Snippets of the Keane Report on Mortgage Debt: More Questions than Answers

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Morgan Kelly’s comments (and research paper) last month on mortgage debt restructuring forced the government to come up with an expert group to recommend solutions to the problem of highly indebted households. The expert group’s report will be presented to Cabinet this week and has helpfully been leaked before that. Today’s Sindo carries a small piece by John Drennan on the content of the ‘Keane’ report that raises more questions than it answers.

In addition to really, seriously, and, like, really, advising people who can do so to pay off their mortgages, the report contains some specific recommendations. From the piece, then:

“Homeowners who can no longer pay the mortgage could negotiate with their lenders to hand back the property but remain on as tenants.

Banks who repossess homes will then lease them to local authorities to deal with housing shortages.

The timeframe to get discharged from bankruptcy to be cut from up to 20 years to just three years.

People facing bankruptcy will be offered a “non-judicial” route — meaning they won’t have to go through the courts in all cases.

The Money Advice and Budgeting Service will be beefed up with hundreds of “front-line” financial advisers who will deal exclusively with distressed mortgage holders.”

The most important part of the report is contained in a rather throwaway sentence–that banks “should engage in debt settlement“. The mechanics of this process (or processes) of debt settlement are very important and should be discussed on this blog and others when the full report is eventually published.

It looks like the group is taking a multi-pronged approach to the problem, which is welcome. It also looks like there is some attempt to deal with the issue of those who will never pay their mortgages via movements to local authority lists. That is not a simple process either, as NamaWineLake has recently shown.

It is important to note the timescales here. Right now, according to the government’s legislative programme, any bill to reform our bankruptcy laws is not even a twinkle in Minister Shatter’s eye, despite his assurances that the personal insolvency legislation would be substantially complete by Christmas or early 2012. That means the lynchpin of the strategy–that people can fail, and fail relatively cheaply through expedited personal insolvency proceedings–will likely not be in place before the summer.

Other questions present themselves, such as: when ‘negotiating’ with a bank on whether to hand the house back and/or rent it back again, will there be a code of conduct for these negotiations? Who will decide?

Third, the super-MABS body may only have an advisory role, rather than an adjudicatory role in the debt resolution process, meaning that the banks retain most of the power in the debt resolution process. Or not. We just don’t know.

The sooner this potentially very important report gets 100% leaked after Cabinet approval, the better.

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59 Responses to “Snippets of the Keane Report on Mortgage Debt: More Questions than Answers”

  1. PR Guy Says:

    @Stephen Kinsella

    Will keep my ear to the ground for you – see if I can get hold of a copy. I heard it had been circulated amongst some ‘chosen’ financial services companies last week. I usually have a look at what’s in the bins or lying around the colour printers when I’m in a client site early (as I will be over the next couple of days)! You would be surprised what you can pick up.

  2. Karl Whelan Says:

    The media often blows hot and cold on issues. A few weeks ago, they were obsessed with the mortgage issue. Now, even though they seem to have been briefed on this report, they don’t care.

    The Irish Times also had a piece on the group’s report
    http://www.irishtimes.com/newspaper/ireland/2011/1001/1224305085337.html

    but they stuck in well inside the newspaper, choosing instead to lead with a fictional report about overseas deposits increasing significantly.

    Funny old rock and roll world, innit?

  3. PR Guy Says:

    @Karl Whelan

    “Funny old rock and roll world, innit?”

    I expect there will be some rocking and rolling this week around Dexia and Soc Gen. We shall see. Mortgages going sour in Ireland could be the least of our problems in a couple of months time.

  4. Stephen Kinsella Says:

    @Karl,
    It was, more or less, the only thing anyone wanted to talk about 3 weeks ago. Now it gets buried, in favour of non-news. A pity.

    @PRG, thanks for the offer!

  5. hoganmahew Says:

    @Stephen Kinsella
    “That means the lynchpin of the strategy–that people can fail, and fail relatively cheaply through expedited personal insolvency proceedings–will likely not be in place before the summer.”
    It also means that we will fail to deliver another piece of troika (IMF one suspects) demanded legislation – the other being signifiant reform of protected professions.

  6. Tullmcadoo Says:

    Hogan,
    You might be right but as the Greeks might tell you if you mess with the Troika you might not get the money.

  7. hoganmahew Says:

    @Tull
    Unfortunately, the targets that matter to international perception are budgetary ones. As long as those ones are hit, the same ole crooks will play the same ole crooked games.

  8. David O'Donnell Says:

    The Keen Report: The Steve Keen Report. Lookin forward to it.

    State now bankrupt for over three years. Ergo, All is Zero. Start again, fail again, fail better.

  9. Tullmcadoo Says:

    Hogan,
    Again you might be right but no reform jeopardises hitting the numbers….

  10. grumpy Says:

    @Karl, Stephen

    i think the mortgage write-down media blitz was a few weeks too early and the way it was presented initially annoyed too many people unnecessarily. Media has had its fill of that topic for now.

    @PRGuy

    Dexia widely expected to become Belgium shortly, but SocGen this week!?

  11. Cearbhall O'Dalaigh Says:

    .
    US economists are calling for a radical step:

    MASSIVE DEBT RELIEF

    NEW YORK | Sun Oct 2, 2011
    (Reuters) – More than three years after the financial crisis struck, the economy remains stuck in a consumer debt trap.
    It’s a situation that could take years to correct itself.
    That’s why some economists are calling for a radical step: massive debt relief.

    The bailout of the nation’s banks, a nearly trillion dollar stimulus package and an array of programs by the Federal Reserve to keep interest rates near zero may have stopped the economy from falling into the abyss. But none of those measures have fixed the underlying problem of too much consumer debt.

    http://www.reuters.com/article/2011/10/03/us-haircut-idUSTRE79125J20111003
    .

  12. Michael Hennigan - Finfacts Says:

    @ Stephen Kinsella

    It was, more or less, the only thing anyone wanted to talk about 3 weeks ago. Now it gets buried, in favour of non-news. A pity.

    Non-news?

    Even pointy-headed intellectuals might find daily newspaper content geared just to their specific tastes, a little unappetising.

    The argument here is that short of the actual review report, there is a void of speculative waffle.

    John Drennan does not say that he has seen the report, which may suggest the caution in presenting what the final report will contain, as fact.

    As to what topics should engage journalists, are they any different to academics in terms of the link with their own personal experiences?

    The Irish Times has an editorial today on the half-baked pension reform proposals; there can be no surprise that it appears to be not generally an issue of interest to academics.

    Finally, a John Drennan article alerted me to the important work of the
    Working Party on the internationalisation of Academic Titles at Trinity College, in these challenging times.

    According to a memorandum “the Vice-Provost advised that this Working Party had been established in October 2010 in response to the strong perception that the current academic nomenclature had fallen out of step with international standards, and its continued use was not only misunderstood, but harmful to the reputation of academic staff in College.

    He drew Council’s attention to the rationale for changing existing academic titles used in Trinity. The Working Party held the view that a change to a more international standard would provide greater clarity of academic titles and roles externally, and would strengthen staff’s ability to be competitive for external funding. The Working Party proposed that the current academic titles together with existing roles and responsibilities, and salary scales be mapped to broadly equivalent American nomenclature titles as follows:

    Current title/ Proposed New Title
    Lecturer below the merit bar/ Assistant Professor
    Lecturer above the merit bar/ Assistant Professor
    Senior Lecturer/ Associate Professor”

    The existing “nomenclature..(is) not only misunderstood, but harmful to the reputation of academic staff in College.”

    Yes indeed – - I know from experience in the developing world that titles can be more important than a pay rise. “engineer” is like a military title and in Jeddah, I was pestered to put my title on teh office door.

    “To compete globally, I need to have flexibility and decision-making powers, the same flexibility that other presidents of leading universities can count on. At the moment, I need to get permission for what I do,” Dr Patrick Prendergast, the new provost said last month.

    He said Irish universities could be big creators of jobs, but the country had twisted itself into a position “where we are forcing universities to shed jobs rather than create them”.

    “It doesn’t make sense. Why aren’t we turning Ireland into an educational hub?”

    Quite so; in mid-2010, hiked pay and pensions fro 27 academic staff.

    A lot doesn’t make sense including blather on hubs.

  13. Michael Hennigan - Finfacts Says:

    2nd last line should read:

    in mid-2010, Trinity hiked pay and pensions for 27 academic staff.

  14. Brian Woods Snr Says:

    @DO’D: “Start again, fail again, fail better.”

    Pithy, precient motto: Any suggestions where it should be placed? Leinster House?

    In respect of personal and mortgage debts; if the economy is regressing (and looking likely to fall back to mid-1990s), you have one big, nasty predicament. Incomes lower, cost of money zero (or near enough), potential borrowers s*** scared, potential lenders ditto. No credit, no multipliers, no faux growth. Lots of underwear in a tizzy now.

    Brian Snr.

  15. Philip II Says:

    michael h
    More than a bit off topic or is there some subtext? What does TCD have to do with the OP..??

  16. Tonicforthetroops Says:

    Meanwhile, the crash goes on. Presume that a thread wil be opened sometime on the daft/my home.ie figures today which suggest that we are still heading south house price wise…

  17. Stephen Kinsella Says:

    @ Michael, the non-news I referred to was the ‘deposits on the increase’ story thoroughly filleted by Karl in a previous post.

    I don’t know what this mortgage debt issue has to do with the title changes, to be honest, but as someone who occasionally has to translate their position for international colleagues (and more importantly for funding bodies) the title change makes a lot of sense in my view.

  18. seafóid Says:

    @ Dod

    What if your banks are to big to fail better ? And they fail worse than ever in the entire financial history of the country?

  19. hoganmahew Says:

    @Tull
    “no reform jeopardises hitting the numbers….”
    You believe that and I believe that (and Paul Hunt certainly believes that), but the ability of government to ignore painful decisions for the well-connected is legion.

  20. seafóid Says:

    I wonder if the Troika will reform the system for allocation of all ireland final tickets.

  21. Jesper Says:

    There is pressure on the government to do something, this proposal appears to be about hiring more people. Can-kicking combined with generating jobs for finance people?

    There are thousands of overdue borrowers. It is impossible to write legislation that will be 100% fair to every single one of the people with mortgages and/or other debt.

    Just reform the bankruptcy laws.

  22. PR Guy Says:

    @grumpy

    “but SocGen this week!?”

    Shares about 7.5% down this morning the last time I looked (and Dexia were down about 13% I think). Soc Gen worse than the other French banks… but I’m off thread… but I see Greece has resorted to choking it’s PR with %’s and statements like “if state mechanisms and the citizens respond appropriately.” They’re having a larf. They are beyond all hope now.

  23. Yields or Bust Says:

    @Jesper

    ‘Just reform the bankruptcy laws’

    As stated here before that simplistic solution in many respects suggests and imposes 100% of the blame on the property consumers and allows the banks to squirm away from their disastorous lending decisions. This does not seem like a logical way in getting to the root of the issue and that’s a mis pricing of property assets for a decade by the lending banks.

    The lions share of any blame for this mess simply has to lie with the banks – putting thousands upon thousands of families through a bankruptcy procedure looks more like a massive lawyers benefit gig without actually facing the reality of the situation. No thanks.

    My view is an across the board debt write off scheme is actually much fairer to all and pay for it the correct way and that’s telling the unguaranteed bond holders to take a hike. You pays your money you takes your chances, you win you win you lose you lose.

  24. Ahura Mazda Says:

    “Homeowners who can no longer pay the mortgage could negotiate with their lenders to hand back the property but remain on as tenants.”

    This is very vague. It doesn’t explain what happens the debt. One interpretation is that this makes existing mortgages non-recourse.

  25. Joseph Ryan Says:

    @Stephen Kinsella

    re:-John Drennan article you quoted
    “Homeowners who can no longer pay the mortgage could negotiate with their lenders to hand back the property but remain on as tenants.”

    It is distressing to hear that the above is the best the government can do. We all know that in Ireland especially but almost everywhere, the ‘best’ negotiators will get the biggest writeoffs.
    Guess which side iof the income & wealth divide the best negotiators are on.

    On Greece:
    It looks like the German and French governments will defend their respecitve banks down to the last Greek.

  26. Ludwig Heinrich Edler Says:

    @ Yields or Bust,

    The lions share of any blame for this mess simply has to lie with the banks – putting thousands upon thousands of families through a bankruptcy procedure looks more like a massive lawyers benefit gig without actually facing the reality of the situation. No thanks.

    Leaving aside emotionally charged language like “the … blame … simply has to lie” and referring to debtors as “families”, there is an inescapable point here:

    If you borrow money you must pay it back. If you don’t, you are liable to have your assets taken away from you.

    Any line of thought that deviates from that is fundamentally at odds with economic justice and efficiency.

  27. The Dork of Cork Says:

    @Ludwig
    Nobody borrows existing money from commercial banks – the banks create new credit.
    I would like to see the ability of banks to create credit taken away – but hey thats just a Dorks view thats unlikely to come about until we get a complete collapse and recovery after maybe a few hundred years.
    When pundits refer to “The Markets” people need to understand what they mean – they essentially have unlimited ability to buy everything from sov debt to commodities with credit.
    Very little money changes hands.

  28. Yields or Bust Says:

    @Ludwig

    ‘If you borrow money you must pay it back. If you don’t, you are liable to have your assets taken away from you.’

    The problem with this argument is that in any mortgage contract the law works on the premise that both parties are reasonable people, and both understand the nature of the agreement they have enter into and have done so in good faith.

    Unfortunately the law is blind to what one of the parties, namely the lender, does outside of the individual contract.

    The nature of the lenders out of contract actions unfortunately can impose a seriously negative economic impact on the ability of the borrower to fulfill his/her side of the original contract.

    The law as it stands believes the lenders in a mortgage contract would do their utmost to ensure the integrity of the market is maintained because its in their long term economic interest that that situation remains firmly in place.

    By which I mean what crazy bank would actively seek to go out of their way to compromise the market, compromise their own own long term economic interest and ultimatlely compromise the borrower.?

    Sadly this is exactly what has happened and as a result largely innocent borrowers and now left in a situation where the law says they are obliged to repay in full, but find that because of the lenders actions outside of their individual agreement, in financing a flood of excess product onto the market brorrowers are denied the normal ‘out’ in selling the property and clearing the debt.

    Now ask yourself again who is really to blame for this turn of events?

    Only a fool would suggest that borrowers in the case as presented are liable to pay in full. It’s as illogical as it is economically daft to suggest the borrowers should be left holding the baby in the circumstances as presented.

    I’d suggest you recalibrate your line of thought to the real world as we find it, not as it should be. The banks have screwed the market up, oh so royally, and cannot expect to come back all innoncent to borrowers and put a gun to their head in the manner as you suggest .

    Lenders have a responsibility to ensure a market which is almost completley dependant on credit for its survival is treated with care and attention. This they didn’t do, and as a result mortgage contracts agreed are largely economically null and void, if not legally so.

  29. Ludwig Heinrich Edler Says:

    Nobody borrows existing money from commercial banks – the banks create new credit

    It’s true banks create new credit, but that is not the same as saying banks create “free” credit.

    For a given money supply, every new loan replaces an older one. The fact that we have a fractional reserve banking system doesn’t mean that credit is a bunch of free lunches which the banks are ripping us off by charging us for.

  30. Shay Begorrah Says:

    @Ludwig Heinrich Edler

    If you borrow money you must pay it back. If you don’t, you are liable to have your assets taken away from you.

    Any line of thought that deviates from that is fundamentally at odds with economic justice and efficiency.

    Justice and efficiency? I had no idea you subscribed to the labour theory of value! Welcome comrade.

    Economic efficiency demands that those investors who made bad decisions suffer a penalty and justice demands that the burden be spread according to the level of negligence involved.

    It is contrary to both justice and efficiency that those whose actual business it was to manage risk should have their interests protected from their own incompetence by the state while those who merely wanted a home find themselves subject to hypocritical Calvinist brow beatings from the toads who were formerly the biggest advocates of the financial “innovation” and “competition” that led us here.

    It is obvious to all that some bets (investments) being perceived as risk free that can cause the very serious misallocations of capital that primed the global financial crisis. It is a great shame that the Christian Democrat funk that afflicts mittel Europe has prevented us from acknowledging the totality of the failure of the current flavour of financial capitalism, accounting for its losses and replacing it with a structure more appropriate to the twenty first century where people are rewarded for doing rather than owning.

  31. The Dork of Cork Says:

    @Ludwig
    We don’t have a fractional lending system – that ended in 71.

  32. Gavin Kostick Says:

    @ The Dork

    “Nobody borrows existing money from commercial banks – the banks create new credit.”

    Does that mean that when, for example, Society Generale, decided, if it did, to buy, I dunno, a 1bn bond from the Greek government – it created the money for itself? I assume in this case it then also gave itself a negative 1 billion to pay back.

    Now I’m lost though – can a bank loan itself money?

    Yes, there’s a proper question: can a bank loan itself money?

  33. Eamonn Moran Says:

    @ Michael Hennigan

    ‘Senior Democrat says Obama could soon end tax loophole that makes Ireland desirable for US MNCs – Business & Finance Mag.’

    Your comments re Ireland without MNC’s being a bit like one big Skellig Mhichael come to mind.

    I don’t think he will do it though. Unless he does it at the same time as tax amnesty.

  34. Stephen Kinsella Says:

    @Ludwig, Dork, Gavin,
    The thread is about the upcoming Keane report, but the role and purpose of banks and credit creation is worth discussion in general terms.

    @Ahura/Joseph, the clear problem is that the power in the borrower/lender relationship is with the banks in the first instance. So one would expect that any negotiations need to mediated by some external agency to address this.

  35. grumpy Says:

    @Gavin

    Google “fractional reserve banking”.

  36. Gavin Kostick Says:

    @ Stephen

    Whoops.

    Okay: trailing of the Keane report worse than useless.

    Those hammer of the peasants at the IMF reckon that US underwater mortgages can be treated collectively without destroying banking system. Yes, USA, but the issue ‘economics is not a morality play’ coming through.

    http://www.huffingtonpost.com/2011/04/15/imf-report-mortgage-debt-relief-for-_n_849930.html

    @ Grumpy

    Thanks. Will do.

  37. The Dork of Cork Says:

    @Gavin
    Yes all goverments go to either a central bank or a commercial bank and they create new paper or digital units – they cannot create interest income however , thats something you must do, but in a static money system that means you must subtract money form someone else.
    They do not walk into their tax office and collect the money – its not there to collect as it is just a accounting metric.
    This problem can be solved easily – all credit can be turned into goverment money , once the velocity can be controlled like they are doing now with QE you will not get hyperinflation.
    But like what you are getting under the QE regime private credit dependent assets will collapse in value.
    Remember QE is not the printing of raw currency – its the printing of bonds that may be spent later.
    But there is no point in a bank loaning itself money – it is a utility , it would be like a electricity company making electricity to give to itself.
    In the final anylasis even a speculative trading bank is dependent on a real economy existing is some form – but parasites unfortunetly have been known to kill its host.

  38. Mickey Hickey Says:

    Here s a link to a paper that questions the efficacy of supply side economics that began under Reagan in the 1970s. Authors Dan Ciuriak and John M Curtis.

    papers.ssrn.com/sol3/papers.cfm?abstract_id=1839647

  39. Tullmcadoo Says:

    Ahura,
    What would happen to lending rates if all mortgages went non recourse at the slip of a pen? What would the ECB/Market charge for funding? Would Risk weightings increase & would we have to put more money into the banks?

  40. Michael Hennigan - Finfacts Says:

    @ Eamonn Moran

    Recently a Robert Pozen proposed that the US should levy a 20% rate on overseas profits with an offset for tax paid.

    Such a measure would neuter the tax incentive of operating in a low tax jurisdiction.

    There is increasing concern about the cash hoards held abroad by companies at a time of high unemployment.

    http://www.nytimes.com/2011/09/19/opinion/bring-american-companies-foreign-profits-back-home.html?_r=1

    First, Congress should exempt United States corporate profits earned in countries with effective corporate tax rates, on average, of 20 percent or higher. These countries include England, France and Japan. (This exemption would be subject to two exceptions: passive income like investment interest, and profits artificially transferred through complex transactions to countries exempt from United States tax.)

    Second, Congress should levy a 20 percent tax on United States corporate profits in any country with an effective corporate tax rate below, on average, 20 percent. Corporations would no longer be allowed to indefinitely defer American taxes on profits in these jurisdictions.

    But the 20 per cent levy should be reduced to reflect any taxes paid by United States multinationals in low-tax jurisdictions.

    If a foreign subsidiary of an American corporation pays some tax in a low-tax jurisdiction, it should receive a tax credit for that amount against the 20 percent tax. For example, if corporate profits in Ireland were taxed at 12.5 percent, they would be subject to an American tax of only 7.5 percent (20 percent minus 12.5 percent).

    Third, Congress should allow American corporations to transfer foreign profits earned overseas before 2012 back to the United States at a low rate — say, 10 percent — for the next two or three years. This rate would be part of a transition to a better permanent approach — not a one-off repatriation holiday.

  41. The Dork of Cork Says:

    @Mickey
    We have been living in a ad-hoc global monetory system for 40 years – this freefloating currency pair system gives weird short term price signals to markets,

    But it does favour smaller indivdual short term investments over longer term larger scale investments.
    It easier to scale up a housing bubble for example then a very long term individually capital intensive nuclear programme.
    Very capital intensive programmes need a very accurate long term anylasis of the future money supply – but the system is in constant flux so therefore these programmes are considered too risky given their multi decade planning time frame despite the fact that they add long term wealth potential to a economy rather then be just another consumption game.
    Its best in that scenario to just throw up buildings as quick as possible and offload the project before things turn for the worse.

  42. Ahura Mazda Says:

    @ Tull,

    I was just looking to trash out what “hand back the property” means. If you get sucked into descriptions of processes where banks become landlords etc, you may miss a simple thing like “hang on a second this makes mortgages non-recourse”. As we don’t have any real detail on the actual proposals, it was just something I think is worth highlighting.

    Re your questions: (1)existing variable and fixed rates would increase, trackers should escape. On new mortgages – rates would go up, but I’d be more concerned that no lender would want to offer mortgage credit. If you create a system that all the downside risk goes to the lender and any upside (property price increases) goes to the borrower, only very low ltv mortgages make sense. Otherwise lenders would be better off not lending but taking property risk directly. (a goal should be to create an environment where a new foreign lender would want to enter the Irish market. Any new resolution process should use this as a test). (2&3) Any steps that will encourage copycat behaviour from performing mortgage holders will increase losses and therefore have knock-on effects on both funding and capital. It’s hard to guess how much greater losses will be.

    @ Stephen,

    “the clear problem is that the power in the borrower/lender relationship is with the banks”

    Borrowers signed contracts. As far as I know banks have not altered the terms and conditions of these. Except in a small number of cases, it’s not clear that mortgages were mis-sold. At a basic level, borrowers knew the amount of loan, the term, the interest rate and interest rate type. They would have also known that they are expected to repay the loan and that failure to pay would have nasty consequences.

    If you want a functioning credit system, lenders need to be able to enforce contracts. The bulk of the power should reside with the lender. That said, the existing system may grant too much power (not that the banks have actually used it! It’s much easier that they try socialise these losses).

  43. TRP Says:

    @ Stephen

    You state that Morgan Kelly is the catalyst for this review. If my memory serves me right that in the Kilkenny Lecture he was referring to 11,000 large mortgage cases which he assumed were given to Professionals. If he had done his research properly he would have found out that significant numbers of Civil and Public Servants including High Ranking people are also in this maelstrom with the result that some for “Rules” reasons cannot avail of the soft candy early retirement pensions on offer up to February 2012.

    This is completely different to the Mortgage Debt of the ordinary man in the street who has to deal with keeping a roof over his head and I have seen nothing to date that will resolve this problem without the State having to pony up more money to the Banks or to pay for Social housing when houses are repossessed. Any writedown deals have to be Judicially reviewed otherwise the system of paying mortgages will collapse entirely. MABS 2 is not a Judicial entity and would be incapable of resolving this problem on a fair basis.

  44. Overseas commentator Says:

    This discussion completely ignores the fact that the banks having been nationalized any reduction of the mortgage debts transfers the debts to the taxpayers.It might or might not be advisable to help mortgage holders ,but the bank shareholders have already been burnt ,the taxpayers are the one that will be punished for the sins of the bankers.

  45. David O'Donnell Says:

    Redaction test

  46. The Alchemist Says:

    Today I was with three butchers of varying sizes. One has had a nervous breakdown and is out of business with unrepayable debts. Another who deals with small wholesalers is owed €150K by just two of his clients since last Xmas and is treading water bravely, and the final one let go his few remaining staff this week and expects to wind up by Xmas. It sometimes escapes notice in the bruhaha about another ‘Hello Magazine’ piece on an MNC planning X number of jobs over a Y number of years, that there are a lot of small traditional businesses still around to fail, and each time one goes down the debt crisis gets that bit worse. The government, ably assisted by experts who never have to worry about repaying their own mortgages, car loans or multiple property lets, has moved with the alacrity of a tortoise in wet concrete in addressing personal debt. And the banks are not lending on any scale that approximates normal.

    As Michael H points out the universities have been very good at creating well-paid jobs for academics, but with at least 450k out of work and emigration doing nicely, it seems that the whole faith in third level needs a rethink and a thorough budgetary reassessment.

  47. Stephen Kinsella Says:

    @TRP Morgan’s remarks were at an ISNE event I believe.

    @Ahura, of course borrowers signed contracts, and of course people should honour contracts up to the limit of them not being able to do so. When they pass that limit, the Keane report is advocating they negotiate with their creditor to find a mutually agreeable settlement. In such a situation the bank has most of the power, and their definition of what constitutes agreeable might not be in the best interests of the other parties in the negotiation, one of whom is us, the taxpayer. But I’m more concerned with the mechanics of this in respect of MABS or another agency like it, I guess.

  48. TRP Says:

    @ Alchemist

    You are spot on. The Self Employed/SME sector in this country are being decimated. These are/were the engine of the economy which the Present and Previous Government and their so called advisers have not a clue what they do in the economy. When you have 4 teachers controlling the main Economic Ministeries you wonder is there is a future for this country. Academic Economists that live in the sheltered sector with guaranteed well paid jobs and pensions can have no sense what it is like to be self employed and what they contribute to the economy and continue to bang on about Bonds and Banks ad nauseam. There is plenty of money in the Government system but when it is mostly given to the Public Sector in the form of guaranteed jobs,wage levels and unfunded defined benefit pensions you begin to realise that this economy is going nowhere .

    What has this got to do with Mortgage Debt ? Everything – because the more these businesses fail then more people become unemployed and default as a consequence. Putting more Quangos in the field to deal with more default is surely going around in circles but achieving nothing.

  49. David O'Donnell Says:

    @Michael Hennigan

    More on Pozen and US Corporate Tax

    http://blogs.law.harvard.edu/corpgov/2011/09/30/the-myth-of-corporate-tax-reform/

    @BW snr Seafoid

    On that fine building on College Green – having first chucked out the present tenants. Also appropriate considering the rabid establismentarian partitionism that has broken out recently – little wonder John TheOptimist is probably too embarrassed to contribute at the mo …. in the interim suggest we lease it to The Merchants’s Quay crew to provide some breakfasts for some of the victims of the financial rape of the citizenry.

    @Alchemist, TRP
    I have argued for a long time for decent and reasonable bankrupty law for small entrepreneurs – (which would also assist certain self-employed – wose numbers are increasing accessing the services of the Cork VdP due to poorly thought out welfare system – which Joan is looking into) – who quite simply have little option but to emigrate in order to start again – and know a few in the internationally traded services sector – who are now creating employment in the US, UK, and elsewhere.

  50. Jules Says:

    The Irish banks have in total 300 billion in deposits on their balance sheet. The fact that about 120 billion of that is tied up in a very risky mortgage book does not bode well for the future. At the moment the courts have been instructed to go easy on defaulters but that is only storing up future trouble.

    The trokia will demand and get further austerity in the next budget. This combined with a rapidly deterioriating international environment will cause a steep secondary recession in Ireland. The mortgage book will rapidly reach tipping point with the courts clogged with serial defaulters (either because of necessity or choice) and half defaulters realising nothing is ever going to happen to them and they will be allowed to stay in their properties until a land (bank) commision comes along and grants them the deeds to their properties at a huge discount.

    At the same time Germany will come to its senses and realise their savings cash given to the PIGS is largely gone – Caput. In the mean time they have benefited from a cheap euro, if they had the Mark they would have seen a sharp Yen like strangle on their economy.

  51. Jules Says:

    @O’Donnell

    The advent of limited liability companies at the start of the last century allowed for a huge increase in productivity and risk taking and massive economic growth. If we were all told that start a company we could become whealthy but if we failed we would be cut out of life and treated like a criminal there would be very few enterprenures as the risk reward ratio becomes closer in profile to a drug lord (who can but rairly make good enterprenures). On this front Ireland has to choose. The great banks tried to get around around the limited Company law by personal guanantees and draconian personal bankruptcy laws and partially succeeded. The fact that the banks simultaneously bet the family silver, house and everything in cupboard on an unending property boom with German money was interesting to say the least.

  52. Mickey Hickey Says:

    @Jules Says
    The last sentence of your comment hits the nail right on the head. German bankers would find it apt.

  53. Michael Hennigan - Finfacts Says:

    1. Mortgage adjustments are necessary for some householders but a scheme should be costed.

    2. As TRP and the Alchemist, alluded to, there are related aspects of resuscitating the economy that should not be viewed in isolation.

    3. I was told on Monday of a case where an individual with a steady income in professional services applied to AIB for a €100k loan over 7 years in respect of a €500K purchase of a house with more than a dozen acres. Even though he was providing €400K cash from his own resources, after a month of contact with the effectively nationalised bank, he was refused.

    The feast and famine scenario is no surprise but if there is even no funding for non-risk lending, there will be many more consigned to the limbo of unemployment.

    4. Despite the gushing about Twitter even though it is likely a lost-leader deal (ie it was effectively paid to open an office in Dublin), the startups that will make an impact on unemployment will not be in high tech.

    (Last March in the Mid-Market/Tenderloin area of San Francisco, residents publicly protested against Twitter’s success in forcing the city to give it payroll tax exemptions.)

    5. Just as an addendum to Trinity’s copying of the American title system, The New York Times said on Sunday that as an increasing number of nurses, physical therapists, pharmacists, and other health care professionals earn doctorate degrees, a “quiet battle” is brewing over “not only the title ‘doctor,’ but also the money, power and prestige” that accompanies it.

    Until 2004, a pharmacist didn’t need a doctorate, but now with the requirement of extra years in education, there is no evidence that such a degree is needed for the work.

    6. Congrats to Colm McCarthy for his selection in The Irish Times as one of the most influential people in education – - just pipped by the troika and a deserved minister at No. 1.

    The people’s economist, with private sector experience, at least has an input amidst the competing vested interests.

    As for Ruairí Quinn, who was once a minister for enterprise and employment, today’s enterprise portfolio could well do with a person like him – - who is not easily sold on bullshit. Quinn also ran a private sector business.

  54. seafóid Says:

    As we now survey the wreckage and discuss mortgage restructuring can we all sing together a version of ” I remember dublin city in the rare ould times”

    http://www.youtube.com/watch?v=ORoN2nnYHY0

    This is the meme that buyers were fed 24/7 during the boom :

    http://www.treasuryholdings.com/news/media/treasurymedia/conferencecentre_dublin/

    Dublin will have 1.7 million people within 20 years and will need 300,000 more homes, a conference was told yesterday. Dublin will then account for 30 per cent of the country’s population, and will have an elevated status in the rank of world cities. The conference at Spencer Dock was organised by Treasury Holdings .

    What’s Johnny Ronan building now?

  55. Mickey Hickey Says:

    We Irish are the world’s champion schemers. We do not need a scheme to deal with mortgages in default. All that is required or should be required is the application of normal business practices. The property has declined in value 42% plus or minus, the property owner does not have enough income to meet existing obligations. In most normal countries the mortgagor simply negotiates a new set of conditions with the mortgagee that takes into account the present value of the property and what the mortgagee can afford to pay. If the mortgagee cannot afford a mortgage for the depreciated present value of the property then and only then would it go to auction or in Ireland (god help us) to NAMA. The scheme that follows on from that is our banks go bankrupt and the continental European and British banks absorb the losses. Oh! this is Irealnd so the taxpayers will absorb the losses. The losses are unavoidable but the need to reduce the pain of the conned, gulled and manipulated mortgagees remains. The phrase “little children and pregnant women without a roof over their head” should get people out on the street and put fear into the hearts of politicians.

  56. Joseph Ryan Says:

    Seafoid

    re What’s Johnny Ronan building now?

    Bricks being laid in Morocco, maybe!

  57. seafóid Says:

    @ Joseph

    He is laying something in Morocco alright but it may not be bricks.

  58. Gavin Kostick Says:

    @ Bryan G, and all

    Hey Bryan G, if you’re in the ether, what do you make of this?

    ‘Developers are laughing all the way to Nama’

    From today’s Vincent Browne column in the Irish Times:

    “I phoned Nama and asked to speak to their press office. I was told they did not have a press office, that their communications were being handed by Gordon MRM. I got to talk to the managing director and owner of Gordon MRM, Ray Gordon, who told me: “The priority of Nama is to recover the amount Nama paid for the loans”.

    “He went on to say that Nama would pursue the full amount in many cases, depending on the level of co-operation they had received from the borrower but often there was no point. He said the focus of Nama on recovering the amount Nama paid for the loans had been stated in the latest annual report and in statements made recently on behalf of Nama.”

    So, debt forgiveness at the state’s expense for developers whose loans are in Nama, whilst none for home mortgages.

    Can’t be right surely?

    http://www.irishtimes.com/newspaper/opinion/2011/1005/1224305257468.html

  59. David O'Donnell Says:

    @Gavin Kostick

    Are we really surprised? Think not – just posted in on the Iceland thread …

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