (most) people rich? Where are the economic models taught in undergraduate classes that show the role of asset prices?

That is the key problem. If you ever have a chance to watch Spielberg’s documentary series, Band of Brothers, there is a disturbing scene where the elite first airborne unit discover a camp inside of German territory, and they don’t understand what it is for, what it is doing there beside a very pleasant and prosperous village. What was even more disturbing in the episode was how the medical experts on hand had to prevent the troops from handing out any more food to these poor misfortunes, and had to close them back into the enclosure. Apparently, more damage can be done by eating too quickly. The stomachs aren’t ready to take it, and the poor souls have lost the understanding of how to stop eating. I was thinking about this scene quite a bit today for some reason, and about the Nyberg report. We can have enormous fun and games with the herd analogy that Peter Nyberg used in his report to describe the inhabitants on the island of Ireland. But there is a more serious side to it. Having scribbled by short piece earlier today about Charlton’s Army, in which I used the analogy of the World Cup successes and soccer supporters to have fun with the herd idea, it made me think about the recent boom and bust in Ireland, on a larger time scale. At first, I thought it would make sense to blame the European banks who were sort of like the First Airborne unit who ‘discovered’ Ireland and its inhabitants in the early 2000s. But then I decided that didn’t work either, in helping my analysis. It made a lot more sense to look at it in a wider global view, as Alan Greenspan or others may have done in 2008 in their writings. Which mention the existence of some much capital from the former socialist regimes in the financial system globally. In effect, it was that global phenomenon of so many millions joining the world market, and Ireland’s exposure to the same, as such an open economy, that enabled us to eat more than our bellies were able to take. BOH.

@ Brian

The problem wasn’t how many people borrowed, the problem was the level they borrowed at due to price increases which led to further price increases in a continual cycle. People had no idea where the peak was and were afraid no peak would be reached (soft landing or continual increase).

Why not index the amount that can be borrowed to income declared to the revenue office and wealth declared on a register there?
E.g. pW + qI
where p is weight for Wealth(W) and q is weight for Income(I)

All loan agreements would then be lodged with the revenue office and these records would be the ultimate determinants in disputes (stopping banks/customers from underdeclaring wealth/income/loans). This should be linked with a propery deeds repository really too to prevent the market moving ouside the jurisdiction.

By declaring a limit to how much can be lent based on income/wealth records and introducing a property tax based on these records, and releasing some statistics on these, future bubbles would be avoided since people have a reasonable expectation of the peak being reached.
Off the top of my head, the only requirements that I foresee to prevent the bubble is a limit to the ratio of Income to wealth that can be used in determining the index value and a requirement that increases in wealth in the past t periods be excluded to prevent feedback loops…..

@Eureka
“It takes different forms in different places. I have travelled too and have never been in a country that wasn’t corrupt. In some places it just takes a bit more looking to see it. Name your country”
It’s not corruption. It is an unwillingness to observe the law. They are different. I agree with you that many countries are officially more corrupt than Ireland (in that corruption is embedded in public officials). In Ireland it is different – disdain for following the rules is embedded in society. Many considers themselves an exception, that the rules are for someone else.

Contrast with Japan, Korea, Taiwan, Switzerland, Germany, the Netherlands – people are generally law abiding, if they don’t like the law, they change it, official corruption exists, but the same sense of pulling strokes doesn’t exist.

@ hogan & Eureka

At the risk of sounding like Fintan O`Toole, is this a case of us never quite grasping or accepting that the law is our law?

Back to Brehon law?

@ Sarah
Thanks for putting that better than I could

@ Hogan and Paul
I don’t accept your claim that Irish people are inherently less law abiding.

People respect laws that are enforced and are seen as fair.

Look at this link
http://www.independent.ie/national-news/drinkdriving-arrests-fall-by-almost-50pc-in-two-years-1436483.html

Look at the stats for Switzerland. This is only an imperfect proxy measure, granted but it shows that even there people will take chances with the law.
This is not a perfect refutation to your assertion but I think the burden of proof in this instance is on you.

You would not get away with making statements like this about any other nationality without having to defend them robustly.
I’m not going to get cross but the vast majority of Irish people are extremely law-abiding. To cast blanket aspersions on their character as you have done is not acceptable in the least.

@Eureka
When I was in Switzerland and Austria, the locals would not even consider jaywalking. The red man meant stop. Not ‘stop if there’s nothing coming or its not coming very fast’. It is not about being law abiding, as such, it is about respecting the law and understanding that it is there for everyone.

You asked me to name you a country. I ask you to name one of the ones you lived in where the same disregard is shown.

@Gavin Kostick
I think that’s absolutely it. The impulse to defy the colonial master has never gone away. Petty civil disobedience was engrained at a level that has been hard to shake off.

I don’t believe it will be like this forever, indeed, I think there are some hopeful signs. As @Eureka points out, the drink driving laws are pretty well observed, although I still end up with drunks in my garden looking for a back road home. On the other hand, the smoking ban has been pretty successful. Mind you, on a recent visit to Indonesia, the smoking ban there has also been successful and I wouldn’t exactly put that country in the law respecting category.

Ah Eureka! No follow rule. Boom! Boom! But we all know that by now.

@Tony: Its a iron (immutable) law. Its cast, not forged. Tamper proof. You mess with it: it snaps! They messed. It snapped. Debt hell.

The Revert to Mean time for res property prices is approx twice as long as bubble takes to form. This includes a dip below mean, before it re-adjusts back up. 2007 => 2015 would be a good bet. But if oil prices do not revert in parallel, then we are in really deep doo doo (in respect of aggregate economic activity). Please watch oil price movements very closely. US Fed dumped a sh*tload of dollars into global commodity markets. Prognosis is a tad worrisome.

In respect of the unfortunate res property buyers. Their behaviour can only be described as irrational (in the extreme). But that was fully predictable. Some of my ‘friends’ still barely speak to me. I advised them to flee the res property market back in 2005/06. I went to metals!

BpW

Did Nyman say anything about the developers who controlled most of the land banks around Dublin ? They are covered in Fintan O’Toole’s “ship of fools.”
In Fingal 15 developers owned 50% of development land in 2003. Before the boom land made up to 15% of the cost of a house. By the top of the boom it was 40 to 50%.
Blaming the punters who bought in 2007 is easy. What about the system that brought the market to where it was by then ?

This goes in the petty complaints category but it really annoys me when people use the word even when they actually mean instead.

And to increase the information content of this post. The word of the day on wiktionary today is “cute-hoorism”. http://en.wiktionary.org/wiki/Wiktionary:Main_Page

Seafoid says,

Did Nyman say anything about the developers who controlled most of the land banks around Dublin ? They are covered in Fintan O’Toole’s “ship of fools.”
In Fingal 15 developers owned 50% of development land in 2003. Before the boom land made up to 15% of the cost of a house. By the top of the boom it was 40 to 50%.
Blaming the punters who bought in 2007 is easy. What about the system that brought the market to where it was by then ?

This is the other said of the story. In addition to the credit availability and the asset price bubble, there was also the land values doing something strange underneath it all, and how the owners of land banks were up to something funny in trying to create a bottle neck in supply. I wrote about this an awful lot, if you check some of my earliest ramblings at the Designcomment blog. To be honest, if one is to look at only the engine of the credit bubble, and the associated asset price inflation, one can come up with a pretty accurate analysis. But in order to fully represent the sequence of events that occured in Ireland in the 2000s, one has to include that third leg of the stool, and all of the associated political weaknesses which led certain individuals to believe they could corner the market with regards to building land. The truth is, no property developer would require borrowing in such enormous volumes as suggested by the top 30 NAMA developers. Construction alone (no amount of it, which we could ever do in Ireland) requires the sort of financing that our top 30 NAMA developers sought. What the NAMA developers were at, was akin to the cold war and the missile silos. They wanted to out maneuvre one another by a grand display of each other’s arsenal. But that is a world so distant from the average Joe soap, that it rarely gets the coverage it warrants in most analyses. Indeed, it is surprising how little intelligent analysis has emerged of the large NAMA developers either before or after their loans were warehoused. It is almost ghostly how the larger developers operate underneath our noses. It is a scale which most ordinary folk just cannot get their head around. I won’t burden the Irish Economy blog here, with much more commentary about development land except to say, there is investigation which aught to be carried out there. But I don’t believe the esteemed economist profession have many who know the area of land values well enough, to know how to really analyse it. BOH.

@ Bunbury: “I believe there must be tens of thousands of fake loan applications on the books of all the banks. That is, ‘fake’ in the sense that the supporting application documents were often fictitious – earnings, expenses and overtime overstated to meet income criteria.”

That’s fraud, pure and simple. Criminal behaviour. Please inform the authorities. An informed opinion is sufficient. Oh! I forgot. “We broke no law. We did nothing wrong”. JC spare me!

“I think that’s absolutely it. The impulse to defy the … colonial master … has never gone away.

Don’t want to stir the sh*t on this one on this site. But Irl Inc was NEVER a colony! We were always ruled by ourselves, us Irish. We indeed did have a self-imposed (yes, self-imposed!) hiatus: 1801 – 1922. But we still had over 100 MPs from Irish constituencies elected (by an iffy suffrage system to be sure – but England and Scotland were little better) to Westminster. Our local civil service was Irish (even some of the most senior ccs in Britain were Irish). Irish-born military types figure prominently as well. This ‘colonial’ business is pure political Crapola. We ran our own affairs. Please read Joe Lee’s (Ireland: 1912 – 1985) to see just how bad we actually were – sorry, still are! Who coined the phrase: “They have learned nothing, because they have forgotton nothing.”? That’s us!

@PH: “Life’s too short.” 🙂 Yep! But someone IS bothering! So for whom are they ‘bothering’ then? Anyone got any info on when one of the RC Bishops cracked the pulpit with his crozier to denounce immoral behaviour in business and finance and politics? AND demanded action from both his flock and the pols? Where’s my Tyrconnel?

BpW

@ Yields or Bust

Does this one example suggest to you that as the property was overvalued almost 3 times, that we are heading for a fair market of around 35% of peak, perhaps around 2015?

Or is it more complex than that as rents have and are shifting?

I know this board won’t do it, but a graphic representation of what you are saying would be very useful.

@ Yields or Bust,

If you want to use rental yields as a key determinant of residential house prices, then you need to look at the factors that determine rent. If you find that these factors are also variable, then it’s reasonable that you need to assess where these are likely to head in the future.

There are some potential factors that could have a major influence on future rent levels: 1.) Government – I’ve heard (but can’t verify) they rent 50% of private lettings 2.) New ‘distressed-asset purchaser’ landlords – they might buy at an estimated 12% yield but be happy to accept 7%.

That said, rent yields are a good tool.

@Eureka,

Outside of the sheltered sectors (private, public and semi-state) the commercial and economic performance of Irish people is exemplary and internationally recognised. Indeed, I suspect it is this that blinded the eyes of many international institutions and observers to the underlying reality in the sheltered sectors (in which the banks, despite their increasing on international short-term funding, should probably be included).

I agree with Hogan that the problem is frequently an ex-colonial legacy where the people never felt they owned nor have fully claimed the system of governance. This is the main problem I see in the electricity and gas sectors and I have seen enough to convince me it runs across all the sheltered sectors in some shape or form.

Tyler Cowen writes in the New York Times today,

If enough depositors fear frozen accounts, the banks will be emptied out, and they also will require additional government bailouts, on top of the bailouts for the bad real estate loans. The banks come to resemble empty shells, conduits for public aid but shrinking and unprofitable as businesses — and, to a large extent, that is already the case in Ireland.

I listened to Ivan Yates on radio this morning speak about Eircom company after privatisation, and he compared it’s situation to that of Manchester United, when it was purchased by a family a while back. How those institutions become shell-ed out by their new owners, loaded up with huge debt levels they never had in the past. I would also argue btw, that a proper explanation of the 30 largest property developers now in NAMA, requires this kind of analysis also. Effectively the Irish banks were using the largest property developers, like their own personal Eircoms. Basically as vehicles, or pack horses upon which they loaded mountains and mountains of debt, beyond which any property developer would actually need to trade successfully. The pack horses believed, or were convinced by the banking institutions, that they would only have to carry the assets a certain distance, and that the banks had a plan for what to do, further down the track. The pack horses, like the innocent beasts that they were, said okay!

There is a very big aspect, akin to that, in relation to Sean Quinn and Anglo Irish bank. Where the bank recognise that a fellow is in trouble, and use him as a vehicle to expand their asset side of the balance sheet. Except, what has happened with the property developers is the opposite to what has happened with Eircom. In the case of Eircom, the privatisation was done and that was the end of things. But with the property developers, they were shelled out first, and then the nationalisation of their debt was executed. Ivan Yates also went to efforts to point out, that at the height of the speculative property boom in Ireland, a total of €3 billion euro of property changed hands. Yet NAMA somehow expects to off load a total of €8 billion in the next two years, according to its business plan. The fact is, that in order to create €3 billions worth of property transactions in Ireland in 2006, all kinds of artificial incentives and market manipulations had to be undertaken, to support that market.

Much of the media conversation, and political conversation by ministers for finance in Ireland focusses heavily on this concept of excessive lending by Irish banks. But what these good folk do not understand – it is not enough to give the guy the finance to make the sausage – you have to guarantee a market for the sausage to the same guy. It was in the creation and artificial support of the said market, that really the greatest damage was done. This is why former minister for finance, Brian Cowen was under such enormous pressure from Anglo Irish bank to establish the legislation, that would allow Anglo to sell securities of commercial property on the London market. Anglo were conscious of the fact, that so many of their sausages were rapidly approaching a sell-by date. BOH.

http://designcomment.blogspot.com/2009/08/push-and-pull.html

@ Paul Hunt
That’s grand. As long as we can put it down to regulatory/governmental failures as opposed to any inherent flaw in Irish people that’s good.
Don’t agree too much on the ex-colonial thing though. All peoples get sucked into irrational exuberance at some time- look at the UK in WW1 (a fast war to end all wars etc)
We can disagree on this but humanity is imprinted with a necessary frailty of logic that allows them to believe that “all will be well” when things seem ok. Fact is we would not be here without it. For example all the wars ever fought were fought by guys who believed at some level that they could win. And all the babies ever born were born to women who ignored the fact that childbirth was (in the past I’m talking about now) the most dangerous thing they could do.

Irrational optimism is a human thing. Ignoring inconvenent realities is a human thing. Trying to get away with stuff is a human thing.

Corruption in Ireland is deeply embedded in politics and business. In Ireland I have never encountered petty corruption such as my encounter with an Indian security guard who questioned my credentials and ask for money to be passed under the table. We negotiated the exact amount which I passed under the table. With a straight face he then asked me if he could trust that I had passed him the exact amount. I burst out laughing. In Nigeria I greased customs officials with cases of Scotch and cartons of cigarettes. Within an hour customs management in gov’t limousines showed up and asked me what quantities I had given their employees. As they explained they could not trust their employees to share fairly. This was deadly serious so I did not even smile.

In Ireland corruption takes place between pillars of the community and is considered to be perfectly normal. Cronyism and nepotism is also deeply embedded in politics and business and I would not be surprised if the lack of competence which brought our economy to its knees is a result of decades of appointments being made with little relation to merit. The merit system is for people without pull in Ireland. Then we have the other Ireland, people like my mother who used to say ” Shooting would be too good for them feckers, slow hanging would be more appropriate.”. This was usually said when the demands were disproportionate to the rewards. We do have a finely calibrated value system and can get highly indignant when the rules are not observed. The whole country is so deeply immersed in shady dealings that one would have to be out of the country for at least twenty years in order to get a sense for what is normal behaviour.
It would take one hell of a shock to bring us to our senses.

@Ronan Burke

Fair point !

However please alow me to make the two following observaions

A) I do not know much about Mr Nyberg but I would guess by his name he may possibly belong to the Swedish speaking minority left over from when Finland was a Swedish colony. I would also guess because of this fact, together with his choice of profession and career, he would not have much in common with extreme right wing Finns .

B) I believe 19 % of the electorate voted for “True Finns” party. So while their opponents may have accused them of extremism, populism etc, during the heat of election campaigns, the fact that their Party received this amount of votes and that they are in coalition talks must mean that the extreme elements in Finland do not have too much of a voice in that political party.

I am sure , as in Ireland, the overwhelming majority of Finnish people are decent individuals with normal concerns and vote for Political Parties who they hope will addres their concerns.

Sweden (and Denmark) also experienced a huge banking crisis at the same time as Finland so we may “have got a bigger bang for our buck” in hiring Mr Nyberg. Hopefully anyway!

“The proof of the pudding is in the eating.” Mr Nyberg produced the report now it is up to us to see whether we can use it or “shelve”it.

BpW
I met Popper when he spoke in Trinity along with Anscombe in ’53, and he would be appalled at having you as an admirer. He would want you to improve, to read and study more, and to write less until you do that.

@Mickey hickey
The one advantage of the euro austerity programme is that it is shaking out all those false patriots that were sucking the now dry teat of Hibernia.

J.C.T. is not all bad – perhaps we can give him the keys to the Aras when he retires.
Shit I am becoming one of them…………………………………………….

@Paul Hunt
Accepted. Perhaps the line: “the Irish penchant for not seeing a rule without considering ways to bend it or break it” was not meant as a reflection on the Irish character and was more a commentary on poor supervision and governance. Anyhow if that is what was meant point taken. And no offence taken. Just think that it was important to tease it out.

@Hogan
I’m not sure about your refutation. Just because the French vote in Jean Marie LePen should we characterize them in a particular way? Similarly the Italians and Berlusconi?

Anyway – was good to tease this out. Maybe can agree that no moral deficit in Irish people means that their children should pay for the sins of a few incompetent bankers.

Peace

The eurozone consists of 17 countries with a combined population of 330 million. Ireland was alone in the eurozone in having a massive commercial property crash. This was entirely a function of our toxic commercial lease law i.e. long leases say 25 years ,tied to upward only rent reviews. All other eurozone countries have short leases say 3-10 years with break clauses and rents reviewed annually by increases/decreases in the CPI.

It would have been impossible to have had a commercial property bubble and crash with normal eurozone lease law. The Society of Chartered Surveyors lobbied for these toxic leases and were the mouthpiece for the landlords/speculators and their valuations were the greatest work of fiction in world property history. Please remember the banks lent tens of billions against these valuations and these toxic commercial leases.

The written media followed the money i.e. economic determinism. There was massive revenues to be gained from auctioneers advertising commercial and residential property. At its peak the Irish Times had 60 page property supplements and became a player by buying MyHome.ie. The paper and other papers were full of property puff articles and property interests press releases with no critique.

To summarise –the banks were not alone —-toxic commercial lease law/the Society of Chartered Surveyors /the Irish Times et al –played a central role in destroying our childrens futures.

John Corcoran says,

It would have been impossible to have had a commercial property bubble and crash with normal eurozone lease law. The Society of Chartered Surveyors lobbied for these toxic leases and were the mouthpiece for the landlords/speculators and their valuations were the greatest work of fiction in world property history. Please remember the banks lent tens of billions against these valuations and these toxic commercial leases.

Good paragraph. It more more less sums up the truth about Ireland. I agree with the logic as presented. What was very, very interesting to me, when my NAMA developer boss’s business crashed in late 2008, how the Chartered Surveyors all seemed to hold their jobs, as every other professional was fired abruptly. It was kind of like, we must send the kids to bed now. This is adult’s stuff. It really became clear to myself, of where the power lies in the Irish property scene. It is a lesson that I encountered the hard way, a lesson I will not forget tomorrow or the day after. BOH.

This has been a really great thread.
The point about normal lease laws is fascinating. But it came up here and not in the Nyberg report.

If anybody ever wanted to know just how serious Irish people were about business, law, and the right way to do things they only need to have a look at this blog. How many posts? How many threads? All trying to figure out what happened, why it happened and how to fix it.

It’s still not over though. There’s fight in the old dog yet http://www.rte.ie/news/2011/0421/export-business.html !!!!
I’m proud to be Irish.

@Peter Kinane
“Did the escalation of bank borrowing relative to deposits happen because (characteristically) the gov. saw it as a means of cheating on the spirit of the euro protective clause of a limit of a 3% budget deficit? (Such a … would have enabled it to have funds to say yes to every sector and win three in a row).”
I believe so. I believe the tax breaks were reintroduced in 2002 with the connivance of the banking and property sectors who were about to be badly stung by a decline in the property market. The share of investors in the market rose hugely after that point completely stuffing FTBs.

The banks stood to gain on the double as they’d financed the property developers, so financing people to buy off them at inflated prices wasn’t rocket science for them. Their poodle economists used their time on the public service property broadcaster to provide the ‘fundamental’ gusto to the blow-out phase of the bubble.

The government gained, aside from the election victory, with bubble tax revenues which hid the structural deficit and the diminishing return on capital investment. It had plenty of cash to buy off social partners who were only too willing to be bought. Let the good times roll…

@Livonian
You might equally say that the other 1.7 million people of working age (or 85%) would be better served by not having their taxes increased or their services reduced by a blanket bailout of the unfortunate and the greedy.

While many would be in favour of a measure of forgiveness for the unfortunate, few are likely to extend that to the greedy. The suspicion is, based on the examples that the papers throw at us, that the greedy outnumber the unfortunate.

Far better for our national well-being (and for demand in the domestic economy) to keep money in the hands of those who earn it so they can have the confidence to spend it to their benefit.

Seafoid says,

Nobody forced anyone to buy a house but the whole system was a Ponzi scheme. How was the average punter supposed to know when all dissent was sidelined?

I recall having a conversation once about the great Wall Street Crash of 1929, and how ordinary folk got access to the market for common stocks. But apparently, the myths of shoe shine boys etc buying stocks at that time, were vastly inflated. There was a signficant segment of regular Joe’s who got involved in the speculation (people from the New York area if I am not mistaken), but nothing like the stories suggested. I don’t know how it breaks down from the point of view of people investing in property in Ireland. But many people found themselves in a position where they were landlords, not having intended to go down that route at all. I mean, quite conservative ordinary folk. The extent of the speculation is unclear though. It seems mostly, the problem was in paying inflated prices for single properties, as opposed to buying multiple ones.

There is one problem with the discussion in relation to property in Ireland though, which we need to be careful about. It is the distinction between commercial property and residential property.

The most unfortunate thing from Ireland’s point of view, is that very severe manipulation occured in both areas. There is a Venn diagram analogy that Ronan Lyons uses from time to time, where he analysed ‘NAMA land’. Ronan looks at Ireland as a map, and looks at areas where both unemployment levels and negative equity are most concentrated. There are places in the midlands of Ireland, where this happens. But there is a third aspect to the Venn diagram which Ronan Lyons cannot include in his map slides. Because the dysfunctionality, which John Corcoran has referred to in the commercial property market, may also affect people – along with unemployment and negative equity. I wrote a sub note at the end of a blog recently, which I entitled Self-Employment. You can read it at the end of the link below. BOH.

@ Seafoid: You bet! Thanks.

BpW

@ Paul Hunt

Read with interest.

Perhaps I’m mithering over nothing, but the bit where people get fined and imprisoned for talking out of school under the Credit Institutions (Satabilisation) Act 2010, seems out of line with encouraging transparency or whistleblowing.

“59.—(1) A person shall not publish the fact that the Minister proposes
to make or has made a proposed direction order, proposed
special management order, proposed subordinated liabilities order
or proposed transfer order unless required to do so by an enactment.

(2) A person (including a relevant institution) who contravenes
subsection (1) commits an offence punishable—

(a) on summary conviction by a fine not exceeding €5,000 or
imprisonment for a term not exceeding 12 months or
both, or

(b) on conviction on indictment by a fine not exceeding
€100,000 or imprisonment for a term not exceeding 3
years or both.”

@ Paul Hunt

“It is instructive though that the natural instinct is to hide things and to punish those who seek the daylight in.”

Yes, that was exactly what I was trying to articulate.

@ Paul Hunt
Excellent link, the comments are spot on and it is heartening to see indications that people have a good grasp of the problems. Again there is little optimism that elected representatives are capable of implementing change. Still a positive first step is recognising that there is a systemic problem and the solution does not reside in Brusssels, Frankfurt, Berlin or Paris.

@ All,

I noticed Gurdgiev, Lucey, Mac an Bhaird and Roche-Kelly have published a good paper referred to on Trueeconomics. I must get around to reading this some time, it looks like it is compiled together pretty well. I liked the graph showing the Irish bank share prices over the years. In the last couple of years, I have gotten to know a few people who had invested in Anglo Irish bank. An academic paper which should be attempted at some stage perhaps, is one in which the analysis is of Anglo Irish share investments, and what exactly prompted its suddent rise. From the graph shown in your paper, I can grasp how Allied Irish bank was a strong share, going back a long, long time in Ireland – and Bank of Ireland sort of kept up the rear at a respectable pace of its own. But then you see the profile for Anglo Irish superimposed upon the two, and one wonders. One really has to wonder, how so much clever money, in large denominations all crammed into Anglo, a relative late comer, and an unknown quantity. Is that the very definition of a Ponzi scheme? A pretty large one. Are all Ponzi schemes able to wreak as much destruction as Anglo Irish? Is that a common characteristic of Ponzi schemes? Or is Anglo out on its own in that respect? I don’t know. I’ve read, listened to and thought a lot about the Irish banking collapse, and I still don’t understand quite how Anglo Irish came up like it did, and established such an unusual business model, which clearly did not fit with the general trend in Irish banking stocks. BOH.

http://trueeconomics.blogspot.com/2011/03/05032011-our-economic-meltdown.html

@Brian O H

There needs to be a fundamental acedemic rejection of the mantra of the 80s – Austerity created the conditions for growth.

There was no austerity – there was a transfer of goverment debt to private debt and a dramatic increase of private debt relative to goverment debt.

There was a transfer of “wealth” and a increase of debt which drove consumption and not wealth creation
I have written before of the deliberate confusion of credit money with goverment money in the world economy since the end of the Gold standard and indeed before.
Modern MMT economies need to have considerable goverment debt to work efficiently – as goverment and central bank debt gives the signal for the true value of the currency.
A false overvalued currency based on a artificial debt metric is inherently non – optimal for trade and commerce as it creates huge unsustainable trade distortions in the economic ecosystem.

The above paper wrote that goverment nominal debt was essentially unchanged during the boom although I do believe that Charlie McCreevy actually reduced the debt in real terms during the height of the “Boom”.

Whats far more important is the ratio of money creation between private credit and goverment.
We are now at a point that the “authorties” have two choices – the much needed inflation of the system through putting real goverment debt on the books or the default or haircut of Term deposits built up during this 30 year boom in credit.
Its really that simple – as forced austerity to correct for 25 – 30 years of economic madness will result in the full breakdown of this society and others.
As long as we can keep checking accounts open we can get through this crisis – but we must recognize the fundemental problem in the system.

Acedemics and others need to project a mesage of at least limited gold ownership / goverment money so the during the possible coming storm there is enough wealth spread around the community to make trade and commerce a effecient excercise as unbalanced gold / goverment securties would merely replicate the deliberate mistakes of the past.

@ DofC: You ‘sound’ an awful lot like Frederick Soddy: “Wealth, Virtual Wealth and Debt” (1926). Familiar with? He was a genuine Nobel Laureat!

Bpw

@ Peter Kinane,

It certainly does seem to deserve a major post mortem.

The Anglo Irish shareholders are still here in Ireland, and are willing to speak about their experiences. There was a comment this morning on the Saturday View radio program about the McCarthy report, by Donal Palcic. Donal said that the McCarthy report on semi-states and privatisation was welcome. There have been numerous reports in the past, about individual companies, and reports about pay scales for individual positions in semi-state companies. But the McCarthy report, is the first in which the information is all assembled together, and one can read it as such. It is different from trying to compile a picture based on lots of fragments. It would be interesting to obtain a picture of the motivations behind those who saw Anglo as a sure thing, without maybe revealing identities. BOH.

Peter Kinane says,

From what I see the Anglo issue you raise is not addressed in the paper.

That is the problem. There is quite a large body of research which has been undertaken in recent years about the bust. There has been TV interviews and documentaries etc. I suppose, it is understandable, that people want to invest their energies into understanding the bust, and proposals of solutions to get us out of the mess. It may be academic on my part, to worry about such things. But I do hope the real academics can focus on this at some stage.

I think it would be a very useful study area for a team of researchers from north America perhaps, or even Asia. Who could try to understand Ireland as a place, which was relatively unspoilt by the excesses of consumer credit until very recently, and how we made the transition. Similar in fact, to how anthropologists may venture into parts of Africa to observe over time the rapid transformation in societies that move away from Neolithic type of survivalism and co-existence with nature, to early forms of urbanism and market economy. BOH.

@ Brian Woods,

You’re welcome. No one is going to believe this, but I did write in in absolute serious-ness. But re-reading it this minute now, you’re absolutely right. It is quite funny. I was watching a Ray Mears Bushcraft documentary about the Hadza tribe in Tanzania last night (off the tourist trail), and it kind of prompted me to think of the analogy. BOH.

It looks like Nyberg,Honohan, Regling and Watson suffered from herd instinct,or groupthink by missing our unique commercial property lease law and the cartel who imposed it on all Irish commercial tenants.