Lack of Debt Forgiveness Not Realistic

From today’s Irish Times,

Debt-forgiveness scheme not a realistic option, says Hayes

THE GOVERNMENT is set to resist growing calls for a debt forgiveness scheme for homeowners in mortgage distress.

Minister of State for Finance Brian Hayes said yesterday a proposal to write off up to €6 billion in personal mortgage debt was not a realistic option.

A spokesman for Minister for Finance Michael Noonan also indicated such a scheme was highly unlikely …. Mr Hayes, however, said there were “two huge problems” with the proposal.

“With any debt forgiveness, it will raise questions of fairness for people paying 100 per cent of their mortgages who are not getting any help from the State. It’s a huge issue for that group, who are already straddled with huge mortgages and who have not sought debt forgiveness.

“Secondly, the Government has put huge store behind the two pillar banks. To introduce debt forgiveness totalling €6 billion at a time when the Government is bringing those banks out of the A&E wards would be very difficult to justify,” he said.

These comments strike me as odd when one considers the underlying policy towards the Irish banks set out in the Financial Measures Programme (FMP) report, released last March and compiled with extensive (and expensive!) input from international consultants.

When Mr. Hayes talks about the “huge store behind the two pillar banks” I’m guessing he’s referring to the money being used to recapitalise them. Well, the recapitalisation requirements for these banks were dictated by the findings of the FMP report. 

The report estimates total lifetime losses on the €74.4 billion owner-occupied mortgage portfolio for AIB\BoI\EBS\ILP at €5.7 billion in their base case and €10.2 billion in the stress scenario. These loss estimates were then used to come up with the capital requirements for each bank, most of which has been met by putting public money into the banks.

For those who say that they don’t think that their money should be used to help write down other people’s mortgage debt, there’s bad news and good news. The bad news is that it’s already happened.  The taxpayer injections from the NPRF are covering mortgage debts that won’t be paid back. The good news is also that it’s already happened, i.e. implementing a debt relief programme won’t involve any additional costs to taxpayers over and above those already announced.

What this means is that the banks are sitting on mortgage losses that will be around €6 billion even if the economy recovers in line with the government’s projections.  This €6 billion represents debt that simply will not be paid back and taxpayer funds have already been injected to cover these losses.  At present, however, the banks are preferring to write these losses off as slowly as possible.  But whether the day of writing down is put off some more or whether the banks actively engage in a write-down programme, these losses are being incurred.

Brian Hayes may believe that the “extend and pretend” approach currently being adopted, while failing to resolve the debt nightmares of many citizens, is at least beneficial for the health of the Irish banks.  I don’t believe this to be correct.

A number of international financiers that I have spoken to recently have expressed serious disappointment at the slow speed with which Ireland is moving to write down mortgage debt. Their attitude is that they could deal with the Irish banks if they could see evidence that mortgage losses will indeed be limited to about €6 billion. However, at present, they do not see any “workout model” in place for dealing with Irish mortgage debt.  In the absence of seeing how such a model will operate, they will continue to be nervous about the size of the unexploded “mortgage bomb.”

What this means is that it will be beneficial for both the banks and their distressed customers to get on with implemented a well-designed debt relief programme. Indeed, prior to the comments from Brian Hayes and Mr. Noonan’s spokesman, I was under the impression that the government would implement such a policy. Certainly, the public statements of Jonathan McMahon, head of banking supervision at the Central Bank, indicate a preference for the banks to get on with writing down with bad loans.

What should a well-designed mortgage write-down programme look like? Brian Hayes raises the issue of fairness as if nobody has ever thought about this before. In truth, a lot of thought and effort has gone into dealing with personal debt problems around the world and there is a lot to learn from. We’ve also been discussing it on this site for a long time, e.g. this post I wrote eighteen months ago.

A well-designed programme needs to deal with mortgages on a case-by-case basis. In some cases, this can involve modifications of mortgages in bilateral deals between banks and their customers. In some cases, those who get modified mortgages will get to stay in their homes. In other cases, they will not.

In more serious cases, a process of negotiations between debtors and their creditors will be required, i.e. a personal bankruptcy procedure. The revised EU-IMF programme from April (page 15) contains a commitment to introduce a revised personal bankruptcy regime as well as a new non-judicial debt settlement and enforcement system. It claimed then that discussions were ongoing and would be completed shortly.

In light of the EU-IMF commitments on debt regimes, the stress test results and recapitalisation, and the stated approach of the Central Bank, I think the comments from Mr. Hayes about the inability to write down €6 billion in mortgage debt are unfortunate.

Let’s hope there is more progress being made on this issue than these narrow-minded comments suggest.

109 thoughts on “Lack of Debt Forgiveness Not Realistic”

  1. Karl, this is my first posting on this website, though I read it daily (many times) and for the past year. It is an excellent place to understand where we are as a country are at, and what are options are. So thank you to you all for the time you spend discussing the situation: it’s educational, informative and I think, incredibly valuable.

    There is a terrific amount of balanced judgement going into these articles…the problem, is that there are few avenues available to get these sensible points into the wider domain.

    It’s very frustrating to read about pragmatic options to get the country through this mess, but mainly, only hear about uninformed politicians view-points. Don’t have any solutions to that….just an observation.

  2. In theory, debt forgiveness sounds like a good idea but I have yet to see any practical suggestion as to how it could be feasibly implemented so as to avoid moral hazard.

    At the moment there are a large number of people in Ireland currently paying their mortgage in full who are struggling to get by month to month. If they feel that were they stop paying their mortgage they can get a win-win situation of extra disposable income at the end of the month and a writedown in their debt balance, then what incentive do they have to keep paying? Instead of having 10% of mortgages in default, you might end up with 20% or 30% which would sink the banks without further large capital injections from the government.

    In the article, you say that a well-designed programme needs to deal with mortgages on a case-by-case basis, but is that not already what the banks are doing?

    Are there examples from other countries that we can look to where a similar debt-writedown scheme has been put in place successfully?

  3. @ Karl

    It is in the nature of banking that loans are being assesssed all the time. Provisions are set up for potential default. Ultimately there are write-offs and reprossessions. As you say the taxpayer has now injected enough capital to see this process through in quite stressed situations.

    As I understand it the process is indeed quite benign to home owners who get into distress. But the projected figures for defaults depend on the continuation of the current approach to managing distressed mortgage debt. These encourage people to do their best to meet their commitments.

    Debt forgiveness completely changes the ground rules. As I understand your argument it goes “look we project 6bn to 10bn losses anyway so let’s just face that now and write to the affected mortgagees stating that we are forgiving them part of their debts now rather tand go through all the hassle”.

    Can’t you see the fallacy in this? We don’t know to whom and in what quantities these 6Bn to 10Bn losses are eventually going to fall or even if they will happen.

    I am truly amazed that you and other leading academics see how this could work at any level.

  4. Brian Hayes has said that writing off €6 billion of debt for tens of thousands mortgagees is unrealistic. If so, how can his Government justify Nama writing off tens of billions of debt incurred by a thousand or so speculators?

  5. The figure being quoted by the Sunday Times is 37 billion euro of debt forgiveness for developers and speculative.
    It is amazing that no Irish newspaper has bothered to follow up this story. We are truly being led up the garden path by NAMA…every red cent” will be paid back etc. if the ST have their story right.
    On a related issue I see that E & Y have been appointed to examine issues relating to financing of Battersea power station in the UK being developed by REO. Did I read a while ago that NAMA have advanced many millions on this speculative development. It now looks like the English bankers will get there first with a huge amount due to be repaid to them by the 31 August.
    So yes Mr Hayes..moral hazard for householders… Millions for developers.

  6. Did Mr Hayes not also refer to the fact that about 50% of mortgages are in banks not recieving the state support mentioned above? (Bank of Scotland, Ulster etc)

  7. Why not wipe out ALL mortgage debt and tax before we experience inflation ?
    Nah – we can’t do that , it might work.

  8. @karl Whelan

    Well done on raising this issue again. In simple terms the taxpayer (citizens) have already provided the funding to banks to provide for a realistic amount of losses in total.
    It seems however that many people do not consider these provisions valid and want to squeeze the turnip until they can taste the blood.

    It is up to goverment to come up with realistic proposals to recognise reality but make sure that any mortgagee has an incentive to milk the system.
    It seems to me that a scheme who does the following should be a good start.
    1. Confine the scheme to owner occupier only.
    2. Set an upper limit to a house value to be considered.
    3. Insist that all other non business assets be offset to reduce the mortgage debt.
    4. Force the banks to take the full hit on the ‘total debt forgiven’.
    5. The State gets equity in the house in the amount of 50% of the toal debt forgiven. i.e a Council house.
    6. The owner occupier must stay resident for five years. Otherwise the State gets the option/right to revert to the status quo ante.
    7. The whole focus of the scheme should be to ‘rehabilitate’ the existing ‘owner-occupier’ and his or her family back into social, community and economic life.
    8. There should be no aspect of retribution in the scheme. If we are looking for candidates to exact retribution from, we should start by reading Dr Walsh’s Beal Na mBlath speech.

  9. The last post should read
    ‘but to make sure that no mortgagee has an incentive to milk the system’

  10. I’m not saying that debt forgiveness is a bad idea but Brian Woods II has a valid point above which needs to be addressed by advocates of such a scheme. Otherwise we will have a debate similar to that of the bank bondholder defaults, where proponents were/are intentionally vague about the subsequent write downs to depositors.

  11. Brian Hayes and the rest of us need get used to the concept of debt forgiveness.

    We don’t have a bankruptcy regime at present in this country (one which sees just nine people a year processed doesn’t count in my book)

    A necessary part of a bankruptcy regime is debt forgiveness because it is normally debtors whose assets are worth less than their liabilities that qualify. And the difference between liabilities and assets is somehow written off. Or forgiven.

    So could Messrs Hayes, Noonan and Shatter get a move-on and deliver the IMF required personal insolvency framework. Because a lot of problems might be solved with such a mechanism eg if the bank knows that bankruptcy will last 12 months, not 12 years then the bank loses a lot of leverage over borrowers and is more inclined to cut a deal, and hey presto in a perfectly natural and capitalist fashion, you have debt forgiveness.

  12. @ BW2

    “Can’t you see the fallacy in this? We don’t know to whom and in what quantities these 6Bn to 10Bn losses are eventually going to fall or even if they will happen.”

    This isn’t about instantly going in and writing off €6bn. It’s about identifying cases where it’s clear the full amount will not be paid back (and there are many of these) and getting on with admitting it.

  13. @ Carson

    “In the article, you say that a well-designed programme needs to deal with mortgages on a case-by-case basis, but is that not already what the banks are doing?”

    Yes, they’re dealing with them on a case-by-case basis but, as the Central Bank have been saying, they have been very slow to admit losses.

  14. @ Karl

    “implementing a debt relief programme won’t involve any additional costs to taxpayers over and above those already announced.”

    Isn’t this somewhat assumptive that the government/banks correctly identify who this scheme should be applied to and how much foregiveness they should be given? Also, from what i’ve read so far, a lot of people are advocating this scheme on a fairness/societal perspective (which is fair enough), but that doesn’t mean that these mortgagees would necessarily have ever defaulted anyway. You could be keeping them in a life of massive debt servicing, but they may still have kept paying. As such, they’d be losses on top of what the CBI has allowed/estimated for.

  15. If this is the problem:
    “At present, however, the banks are preferring to write these losses off as slowly as possible. ”

    Then a solution might be that the owner of the banks (currently the Irish state) used the control that comes with ownership and simply told the banks management to get on with it and promptly recognise the losses. He who pays the piper etc

  16. I’ll try and put some more numbers to this.

    If we are saying €6Bn will do it – then how does this square with the Central bank figures on arrears?

    http://www.thepropertypin.com/viewtopic.php?p=529979#p529979

    If you take 180 days+ in arrears as the “beyond saving” event horizon, then there are mortgages to the value of over €7Bn already gone. If the security against these has fallen 50% (and counting) – then there is already at least a €3.5Bn loss on the banks books.

    There is also €750m of actual arrears on these – and if people aren’t making their current mortgages payments after 180 days then paying off the arrears is surely beyond their powers.

    So now we have a pre-forgiveness plan loss of €4.25Bn baked in.

    There is then the conveyor belt of 90 day+ mortgages in arrears of €2.5Bn – with only €73M in recorded arrears. The obvious sign of the aggressive management here is the leap in actual arrears from 2.8% to 10% past the 180 day horizon. You then have the sub 90 day €11Bn that have been “restructured” – over half of which have gone Interest-Only (or even less!). Tick.. tock… tick.. tock…

    The banks know the 180 day+ brigade are gone – and will have no interest in putting too much effort in trying to save the unsaveable.

    The 90 day+ brigade are flashing orange – these are being actively managed and this is where the majority of the €1.75Bn balance would be targeted by the banks.

    The sub 90 days are sitting there.. waiting… watching…

    Which is why the banks (and their political wing) are claiming there is no plan – because there is no plan. The wave of defaults sub-90 days will swamp their paltry efforts if they open their gobs.

    So they adopt the “Best to say nothing and have people think you a fool…” approach.

  17. Surely the current system is near optimal for the banks and their creditors, the biggest debts have already been moved from individuals to the public while a good percentage of people are also owned by the banks.

    it makes sense to have as diversified a portfolio as possible.

    As Eoin says “You could keep them is a life of massive debt servicing, but they may still have kept paying”

    Surely given the overall numbers the optimal strategy for the banks is to keep as many as possible in a life of massive debt servicing. The talk of debt forgiveness is useful though, these people need hope.

  18. @ Eoin

    I agree there are tricky issues and it’s important to avoid “blanket” programmes and that debt relief can only be planned on the basis of the capital resources available to the bank. However, there are plenty of cases out there now of people in deep trouble and we can and should be dealing with more actively these cases.

  19. @ Karl

    Let’s just say I misunderstood you. Your point now seems to be more one of criticising the banks’ loss recognition process.

    I believe that Brian Hayes, Noonan, Morgan Kelly, Gurdiev etc. are refering to a much more radical concept “debt forgiveness” which implies a process which would set aside debts many of which, although in current distress, may ultimately be payable.

    Debt forgiveness along these lines definitely increases the projected losses for the reasons given by Carson, B.E B, myself and others.

  20. @WGU

    “’ll try and put some more numbers to this.

    If we are saying €6Bn will do it – then how does this square with the Central bank figures on arrears?

    If you take 180 days+ in arrears as the “beyond saving” event horizon, then there are mortgages to the value of over €7Bn already gone.”

    Well, as has been said, half of those mortgages will be held by foreign owned banks.

    I have a feeling writing off mortgages in State-owned banks will be one thing but actually giving money to foreign banks will be quite another.

  21. I am in favor of debt forgiveness for first time buyers who bought from 2004 to Sep 2008. As far as I am concernced they were victims of clear collusion and pricefixing in the housing market. I would like to see an investigation into pricefixing by banks, developers and real estate agents during that period.
    Instances such as developers who reduced their prices having their entire stock bought up by groups of developers to maitain high prices were commonplace.
    The circumstantial evidence of hundreds of thousands of empty units, very few sales and yet continuing high prices during this period is pretty strong.

  22. @ Karl

    per BWII’s comment above, your suggestion of a more pro-active stance being taken by the banks with coming to bilateral agreements with debtors is entirely reasonable and sensible. A blanket foregiveness scheme would be a de facto bailout for a certain particular subset of the economy direct from the government (nothing wrong with that, but lets call it what it is), where as a more proactive approach from the banks would simply be a more effective way of the financial system speeding up its deleveraging and balance sheet cleansing processes.

    I think there needs to be completely seperate discussions about the pro’s and con’s of the two different suggestions, as there is a clear overlap, and a whole set of differing fairness and economic issues, between them when you go from the “cant pays” to the “can barely”, “have difficulty” and “wont pays”.

  23. There is too many assholes calling the shots,

    Anyone with half a brain knows there will have to be mortgage debt forgiveness,

    the banks lend the money in a inflated economy so they will have to take the loss same as the people who lost money in shares,

    very simple you dont need a degree in finance to work it out,

    there is too many people in charge who are suppose to be well educated,

    BUT the big problem is the lack big time in COMMON SENSE, you can not teach that, its a skill very few have unfortunately,

    the mortgage crisis is a tsunami waiting to erupt,

    people are under severe pressure which will have serious negative effects long term,

    No human being should be crucified like that the vast majority through no fault of there own,

    ITS time for the irish people to stand up to these bullies and demand what there rights,

    And maybe they should listen to MORGAN KELLY, he is one of the few who is living in the real world.

    IF the people dont get mortgage write down, they should all pull together and go on mortgage strike.

    get real…..

  24. @ Garry

    🙂 – Yup! Who says the banks are broken? The set up looks pretty sweet to them.

    Add in the fact that the 2 pillock banks have gone from a share of the market to a monopoly – then you have to say there are definitely some advantages in going for broke…

    @ Rob S

    Loathe though I am to mention the largesse of the government(s) to the bondholders…

  25. @Karl

    What about a scheme i have seen suggested elsewhere where some negative equity mortgage holders get the excess written off and the bank gets a share of any future increase in price?

    I know there is probably complications, but do you think that, in principle, that might be a good idea?

  26. Karl,

    I’m not clear on your position.

    “What this means is that the banks are sitting on mortgage losses that will be around €6 billion even if the economy recovers in line with the government’s projections.”

    This 6bn is expected losses (i.e. you have current non-performing and model future defaults among performing loans to get your foreclosure frequency. On the loss severity side, your recoveries offset principal owed, unpaid interest and foreclosure costs. I expect Blackrock would have assumed recoveries only coming from property disposal. Though it’s likely the Irish banks may have lobbied for some additional recoveries to be included).

    Do you think this includes any element of debt forgiveness for performing mortgages? I’d expect it does not. Reading your post gives the impression that there is money in excess of expected losses.

    I would caution against any principal forgiveness scheme that leaves the beneficiary with the underlying asset. Every debtor would be motivated to take advantage of such a scheme and the costs could rocket. Let’s face it; we’d all consume a lot more if we didn’t feel obliged to pay the credit card bill. The cost of servicing the mortgage isn’t affected by negative equity, so I’m a bit bamboozled as to why NE is being linked to debt forgiveness. A car loan is in negative equity for most of its term, but that’s no reason to reduce the borrower’s debt.

    I agree with changing bankruptcy laws – a graduated time period should be introduced. In most cases 2yrs discharge should apply, but longer periods should apply to limit strategic defaults.

    Mortgage modifications (excluding principal forgiveness) should be looked at to help those at the margin. Extending loan terms/ deferring interest, liquidating pension funds, etc.

    @ Grumpy,
    Re your comment/query on a different trend. Forgiving principal has the potential to open the floodgates to huge losses. If paying becomes optional, you’ll find plenty of people with reasons not to pay. I was thinking of a different example to yours: if some borrowers had 100k principal forgiveness to cover negative equity. Say another person with 60k remaining on their mortgage lost their job and had no other assets (except a 300k house), is it fair that is person lose their home? It mightn’t take too many steps before mortgages can’t be enforced etc.

  27. @ All

    Does not this comment by Ahura Mazda sum up the situation.

    “I would caution against any principal forgiveness scheme that leaves the beneficiary with the underlying asset. Every debtor would be motivated to take advantage of such a scheme and the costs could rocket. Let’s face it; we’d all consume a lot more if we didn’t feel obliged to pay the credit card bill. The cost of servicing the mortgage isn’t affected by negative equity, so I’m a bit bamboozled as to why NE is being linked to debt forgiveness. A car loan is in negative equity for most of its term, but that’s no reason to reduce the borrower’s debt”.

    Comparisons with the bank bailouts are misplaced as the beneficiaries were not left with the underlying assets and, indeed, the shareholders were largely wiped out.

    The idea of a generalised scheme of debt forgiveness on a case by case basis, which is in itself a contradiction, is going no where. The main reason is that while the average Irish taxpayer would be quite happy to see his German counterpart pay for getting Ireland out of the self-inflicted mess that it is in, he is totally unwilling to see his taxpayer’s money used to bail out his neighbour.

    Getting on with overdue changes in the bankruptcy laws is another matter and justified in its own right. But the snail’s pace with regard to this happening is just another example of the sclerotic state of the overpaid Irish public service to which Ed Walsh has rightly drawn attention.

  28. I was struck by the point that debt forgiveness is “not realistic”.

    The Irish property boom was sensible. Bank regulation was prudent . Guaranteeing the banks was logical . NAMA was the epitome of common sense.

  29. @ Ahura

    “Do you think this includes any element of debt forgiveness for performing mortgages? I’d expect it does not.”

    Indeed, it does not.

    “I would caution against any principal forgiveness scheme that leaves the beneficiary with the underlying asset.”

    I agree this there are problems with this. However, I think the problem is sufficiently widespread that this has to be part of any solution. Think about the case I discussed here.

    http://www.irisheconomy.ie/index.php/2010/02/03/mortgage-modifications/

    A no-keeping-the-underlying-asset approach would result in a lot of people getting tossed out of their homes, lots of additional legal and real estate fees, and an even bigger pile of homes for sale.

    One way to make it seem less attractive is to have the bank take part of an ownership stake in the home.

  30. @ Chris

    I’m a 2005 FTB. A modest enough house, but not a shoebox 25 miles past the M50. Cost a bit but nothing eyewatering. I thought long and hard about whether to buy, what to buy, where to buy and how much I could afford. Did a lot of the DIY work required on it myself. Never considered trading up even after 150k or so of increased value was on it by Q2 2007. Didn’t buy a flash car or go on bizarre 5* holidays. IE I was the prudent buyer, not the naive market chaser, bought within my means and used my head when doing so. From that point of view, i’m as deserving of debt relief/foregiveness as anyone.

    However, here’s today’s reality – had then and have now a decent job, had some decent savings at the time, had a bit of family cash to help in the process too. Can easily afford my mortgage right now despite the recent increases (on a variable, not a tracker), and am not so indebted that I’m particularly worried about the long term implications of that debt. Why the hell should i get some debt forgiveness? People should be outraged if someone like me got debt forgiveness, but I’d be outraged if someone reckless enough to buy crap for ridiculous money, and all the while living the high life, got a bailout on the back of my taxes.

  31. Useful discussion so far by IE standards … 😉

    Three follow-up observations.

    1. We cannot afford an approach that provides mortgage relief to people who can pay back in full simply because they are in negative equity or bought during a particular time period. While the €6 billion figure from the FMP report tells us that a well-targeted programme can have a manageable cost, it also tells us that a badly-designed programme will cost much more.

    2. I know that mortgage relief is an unpopular idea for many people who did not make financial mistakes during the boom and who are still able to pay back their debts. However, the reality is that many people entered into house purchases in good faith that they cannot now afford.

    3. One of my favourite economics books is a book Alan Blinder wrote ages ago called “Hard Heads, Soft Hearts”. The public interest will not be served by either the soft-headed approach of pretending these people can pay back all their debts or the heard-hearted approach of turfing all of these people out of their homes. I believe a hard-headed but soft-hearted approach to debt relief is affordable and is in the best interests of the economy.

  32. Ok, how about this for a cut-off point for case-by-case consideration?

    FTBs of non-investment properties purchased between 2004 and 2008, where their current mortgage repayments are =>40% of their net income and where they have => 1 non-adult dependent.

    As an added benefit it could work wonders for birth rates.

  33. Debt forgiveness will never work as it is totally unfair to people who are paying their mortgages JUST AbOUT. I,m saying this from experience in my house hold. We have cut out all the fat even the foodbill has been curtailed. Our wage is public sector which has been slashed by 14%. The yearly increment has been slashed by 68%. So going by this cuts I should be looking for some cut in my mortgage as we took it out 6 years ago. I used my common sense taking out the mortgage and did,nt go for a 40year mortgage or 100%. Our mortgage is not relative to our incomes anymore.

  34. Presumably the minister is not going to tell the country that mortgage debt forgiveness is open for business. I imagine the IMF and other adults have told the Govt that a certain amount is necessary for the recovery of the economy. And that the scheme would have to be run according to the principle that discretion is the better part of valour.

  35. I would be surprised if the DoF has not considered a series of debt forgiveness measures already. The stress testing exercises held in the central bank should provide a high resolution guide to which classes of mortgagee are at risk, and where they are on which banks’ balance sheets. Adequate resolution of the data should be there already, so understanding likely costs of write downs should not be a hand-waving exercise, Writedowns of existing debt, perhaps not just mortgage debt, should take place in a court setting where tests for solvency can be run quite easily and quickly on a case by case basis. It would be fraud to lie to such a body, with appropriate penalties during and after the process, thus reducing the moral hazard part of the problem. The court should be able to discover ‘can’t’ from ‘won’t’ pay with alacrity. The eventual workout for each household doesn’t need to by a 100% debt write off by any means, nor does it mean everyone would stay in their homes after having such a write down applied to their debts. The point of the exercise is to work out a reasonable level of repayment where possible, recoup the underlying asset if necessary, remove the unfair and excessively harsh bankruptcy regime that exists at the moment, and as a by product bring clarity to the ‘pillar’ banks’ balance sheets.

    Again, before running off and saying ‘I didn’t go mad in the boom’ or ‘why should my taxes pay for these guys’ 5* holidays’, perhaps reflect once more on the points raised in Karl’s excellent post.

    Debt forgiveness of one kind or another is, in my view, both necessary and sufficient for a large class of silent, miserable households in Ireland at the moment. Most of the people I speak to who are going through repossessions and court processes at the moment are not those who splurged during the boom. They bought a house because that’s what you do (or did) in Ireland. They didn’t think about the long term consequences of buying in a bubble, because not many people do. They just wanted somewhere to live. Should they bear the costs of that decision? Of course they should. But should they be crushed by their mistakes by a set of outdated rules and regulations? No, they shouldn’t. I take Eoin Bond’s points, and in fact I subscribe to them at one level. But at a more realistic, human level, the argument doesn’t hold water. Eoin’s future taxes are already gone, the only thing that remains is to use the money in the banks to best effect, and change the bankruptcy laws accordingly.

  36. @ Karl,

    Your typical rating agency identifies unemployment, divorce and death as the main causes of owner occupier defaults. Although their default models largely go on to ignore this, these reasons hold up. Obviously mortality risk is mitigated in Ireland, though this is not the case in other countries (I’ve seen losses from German mortgage pools where death was listed as the reason for default. And Germans are supposed to be prudent!) During bubble times, these types of default were masked as borrowers could voluntarily sell up without a loss.

    So ignoring death, we have unemployment and divorce as causes for default in Ireland. It’s hard to make a case to restructure mortgages for these types of defaults. A moratorium to give an unemployed person a chance to find a job is generous (as in the current environment it’s likely to be futile). From a societal perspective, it’s the right thing to do. But we should remember that from the lenders perspective it increases interest carry costs. Note: within unemployment, I include mortgages where 2 people’s incomes are required to service the mortgage.

    Currently in Ireland it seems that ‘affordability issues’ are being suggested as third cause for default/arrears. I guess this is where the debate needs to take place. Although it’s possible to reason some form of modification may get these back on track, we need to quantify how many fall into this category. I suspect it’s quite small. We need to differentiate between ‘struggling to meet monthly payments’ and ‘struggling to maintain lifestyle’. And quite honestly given what’s coming down the tracks in increased taxes, if borrowers are already in difficulty, how many times will they have to come back to the well.

    Regarding your earlier thread on the bank taking partial ownership, it might be easier to split debt into two mortgage – 1st lien relating to ‘debt relief’ and 2nd lien being the piece to be serviced by the borrower. You could then be creative on the conditions for interest roll-up on the first lien. Taking ownership might incur costs for the banks (property tax, insurance?, it would be funny if the borrower fell down the stairs and sued the bank).

    @ DOCM,

    Your point regarding the banks being bailed out is important. There is lazy media comment saying the banks were bailed out. In the context of this debate, you’re correct to point out that the shareholders have been wiped out. Unfortunately NAMA and their approach to developers appears to be a bail-out. I’m very much against this and have seen nothing to suggest that it will result in lower losses to the taxpayer.

  37. Re ‘moral hazard’,’debt forgiveness’ etc – in relation to our so-called ‘pillar banks’ – where has moral hazard/debt forgiveness come into play from the pov of the ordinary citizen in relation to these ‘pillars’?

  38. It is disappointing to note the level of “moral hazard” espoused here when it comes to ordinary mortgage holders in trouble.
    DOCM writes…”Comparisons with the bank bailouts are misplaced as the beneficiaries were not left with the underlying assets and, indeed, the shareholders were largely wiped out.The idea of a generalised scheme of debt forgiveness on a case by case basis, which is in itself a contradiction, is going no where. The main reason is that while the average Irish taxpayer would be quite happy to see his German counterpart pay for getting Ireland out of the self-inflicted mess that it is in, he is totally unwilling to see his taxpayer’s money used to bail out his neighbour.”
    Comparisons with bank bailouts are not misplaced. The shareholders may be massively diluted but the banks received massive infusions of public funds without any outrage about “moral hazard”. Not one has commented on the “moral hazard” of providing thirty seven thousand million euro in debt forgiveness to property speculators/developers.

  39. It is clear that there is a large amount of mortgage debt that will never be repaid. In the context of this, the comments of Brian Hayes are not helpful.

    The FMP gives the estimated losses by BlackRock in the base and adverse scenarios, as well as the capital requirements to cover the “three-year” losses as used by the Central Bank. The figures for the cost of debt-forgiveness and the projected mortgage losses are similar but they are not directly comparable. They are the outcome of different processes.

    It is also important to remember that one-third of Irish mortgages are not in the covered banks and are not included in the BlackRock estimates.

    I think that steps have to be taken to resolve the debts on mortgages that are unsustainable but would oppose a general debt forgiveness scheme. This will involve owners giving up part or all ownership of the house. A scheme that includes debt forgiveness but allows the owner to retain 100% ownership would be unworkable in my opinion.

  40. @ Stephen Kinsella

    Why do the lawyers always win?

    @ All

    Some of the underwater mortgages were presumably what Americans would call liar loans; deposits provided by family and income falsified.

    Ireland still has one of the highest rates in Western Europe of owner occupier homes without mortgages and there is €100 charge coming these folks way.

    However, as the Government would be giving one group €6bn , it would be identifying others for the hatchet.

    Whether it’s merited or not to spend, the amount should be seen as a cost.

    There are other deserving groups as well – private sector pensions are not likely to recover for many years; 5,300 company collapses by the end of the year and many people have seen years of effort going down the drain and little opportunity to fight back because of the credit situation and the legal process of winding down an operation.

  41. @Stephen Kinsella

    Your suggestion “Writedowns of existing debt, perhaps not just mortgage debt, should take place in a court setting where tests for solvency can be run quite easily and quickly on a case by case basis ” is unwise. No decision that is contentious and that involves difficult to verify information happens “quite easily and quickly” in a court setting. By their nature, court proceedings are slow, difficult, and expensive. The proposal to run tens of thousands of individual mortgages through a court setting, testing each case for solvency, is not a good idea.

  42. @Karl

    The good news is also that it’s already happened, i.e. implementing a debt relief programme won’t involve any additional costs to taxpayers over and above those already announced.

    You seem to be mixing up the gross and net cost to the taxpayer for bank recapitalization. The net cost will be a function of the recoveries made, and a general debt forgiveness program over and above current policies will by definition decrease the amount of recoveries. Since the banks are overcapitalized I am assuming that at some point if the banks return to a normal mode of functioning with retained earnings etc., that some of the taxpayer equity can be sold/withdrawn and spent on something more productive. If this is incorrect I would like to be corrected. Implying that a debt forgiveness scheme has no further implications on taxpayer cost is disingenuous.

    I do not know why you characterize Hayes’ comment on fairness “as if nobody has ever thought about it before”. Simply just saying that a debt relief scheme should be handled on a case-by-case basis, with a spectrum of options ranging from both extremes to everything in the middle, is not addressing the issue of fairness, it is avoiding it.

    Nobody would argue against moving the bankruptcy laws from the 19th century to the 21st. If done right that should be all that is needed. There are plenty of models that can be used. This is where the focus should lie, and perhaps there is not much difference between “debt forgiveness” as proposed by some here and a half-decent bankruptcy law.

    However Hayes is right (and I am quite sure both Hayes and Noonan have actually spent some time thinking about it) – there will never be a generalized debt forgiveness scheme since one cannot be introduced without triggering a nationwide flood of B.E.B-like comments.

  43. @ Bryan G.

    You may think I’m being harsh on Mr. Hayes but we’re told he said that

    “a proposal to write off up to €6 billion in personal mortgage debt was not a realistic option.”

    Given that at least €6 billion is going to be written off according to the Central Bank then it seems that it is Hayes that isn’t being realistic.

    Perhaps someone has evidence that he was making a point about case-by-case writedowns rather than blanket writedowns. There’s no evidence from the Irish Times that this was the case but if such evidence appears, I’ll be happy to withdraw my implicit criticism of Hayes.

  44. I agree with those above who propose protection of owner-occupiers and that that some home equity will have to be put in play. People in this scheme would essentially revert to a similar status to those who bought out council houses.

    One potentially problematic snag might be the impact on the State’s ownership on a nationwide basis of large numbers of home equity loans on stuff like national planning policies, since the State has a higher chance of recouping its part of the deal if fewer new houses are built than local councils might want.

  45. Let’s be honest; debt-forgiveness in any shape or from is just not going to work. If such a thing were to occur what’s to stop me from quitting my job, signing on and avoiding all attempts to find another job. Sooner or later I’ll join the ‘at risk of default’ category and can then negotiate a nice discount on my mortgage courtesy of the taxpayer.

    When I then return to employment and have no problems paying back my now ridiculously affordable mortgage, and the banks going to come after me now that my earnings have increased again? Are we talking debt-forgiveness or debt-deferment?

    As for the so-called deterrent of banks taking part-ownership of the property, it will most certainly be in their interests to ensure the value of this asset doesn’t deteriorate over time, either because I will have to pay more money to them to buy them out or because they will benefit more on the eventual sale of the property. To say nothing of the fact that the banks are largely nationalised now, so it would make sense for the government to pursue policies with the intent of propping up the price of my property.

    Certainly our personal bankruptcy laws need to move into the 21st century and those who are being crippled by a contract they entered into in good faith should be given some hope for the future, but let’s not kid ourselves that we can afford to do anything more than that.

  46. Just a few random observations, not a thesis, especially given the quality of contributions.

    1. I think a 180 day + situation is irretrievable of the mortgage in 180+ arrears was taken out post 2003. Therefore I suspect the banks have already written those off to an extent and the foregiving is done. We recaitalised some of that writeoff back into the banks ALREADY if the 180 day threshold was reached by end 2009 ….as many were.

    2. The current level of debate in the media…especially the near hysterical flip flopping of the Sunday Independent as it tries to guage the public pulse…will inevitably lead some to go into arrears on the grounds that proof if stress will be required to avail of this scheme. Some who could pay ( albeit with difficulty) will now wander close to that cliff edge…some will catch a crosswind as they totter.

    3. What has not been discussed properly is that many of those with too high a mortgage are also endowed with too much of every othe rclass of debt too. The Plastic, Term Loans, Mortagages and the Never Never piled upon each other. For them we need to sort out Bankrupcy Lite and sharpish…..of course that forces banks to realise writeoffs as yet unrealised and unaccounted for does it not ???

  47. I think it would be useful if Karl Whelan outlines what he is proposing. This article left me wondering whether there was any substance beyond ‘you know the government should just like write off those mortgages because they’re never going to get them back. NAMA for the little guy.’

    Karl points at this article as an example of the kind of thing he has in mind:
    http://www.irisheconomy.ie/index.php/2010/02/03/mortgage-modifications/

    In this example, the unlucky couple get a reduction in their monthly payments with a charge hanging over their property to be dealt with in the future. In this way they continue to make smaller payments and they get to keep living in their house.

    That’s happening already – that’s what mortgage restructuring is. You ring your bank, tell them you can’t afford the payments, you go through the process and they switch you to lower payments.

    Why do millions of people get up early and go into their soul crushing jobs every day? They do so because of fear. the alternative to going to work is explaining to your family that you’ve lost your house. This is the primary economic motivating force in society. Take it away and people will stay in bed. I know I would.

    What happens when you lose your house? After you’ve faced the social shame, you have to rent a place like everyone else who isn’t a ‘homeowner’, you can’t get credit any more so you have to save up for holidays and cars. Soon enough the state will push through bankruptcy legislation and then you can be legally discharged from your debts. Being refused credit for a long time is hardly the worst punishment.

    Promoting the idea of debt forgiveness encourages people to think that perhaps if they stop paying their mortgage, their neighbour will be yoked in to do it for them. I believe that the action of the previous government in announcing a repossession moratorium led people to choose to take a payment holiday and thus get into more trouble. Repo stats are still tiny and the press is full of talk of the ease of restructuring. If anything, people need more motivation to repay and not less.

    What about kindness and the welfare state? Well we have a generous mortgage interest supplement scheme for people who have lost their income. So long as you can convince the state that your house is not oversized for your needs and that you could afford your mortgage when you took it out, the state will pay your mortgage interest for you in full. You tell your lender you need to go interest-only for a while and bob’s your uncle – nanny looks after the payments.

    So, in summary Ireland needs bankruptcy legislation which is a form of debt forgiveness. Ireland does not need political pressure on banks to arbitrarily write off some people’s mortgages.

  48. @Bryan G
    “However Hayes is right (and I am quite sure both Hayes and Noonan have actually spent some time thinking about it) – there will never be a generalized debt forgiveness scheme since one cannot be introduced without triggering a nationwide flood of B.E.B-like comments.”

    A nationwide flood of comment did not prevent NAMA going ahead to bail out bankers and speculators.

  49. I’m all for introducing a proper system of bankruptcy in Ireland. But debt forgiveness where the person gets to keep the asset is deeply unfair.

    There are tens of thousands of people in Ireland who have wanted to buy a house for years, but have not been able to buy because of the property bubble. These people recognized that housing was completely unaffordable, and didn’t buy. Most ended up renting, an option that is particularly unattractive in Ireland, where rents are high, the quality of rental properties is often low, and protection of tenants is weak.

    What these people need is for the property bubble to burst. The main thing keeping the property bubble going now is government policy. The government intervened to save the developers. It used NAMA to hoover up tens of thousands of empty properties and keep them off the market. It used its control of the banks to prevent foreclosures on both investors and owner occupiers. At every stage, the government has done everything in its power to keep supply off the market and make housing as expensive as possible.

    The policy has been hugely successful. Despite there being hundreds of thousands of empty properties in Ireland and economic armaggedon, prices have fallen only 42% on average (CSO).

    It’s not clear why the imprudent should get their mortgage reduced and get to keep the house. In the meantime those who were prudent are still stuck in rental accomodation, and have no protection at all if they fall into arrears on their rental payments.

  50. The idea of forgiveness is sweet, but ridiculously naive, hard heads and soft hearts indeed – more populist bunk, the opportunism that such a scheme would invite would rival any gold rush of historical repute. Write downs are necessary but the asset must be disposed, more modern bankruptcy laws would indeed offer greater leverage for those in genuine longterm default. The application of the capitalist doctrine requires a return to equilibrium, credit and asset prices must settle togther, the more forgiveness the less credit as banks will have greater write downs, therefore the lower asset prices will go. Unless of course we get a QE holiday and perhaps thats the plan?

    This circle is closed, the more money we waste based on bleeding heart economic populism the longer the economy will fall – explain to my ketone soaked brain how this is helpful economically

  51. @Bond. Eoin Bond.

    Well done on your prudence and on the fact that you are still employed in what is probably a decent paying job.
    In relation to your comment that you would be outraged if a high roller were forgiven part of his mortgage, so would everybody else.
    But you are intelligent enough to know that not all people in deep trouble with their mortgages and consequently with their lives were high rollers and many have not managed to hold onto bad jobs, let alone good ones.
    You are also intelligent enough to be able to design a scheme that would be equitable enough to have positive impact on the lives of thousands and of the country generally without allowing freeloaders to benefit.

  52. I should add that in the absence of a structured approved scheme, bank executives will be (probably are already) deciding which mortgages to write off. It is not unreasonable to suggest that both political and executive influence with be factors when it comes to decision making. And it will be done behind closed doors.
    Just like NAMA at present who, per @ceteris, have or are deciding to write off €37 billion. €37 billion. Gone. I wonder what the criteria were.
    Surely a write off of this magnitude is a matter for a Dail Eireann vote? But maybe I kid myself.

  53. @ Karl
    Perhaps debt relief needs to be brought into the mix with the Croke Park Agreement, Social Welfare so that all can be sorted at once???

  54. The term “written off” is being used above in two different ways and this is confusing issues.

    Write off: accounting term for when conservative accounting principles require that the expected market value of the loan asset is set to zero on the asset side of the lending institution’s balance sheet. This has no implications for the firm’s debt management policies. The accounting decision cannot be seen to affect debt management policy since this infringes on accounting impartiality. The debt is still due, but it is the accountant’s best guess that it will not be paid in likely circumstances. That is not a textbook definition but how I remember it.

    Write off: Lending institution decides to forgive a debt and not chase the debtor for any payment.

    The second definition implies the first, but the first does not imply the second. Accounting and bank balance sheets are only about the first definition. They have nothing to do with the second definition. The second definition is a political or debt management decision not tied to accounting balance sheets.

  55. @ Joseph Ryan

    I know that if I were in government I’d be looking for weekly updates from the pillars about exactly who had benefited this week and then I’d be dispatching local TDs to remind them that it happened on Fine Gael’s watch. Talk about buying votes.

  56. @Karl

    What should a well-designed mortgage write-down programme look like? Brian Hayes raises the issue of fairness as if nobody has ever thought about this before. In truth, a lot of thought and effort has gone into dealing with personal debt problems around the world and there is a lot to learn from. We’ve also been discussing it on this site for a long time, e.g. this post I wrote eighteen months ago.

    You accuse Hayes of being mistaken in his view that fairness is a problem, and imply that if he had read this blog he would find some fair schemes that he could implement. That is not the case. Your own post from last year raises more questions about the practicality of any such scheme than it answers.

    Also you say

    A well-designed programme needs to deal with mortgages on a case-by-case basis. In some cases, this can involve modifications of mortgages in bilateral deals between banks and their customers. In some cases, those who get modified mortgages will get to stay in their homes. In other cases, they will not.

    This is what I meant about your post sidestepping the fairness issue that Hayes raises. It is very easy to talk generalities from the sidelines and say that all possibilities should be on the table, decided on a case-by-case basis. If a government were to legislate on this it would not have that luxury, but would instead have to put in place hard limits/thresholds etc.

    The way to prove Hayes wrong is to produce a detailed template of what this debt forgiveness scheme should look like, and then evangelize that. Until that occurs I would agree with the Leon Nova post above – “This article left me wondering whether there was any substance beyond ‘you know the government should just like write off those mortgages because they’re never going to get them back. NAMA for the little guy.”

    My suspicion is that the distance between some of the more conservative debt forgiveness proposals and a global-best-practice bankruptcy scheme is not that huge, but in the absence of detailed proposals for both approaches it is impossible to tell.

  57. @Ceterisparibus

    “A nationwide flood of comment did not prevent NAMA going ahead to bail out bankers and speculators.”

    Which is why having another government-controlled department that assumes more private debt at taxpayer expense and makes somewhat arbitrary decisions as to who benefits and how much they benefit may not be such a good idea.

  58. @ Joseph Ryan

    The story on the 37 billion debt forgiveness programme for developers and speculators is per the Sunday Times. I understand per PR Guy that they have been running it for a number of weeks. I haven’t seen it anywhere else. Amazingly no Irish newspaper has commented on such big story.

    As for a Dail vote.. I seem to remember the Minister reserved major powers onto himself. So presumably the current Minister would have veto powers on a decision of this magnitude.

    It must be the silly season with Irish papers ignoring major stories relevant to Ireland such as the Battersea power station site/ REO which the Telegraph reported few days ago.

  59. @Gregory Connor

    “The term “written off” is being used above in two different ways and this is confusing issues…”

    An even clearer description than last time on the other thread. However for those conflating the two I don’t believe the problem is an inability to comprehend, but is rather an unwillingness to acknowledge, since it lays bare the zero-sum nature of the problem.

  60. @ Bryan G.

    “I would agree with the Leon Nova post above – “This article left me wondering whether there was any substance beyond ‘you know the government should just like write off those mortgages because they’re never going to get them back. NAMA for the little guy.” ”

    Honestly Bryan, my role in life is not to convince every punter that reads the IE blog so think that if you want. Still, I think that’s a really bad characterisation of what I’m saying.

    The main point of the post is simple. Brian Hayes is free to say that the banks can’t afford six billion in debt relief — but it’s worth pointing out that our bank recapitalisation policy is based on assumed losses on mortgages of between six and ten billion.

    I agree fairness is an issue but it is in every time when there are large-scale debt writedowns and to produce it as a rationale for doing nothing was weak, in my opinion.

  61. FWIW I am sure many people would wish that a painless means of disposing of debt existed, but anyone over 30 with any real life experience is likely to understand that, whatever is decided, there will be losers in the process.

    The assumption that a mortgage forgiveness plan can be designed in an impartial manner and that only the honest and upright would benefit, is a fiction that is laughable. The corrupt manner in which NAMA was established is still a marvel, how would it work when the bank manager/elected official is bailing out his friends, cos you know, he’s always been a good party man! While the really honest, keep your head down type is sent off with a flea in his ear for daring to ask for a freebie…

    I think is was de toquevile said of US democracy that it would work only until the masses worked out that they vote in those with the power to print money…it’s amazing that in Ireland, we voted away the power to print money when we joined the euro, but we decided to print it anyway!

    And to use Thad argument that NAMA was done, so now to refuse to forgive debt to individuals would be immoral, is specious, and dangerous. If that is your argument, then the answer is to repeal NAMA.

    The bureaucrats, the bankers, the developers, the estate agents, the economists and the lawyers who designed and benefited from the abomination of a property bubble, are all still walking free, most of them are sitting in the SAME positions of power that they abused so outrageously and we are assuming that, this time, they’ll behave responsibly…? Shouldn’t we work to at least fix this before we move to the next phase of the repair?

    A formula for forgiveness is indeed just, but it is a recipe for a disastrous cleavage in the unity of irish society. There is no history to suggest that it will be managed professionally or dispassionately, but we have to assume it will be…

  62. @Gregory O’Connor

    I disagree, but you may be assuming a kind of High Court or Commercial Court process implicitly in your comment above as we have right now. Speedy court processes are possible, even in Ireland. They need not be overly costly, and they need not be slow. Take a look at the BIS data here:

    http://www.insolvencydirect.bis.gov.uk/otherinformation/statistics/201108/index.htm

    The staff of 2,100 in the BIS processed 30,513 individual insolvencies in England and Wales in the second quarter of 2011.

    You see speedy and efficient debt resolution mechanisms up and running a 45 minute flight away. These rulings have the force of court orders. Have a look here http://www.imf.org/external/pubs/ft/spn/2009/spn0915.pdf, page 6, at the cost of these proceedings internationally. True, they vary, and this 2008/2009 data, but they can be done quite quickly indeed.

    One wouldn’t expect thousands of mortgages to require processing immediately, but a steady throughput of a few hundred a month would go a long way towards alleviating the problem in my view.

    Btw I’m using the phrase ‘write off’ in the second sense. Well done in clarifying this vital terminology in the comment above.

  63. @Ceterisparibus
    The article said up to E37 billion. Enforcement actions etc mean it will almost certainly come in below that, but the figure is correct as the top level that could be reached.
    I too am surprised at the lack of follow up in newspapers – it got huge coverage on the radio – but I can say that when I wrote originally last November that debt forgiveness was being offered by Nama to developers it didn’t receive follow up either. I’m sure it’ll probably be the story of next year when the deals are being signed off.

  64. There seems to be widespread unstated assumption that the distribution of wealth between the classes must be frozen as of September 2008 and that any transfers are justified, no matter how regressive, so longer as they serve this goal.

    Saving the bank bonder holders is a simple transfer from society in general to what we were once allowed to term ‘the ruling class’. All the talk about pension funds etc. cannot disguise the fact that transfer is between the generality of taxpayers and the top 5% , since they own the vast bulk of the bonds in question. The details don’t matter.

    Likewise we are given the plausible ‘pragmatic’ argument that most of these big mortgages will never be paid in full, so recognise reality, forgive the debts and move. Of course the unstated consequence is that people who bought houses they couldn’t afford, (disproprtionately upper middle class people) get to stay in the houses they thought they could afford, instead of trading down, which is the fairest solution. Of course the banks are still out of pocket, but the moral hazard dssapears. It is simply not true that the moral hazard cannot avoided, upper middle class people who have made themselves insolvent, can actually actually live in cheaper houses, just like members of other classes.

    Petty snobbery is so pervasive in this banana republic, that even an economist like Morgan Kelly cannot conceive of a solution that involves barristers handing in the keys to their semi-D in Glenageary so as to take up something closer to their current means, say in Clonsilla.

    It is not a choice between forgiving mad debts and putting children on the streets as the Sindo melodramatically pretends. It is not the responsibility of the tax-payer to provide people with the lifestyle they believed they deserved in September 2008.

  65. A bit frivolous I know, but does anyone else think that the 6 to 10bn assumed losses which are part of the recapitalisation program have already been earmarked to cover losses elsewhere?

    I can’t help but be reminded of some lines from Martin Amis in his novel “Money” on the subject of the likelihood of a character being repaid a long-standing debt.

    “The money he was expecting – it looked like my money now. It looked as though it was all marked me. But when that money came, it wouldn’t look like my money anymore. It would look like his money. He wouldn’t want to blow it all on me. Money is very versatile. You have to give money credit for that.”

  66. @Tim
    That is exactly what is going on…and it’s going on across the world..it is in the nature of human beings I suppose to expect that position is permanent and that the upper classes have done something to deserve their position. These classes will fight to their last breath to protect that status too, and when they feel the danger has passed, they will again assert their privilege on the basis of moral superiority.

    The Blanket bank guarantee was a mistake, NAMA was morally abhorrent yet both were sold as unfortunate but necessary, avoiding disaster that would destroy the ordinary person…well I suppose what is actually happening to the ordinary person could be worse, but not by much. Today, the only Real benefit we can see are that the managements of the banks, the developers and the politicians got themselves a free pass to hide the collusion (politicians) write off losses (developers) or transfer losses (banks)….and they get to sit in their positions of power as if they did nothing wrong…oh Yes, and these people are so trustworthy, they can be counted on the manage a programme of debt restructuring/forgiveness/forbearance without question, when we all know that the manner in which both the guarantee and NAMA were conducted was obscure and corrupt….are we fools?

  67. @Karl,

    It’s not IE blog punters that you need to convince, it’s Hayes & Noonan. They don’t believe there’s a workable plan that wouldn’t be socially divisive.

    The current loan loss provisions are write downs in the Gregory Connor #1 sense – an accounting construct. What really matters are actual losses realized – i.e. the true cost to taxpayers, and this a function of the debt management policy. Noonan and Hayes have to decide whether taxpayer funds are better allocated to a new debt management policy or used for other purposes.

  68. @Karl Whelan

    (I am not an expert on anything.)

    It seems (amirite?) there are (or have been) roughly two kinds of uncertainty about future losses at the Irish banks. One is opacity in the loan books: outsiders not knowing how badly loans are already in arrears, or what the debtors’ current capacity to repay looks like. (Not that even the banks themselves are necessarily well-informed on the financial situation of their debtors.) The other uncertainty is uncertainty about what the future course of the Irish economy will mean for the future performance of the banks’ existing loans (as well as their prospects for new business). Clearly even full insight into the banks’ books (plus a good idea of what their debtors’ accounts look like today) would not be nearly sufficient to settle that question: it’s an economic, not an accounting question, and moreover the answer may end up having as much to do with ghost estates in China as those over here.

    Then writing off and forgiving clearly bad, “can’t pay, won’t pay” mortgages several months in arrears should ease the type-1, opacity-related uncertainty a bit by (let’s cheerfully assume) giving assurance that the present proportion of debt in that hopeless category is about in line with current estimates. But it can’t do much for investors’ type-2, growth-(etc.)-related uncertainty, because that’s almost wholly uncertainty about the future performance not of hopeless “can’t pay, won’t pay” debt which can be safely wiped clean precisely because everyone knows that it’s toast*, nor of safe “can pay, will pay” debt which (fingers crossed) will remain good even in a future downturn, but of the middle “may pay” debt which is current (or just about current) so far, but which could easily go into serious arrears if the debtors’ fortunes worsen (or don’t improve) and/or they choose some kind of elective default.

    So if (amirite?) the Irish banks’ uncertainty problems are to a large extent a matter of type-2 uncertainty these days, then forgiving the hopeless cases will come at a low cost to the banks* but can only reduce the uncertainty that clouds them to a limited degree. A different, more generous debt-forgiveness scheme could do a lot more for that uncertainty – by targeting “may pay” debt, it would give the banks a further cushion against the consequences of “unexpected” bad economic news – but would cost public authorities a lot more: beyond a certain point you’re getting what you pay for here. Would you agree?

    \* Completely glossing over for the moment that barring repossessions, etc., would indeed reduce what the banks recover.

  69. I hope Brian Hayes visits this site, sometimes spelt with a ‘h’, and acquaints himself with the spectrum of opinion and perhaps he could offer his solutions to the inertia that persists. At least then all this hypothesising might contribute, rather than simply irk the thread bearers, although that is personally thoroughly enjoyable

  70. @ Tim/Bklyn_rntr

    Yes. There are always two processes going on on in Ireland. One is the official debate in the dail and the media. That’s for consumption by the small people. Hard decisions for hard times etc.

    The other is the insider debate between various stakeholders and their busy lobbyists. That is all about papering over the bubble stuff, letting sleeping dogs lie, and and preserving the existing systems of privilege insofar as possible. Business as usual.

  71. @ Anonym

    It is incongruous to hear a discussion on the equity of transferring wealth between people whose ambitions, and mortgages, are in different states of repair, in circumstances where much more massive transfers have been made without any discussion whatsoever. A point made above by several commentators.

    Transfer of wealth to the very powerful, it seems, does not have to be justifed on equity grounds. It’s different you see, because they are not like us. That’s just how the world works, what the economy requires. Get used to it. Creditors rule OK. Always was and always will be.

    I recommend reading Yves Smith’s Econned, and Michael Hudson’s Trade Development and Foreign Debt. Then we can begin to talk about what is equitable.

  72. If this was the problem:
    “A number of international financiers that I have spoken to recently have expressed serious disappointment at the slow speed with which Ireland is moving to write down mortgage debt. Their attitude is that they could deal with the Irish banks if they could see evidence that mortgage losses will indeed be limited to about €6 billion. However, at present, they do not see any “workout model” in place for dealing with Irish mortgage debt. In the absence of seeing how such a model will operate, they will continue to be nervous about the size of the unexploded “mortgage bomb.” ”

    Then the issue isn’t so much the speed of realising the losses, then I’d say that the issue is lack of confidence in that the provisions has been calculated honestly and/or competently.

    Why is there such a rush to sell the ‘pillar’ banks? Quick sale with lots of uncertainty equals low price.

  73. @paul quigley

    I’m confused – there has been a massive amount of discussion about the transfer of €64bn from Irish taxpayer to bank creditors, thanks to the bank guarantee and the ECB. The current zero-sum game exists as a result of those previous battles having been lost.

  74. As someone who just recently managed to clear the mortgage I can empathise with Eoin Bond’s comments but there is a difference between those who won’t pay and those who just can’t pay. As I stand here on my moral high ground all I see below me is the shattered hopes, dreams and aspirations of ordinary people who only wanted to buy a home, settle down and start a family.

    The link above to the IMF paper has some good points regarding case-by-case debt restructuring. We need a framework where people can enter and deal with their problems and exit in a timely manner.

    The program should, where feasible, be selective and target borrowers who
    cannot meet their debt service obligations but whose ability to service their debt is likely
    to be restored upon restructuring.

    There must be many who would fall into this category and its about time we got a start on doing something to solve this problem. All this guff about moral hazard is just an excuse to do nothing. Noonan and Hayes have done their sums and they know that they have more to gain by not instituting some form of debt forgiveness.

    I listened to Hayes on Newstalk this morning and his performance was pathetic. Gobshite. If you want moral hazard just think NAMA.

    The mean-spiritedness and common begrudgery about this subject will ensure that there will be no NAMA for the little people.

    @ Paul Quigley

    well said.

  75. Paul quigley
    And so it is in this world…to he who said there was huge discussion about the 64bn, I can only point out that this was AFTER the fact.

    One of the easiest ways for the insiders to maintain their hold is to sow dissent and nothing could be more divisive than a badly thought out or executed forgiveness program. When Fred who has one three bed semi and lost his job as a plumber goes to get his debt redone, he’ll be shown a series of impossible hoops to jumpy through by some jumped up prick who is only in his job cos his dad knew the manager. But when mick goes to get full forgiveness on his 5 bed detatched and the three BTL apartments cos he can’t afford all that and the lease on the BMW too, he’ll get the wave through cos, you know, he’s a great man and he always looked after his mam.

    Nama was a joke, the bank guarantee was criminal act of treason. Now the PR campaign to save the lower order insiders is in gear, we can look forward to many mean and nasty stories of woe…but be careful….people will only put up with so much….

  76. @Paul
    The conversation will always be contained.

    Anybody questioning the very nature of the tabernacle will be silenced.

    Its the structure of this society – it is priest ridden , we are wasting our time really.
    Financial buggery is endemic but never talked about as it is a vulgar concept in polite circles.

  77. Remember that the original Tea Party revolt in the USA didn’t start over taxes — it started over mortgage debt restructuring. Use the Google for Rick Santelli’s original rant and the HAMP fiasco to confirm.

    It would be useful to have firm data on what kind of restructurings are currently taking place — covered banks vs non covered, “sub-prime” vs standard etc.

  78. @ Bond Eoin Bond

    Eoin – I am a great admirer of your postings here so I am not taking the mick when responding as follows re your comment…”but I’d be outraged if someone reckless enough to buy crap for ridiculous money, and all the while living the high life, got a bailout on the back of my taxes.”

    Is’nt this exactly what we have done for bankers and developers?

  79. @ Eoin
    ‘Why the hell should i get some debt forgiveness?’
    I pointed out in my blog above there is strong circumstantial evidence of price-fixing and collusion in the Irish property market involving the banks.
    We could have a government led investigation in which case the banks, if guilty, would have to pay a fine to the government. The government could ‘pass on’ these proceeds to write downs in as fair a way as possible. Due to the fact that shelter is defined as a basic human need in the U.N. declarations of human rights – which all governments are supposed to follow, then First time buyers owner occuppiers would take precident.
    Alternatively people could get together and file a collective lawsuit against the banks for colluding with developers to fix residential property prices. I wonder if there could be a case for the European courts. I remember the case of a guy thrown out of social housing in Ireland, no success in the Irish courts, went to the European courts and won. The European courts basically said Irish laws protecting tenants were among the worst in Europe.

  80. The report from the Mortgage Arrears group can be found here.

    Having looked through this I am more convinced than ever that a general debt forgiveness program would not work and that the problem should be handled by means of a proper consumer insolvency scheme. The group could not find any mortgage debt forgiveness schemes anywhere else in the world (except for some in the US but the landscape is completely different there due to non-recourse loans). This would imply that any such scheme in Ireland would be a new “Irish solution to an Irish problem”. Who has confidence that Irish public administration has the capacity to design a scheme from scratch that won’t lead to a raft of scenarios like Fred the plumber losing out to BMW Mick. Even worse the very design of the scheme could be subject to capture by certain interests.

    On the other hand nearly all other European countries already have consumer insolvency schemes. Only Ireland, Greece and Spain don’t – what a surprise. Hence it should be possible to simply take common/best practice and adapt around the edges for Ireland. This is probably within the competence of Irish public administration. Unsustainable mortgages result in a forced sale. The shortfall becomes unsecured debt and a payment plan is put in place for 5 years, with all assets/income on the table, but with debtors living a normal lifestyle but in reduced circumstances – no Marshalsea concepts are involved. After 5 years the debtor is discharged. Those with really large shortfalls due to uncontrolled mansion buying would have a longer period before they are clear. There is no need to reinvent the wheel here.

  81. @ All

    This has been such a rich debate, that in order to keep up here’s a list of things that have struck me from this and other threads that could usefully be examined in a package of reforms.

    Overall objectives:

    (1) People get decent housing at reasonable prices.

    (2) Speculation in residential housing market discouraged.

    (3) A route out for people in financial distress.

    Look at the following:

    (a) A full housing database with accurate, regularly updated figures.

    (b) This database to show simply the current price of houses in relation to average income, and/or rental yields to identify over-pricing as it occurs.

    (c) Possible limit of two houses per person.

    (d) Change of law such that banks providing a mortgage have recourse only to the property on which the mortgage is lent.

    (e) Assuming this has not already happened, bankers bonuses not to be directly linked to the amount of money loaned.

    (f) Consider reforming lending regulation to limit multiple of income(s) that can be made for a mortgage.

    (g) Independent financial advisor to be required to act as mediator between lender and mortgagee for anything but a ‘plain vanilla’ mortgage, possibly building in expertese available through CAB or similar.

    (h) Reform of bankruptcy laws to simplify process and shorten term of bankruptcy.

    (i) Not sure about this, but consider some sort of ‘class of 2002 – 2007’ investigation to see whether the lending was so egregious, that people were effectively missold mortgages and some sort of collective response required.

    (j) Also not sure: Consider reforming collatoralisation. Mortgagee to have right to refuse lender permission to sell their loan on.

    For the last one to work, Ireland probably needs a decent building society to remain.

  82. There are a few major problems with this debt forgiveness plan

    In summary I would recommend the following and there is supporting detail listed below.

    • People who borrowed 90 per cent + mortgages should not be considered for the scheme – other than to be able to hand back the keys and not get another mortgage ever – the should be able to walk away and continue life as a tenant.
    • Any restructuring of the loan – the amount written down needs to stay as a debt against the asset – to be realised at such time as the ownership changes – prevents profiteering at a later date – as was the scandalous case with both social housing and corporation housing during the boom.

    Some possible questions which would arise.

    • Take an area of Dublin where couple A and couple B bought townhouses for 400K – couple A borrowed 400K 100 per cent and couple B 250K – Couple A both employed in the financial area have lost one or both jobs and are now unable to make the monthly repayments. Couple B are working in IT and Pharma and their circumstance has not changed both properties are now selling for 180K. A debt forgiveness scheme is announced from 01.01.12 to 31.12.12 and couple A one person working can make repayments on 180K of a mortgage – debt written down and they are on the road again. 05.05.2014 e.g. – changes in corporation tax and couple B are now both unemployed and have a remaining mortgage of 160K – property value has increased and the house is now worth 250K – couple B have to sell at 250K as they cannot support the mortgage – they leave with 90K a loss of 60K on their initial investment – couple A with kids now decide to sell as they want a bigger place circumstances changed more disposable income – they walk away with 70K profit on the investment. (Which is fair? – is this realistic)
    • People who are servicing mortgages now of 400K – their circumstance can change in 4-5 years from now and they are in the position of people who are currently being talked about for debt forgiveness – what happens for them in 4-5 years? In short the difference between a performing 400K loan and not is by and large overall chance.
    Aside from the current retail and construction collapse – overall the economy is attracting inward investment and exports are growing – its probably not reported but to maintain the position we are in currently we will be doing well!!!!
    • What about people who bought in the commuter belt and are now facing doubled transportation costs – who bails them out?
    • What about people who invested their life’s worth in bank shares?
    • I know a person who works in mortgage arrears in Bank of Ireland – he is calling people who are up to 10K behind in mortgage repayments and calls are being answered from Spain and Italy where they are on holidays. People are meeting him wondering what to do and they still have full Sky packages and dual gym memberships. So just have a chat with some of these people who are working for the lenders and see the real picture.

    So in short albeit commendable to promote a solution please be aware that this problem is not restricted to the 30 or 50,0000 non performing mortgages – its anyone of the 400K plus mortgages which are now in negative equity and whose circumstance financilly has not changed but may change over the next 30 years!!!!!!!!!!!!

  83. one extra part that is missing from this plan – as I understand and I am no expert – under new EU banking guidelines the banks are required to have x% capital – is it not the case that money on deposit is flowing out from Irish banks – state guaranteed banks and this is being replaced on a bi-weekly basis by the ECB – it is perhaps to not accurate to suggest the pension reserve fund is sitting in the banks as capital.

    Whats happens at the end of summer if Spain and Italy cannot borrow through the normal channels?

    There is a complex picture here – and I think EU wide defaulting is a more realistic solution than the 30 or 50K mortgages being discussed here.

  84. Very productive thread.

    I think Debt relief scheme would be messy and would increase the losses to greater than 6bn taking other economic factors constant. However the benefits of a scheme for the wider economy would exceed the marginal losses to the banks in implementing it. It must be done carefully, minimising extra losses but it must be done.

  85. I think it is generally accepted at this stage that Ireland’s bankruptcy laws are outdated and archaic and that the recommendations of the Law Reform Commission from December 2010 should be implemented. While people may oppose debt forgiveness on the grounds of moral hazard, an updated bankruptcy system will inevitably involve some form of debt forgiveness or write-off as debtors who successfully complete an agreed payment plan will have their debt discharged after a period of time.

    While glad the debate is now taking place, the lack of political will to tackle this issue is disappointing. According to the Programme for Government, “ a more radical approach is needed to protect families in fear of losing their home” – I haven’t seen much evidence of that yet but I live in hope.

  86. @Gavin
    Nice list, i fully support it. This kind of regulations would help to avoid a bubble in future and should be top of the agenda. I have actually already emailed local TDs and others with points a,b, and c. I also suggested legislation to prevent hoarding of development lands by developers.
    Point (j) was mentioned to me recently by a Canadian as the reason why their banks fared better than the Americans. The banks selling the mortage were not allowed to sell it on to someone else so took it more seriuosly.
    Unfortunatly I have a feeling that this kind of responsible legislation would not get much public support as people seem to be more concerned about their own home equity and value in the short term than medium term solutions. Also the real estate lobby in Ireland is still quite powerful and the government has substantial bets on house prices rising again. Hopefully these kind of challenges can be overcome with time.

  87. @ all
    The reason Brian Hayes said “To introduce debt forgiveness totalling €6 billion at a time when the Government is bringing those banks out of the A&E wards would be very difficult to justify”
    Was because if he said
    “To introduce debt forgiveness totalling €6 billion at a time when the Government is bringing those banks out of the A&E wards would be very easy to justify” It would be true.
    Also in fairness if he said the second thing it wouldn’t be a 6 billion debt forgiveness anymore. it would be a lot more. People would start getting strategic about default. Are the CB projections of 6-10 billion not based on the laws as they currently stand? If the Bankruptcy laws changed to favour individuals wouldn’t they revise these figures up?

  88. JTO would be delighted by this.
    http://www.rte.ie/news/2011/0823/exports-business.html

    Impressive figures

    The reason for posting it here is that there has been a decoupling in the economy from living standards and actual economic performance. The debt overhang has a big part to play in this.

    This is really very very simple. Ireland needs to reform its bankruptcy laws.

    Reforming bankruptcy laws is about much more than debt though – it’s about our attitude to failure. We like to keep people down here, make them pay for any misadventures. It’s post-colonial stuff.
    And yet all around us are people who have grown up with a real can-do attitude. People who must be given the lattitude to fail.

    The Government doesn’t have to spend alot of time on the spin for this – “we are merely moving into line with our international peers and maintaining competitiveness and encouraging entrepreneurship”. It’s easy – let’s just friggin’ do it.

  89. @ Gavin

    I would add regulation of land banks to your list. My understanding is that the building land around Dublin was controlled by less than 10 developers during the boom.

    So you had a scenario where land was plentiful but zoned land was like gold dust and the players in the middle made windfall profits.

    The whole planning process and that of how land is recategorised from agricultural to residential is a mess.

  90. A lot of this discussion seems to amount to the appropriateness or otherwise of the word “scheme”.

    If there hadn’t been carpet-bombing of the media by some economists in the last few days over the requirement for a “scheme”(almost “a scheme, any scheme”) – but instead a coordinated mention of the fact that it was appropriate for the banks to speed-up their processes – then maybe there would have been more progress.

    Sometimes less is more?

    The “international financiers” should be valuing the Irish banks much as options – and the 6bn figure (or not) should be part of the calculus of that. If the writedowns were done and it could be demonstrated that 6bn was it, then the basis of valuation would change. You would then get investors who did not want to take so much of a punt buying, but they would be buying a different thing at a higher price.

  91. A ‘what-if?’ scenario…..

    What would happen if all owner-occupier mortgages were made non-recourse loans overnight for a limited duration of, say, one month? How many people would walk away from their family homes during that month – send in their ‘jingle mail’ letter – and what impact would it have on the lenders?

    Is that idea any more insane than doing QE for a third time and hoping you get a different result?

  92. @Paul Quigley +1

    It is incongruous to hear a discussion on the equity of transferring wealth between people whose ambitions, and mortgages, are in different states of repair, in circumstances where much more massive transfers have been made without any discussion whatsoever. A point made above by several commentators.

    I think that many of the usual suspects are against some form of selective mortgage debt forgiveness because they instinctively side with the financial sector (or large investors) in any conflict of interest. Moral hazard is only for the weaker party.

  93. One of the more intelligible threads at least to someone like me who has no economics background. Just because no other country has done it before, is no reason not to at least examine a debt forgiveness scheme – perhaps more properly called a principal private residence (ppr) debt restructuring facility. The main objection appears to be the moral hazard but this can be addressed if there is a price to pay for a cut in the mortgage. In my experience most people want to hang on to their home and even if they will not own it in full, they will still have a vested interest in repaying the reduced mortgage with a view to ultimately recovering full ownership of the property – the moral incentive perhaps….
    In response to the original post, the bank acquiring the property right in lieu of a cut should be able to sell that right to the State, so that if it does cost 5 or 6 billion at least the State has some tangible interest for its money. The State is the only entity that has the wherewithal to finance and coordinate what must be of necessity a long term scheme.

  94. While a lot of people here are arguing about this Scheme and that Scheme the facts on the ground are that in relation to Commercial Debt the Courts are accepting payment plans supplied by MABS (Money Advice Budgeting Service) to clear creditor balances. All of the Banks apart from AIB and B of I are negotiating deals on mortgage debt based on reality on the ground. Few of them want to get into the Courts except for the lenders who were lenders of last resort i.e. Smart, GE etc. What would speed up the process is a modern Bankruptcy Law and Voluntary Arrangement Scheme that dealt with the reality on the ground. Shatter is away with the Fairies worrying about the sanctity of the Confessional when he should deal with this problem now that is tearing peoples lives apart. Debt Forgiveness as a policy across the board will not work but make it worse. Resolution on a case by case basis within a new Legal Framework will allow both borrowers and lenders to sort the mess out.

  95. One other aspect that makes a debt forgiveness scheme difficult should be mentioned. It’s in line with issues raised by Tim above, about any bailout being potentially mostly about keeping the right sort of people in the right sort of house and protecting well connected barristers from having to live in Clonsilla.

    That issue is any such scheme’s long term political toxicity and social divisiveness unless it’s restricted to a simpler/fairer bankruptcy scheme. If middle class people get to default and keep their house while poorer/more prudent people are made to pay for such a scheme FG would be handing the political future to Labour, SF and the rest of the left.

    Given Ireland’s financial situation, any middle class bailout would take money from refurbishment of mouldy inner city council properties, from SNA provision in schools, etc., etc., etc.

    It may be true that there is already a provision of 6 billion for mortgage default in the banks’ capital structures, but that provision is based on the assumption that the banks still get to “squeeze the lemon” as hard as they currently can. Unfortunately, there is no pretty solution to the current problem. Ireland Inc owes lots of money and if you release one person from the debt then some other resident has to make up the gap. It’s a one-for-one.

    The only debt forgiveness that will allow any meaningful increase of spending in Ireland is if a chunk of the banking debt is somehow “forgiven” and taken on by another country. Again, the most obvious candidate donor seems reluctant.

  96. @TRP/ Others.

    There are a number of facts that need to be understood.
    1. Banks have always written off debts and decided not to pursue the debtors.
    2. Those ‘ not to pursue’ decisions have been made behind closed doors and if there was any criteria involved, it was the criteria of the Chief Executive and Board of the bank.
    3. The IFA, for example, have operated as a very effective lobby for many years, ‘negotiating’ on behalf of often quite large and reasonably high net worth individuals.
    4. The banks have now made ‘provisions’ against bad or doubtful mortgages to the tune of €6 billion.
    5. This does not mean that these amounts are written off as uncollectible yet.
    6. The amounts are clearly now large enough that the new AIB chairman, quite properly, wants a written criteria for dealing with this issue. He has probably asked for the existing written policy, only to be told there is none, and that such decisions were left in the hands of a mysterious group inside the bank, that cannot be located at the moment.
    7. These debts are banks debts. There is no need whatever of a seperate State agency to deal with them or to pick up the tab for dealing with them.
    8. There is definite need of of a State approved bank policy for dealing with these issues, and to lay these policies on the line for the banks. Otherwise people should take Morgan Kelly’s advice and join FG or Sinn Fein or whatever, and wait for the mysterious groups within banks to re-emerge for these little issues. The higher up the food chain the debtor is, the more sensitive the issue will be dealt with.
    9. There is the alternative policy, quite Irish you might say, of do nothing. Then when the banks have been nursed back to the health the doctor ordered and the banks have been reprivatised, the nasty little issue of mortgage write offs, with all costs, can be dumped onto the State as per normal. Not a bank problem any more. Tough. It is now a social issue. And we will be told the ‘new pillar’ banks don’t do social issues. This is the current road we are on.

  97. @ seafoid

    ‘The whole planning process and that of how land is recategorised from agricultural to residential is a mess’

    It’s a rigged market for development options, a fine example of regulatory capture, a Celtic casino, and a sad monument to machine politics. God save Ireland, because the planners didn’t.

  98. @Stephen K

    I don’t know what experience you have of winding up companies in Ireland but believe me between the Revenue and rest it is quite an ordeal.

    @Karl
    I have argued the point here many times the default begins at home. Unless mortgage debt at least on the family home is discounted I can’t see how Noonan can raises taxes, i.e. cut wages, and expect many homeowners to meet their debt obligations. In the case of buy2let, they are in the same boat as investors (such as myself) who take a punt in equities.

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