Eviction in Ireland in 2012: I stopped the sheriff

Dear God!

If this is to be the “poster child” of the defenseless homeowner then it’s open season for all Canny McSavvys to defend to their death their BTL pensions on I/O trackers!

‘Tis mad Ted.

He bought in 2003, topped up along the way, in default since 2006 and subject to proceedings since 2009.

The guy is so far underwater he’s The Man From Atlantis.

Sometimes the adult thing to do is to save someone from themselves.

Thank you for posting it Stephen!

It is this”faked authority” game they are playing with every citizen and do not wish them to be in the knowledge about common law!

This “Shire Reef” is what they tried there and had this man not had support and knowledge, these faked authorities had succeeded evicting him, I bet on that!

This video went from 41 views yesterday to >24,000 already, hopefully steadily growing. We need to show this form solidarity, and grow it, if you know of a daunting eviction in your area, get your friends together, be there, document it. post it.

x x x x

Over 84,000 Mom and Pap businesses, small businesses, one man bands etc., they all are denied access to the financial services ombudsman. Cowen enacted this into the Central Banking Act, Noonan and Shatter have not rectified this to date, and this is way over due!

Change it!

Stephen: I respect your opinion (btw, do you know Sean Corrigan?) so I thought I’d try re-posting the following from a comment I made over on Naked capitalism. It’s a little long but the point is that we’re witnessing monetary system breakdown in all this, that’s really the nub of the problem, and few people seem to get that:

“Personally, I think the liquidity trap is a real thing and that we’ve been in one since the subprime problems in ’07. And you could see it coming before that, too.

Keynes and MMT are the ones who fundamentally misunderstand the government’s relation to money. The proper role of government wrt to money is to define a monetary unit of account and adminstrate it through bureaus of weights and measures.

The liquidity trap occurs when all that has been disregarded, the unit of account becomes fiat, and the bulk of a nation’s money is created through lending to individuals and businesses. Without a reference point at the bottom of it all, new money issuance is deemed satisfactory so long as loans are being repaid on schedule. In fact this is the only criterion for monetary balance in such a monetary system. When that changes, and loans are no longer being repaid on schedule, lending constricts, and it cannot be otherwise. It doesn’t matter how much liquidity you supply to lenders, they can’t make loans because the borrowing capacity of the populace has dried up. They are debt saturated.

The only answer for this that Keynsians have come up with is for the government to act as borrower of last resort. But in that case government deficits explode and you wind up with Greece and the EU.

In the system that we have, the fact that new money is loaned into existence is not discretionary. There is no other option. Thus if lending isn’t possible, no new money is possible either, and the money supply will stagnate or contract, which of course makes the repayment of existing outstanding loans more and more difficult.

This is why the “helicopter drop” remarks are intended to be funny. New money cannot be distributed that way. All newly created money must be owed back into the system; that is, someone must borrow it into existence and owe it back. It is the only way in a fiat system to regulate money issuance.

The subprime “crisis” signaled that the lending saturation point had been reached in the US. Since the country had largely run out of qualified borrowers, loans were made to UNqualified borrowers. There is no one to blame for this except the people who instituted the monetary system in the first place, and they’re all long since dead. The system will always wind up in this spot after a few generations.

The WaPo article discusses the common MMT inspired idea that taxes are the method for managing the government deficits that occur as the government becomes the borrower of last resort in a liquidity trap, which is just what is happening now. The idea being that the government takes back more and more of the new money that has been issued to ameliorate the deficit issue.

This is a frighteningly stupid assertion. It seems to contemplate a monetary circle jerk where new money is created through a loan to the government, paid out to whomever as salary or pursuant to a contract, and then the recipient is heavily taxed so as to get most of the money back. At that point, the monetary system is not reflecting or facilitating or serving the real economy, rather it’s the reverse: the real economy is serving the monetary system. To say that this is pointless and perverse is an understatement.

No theory of money and credit is worth a largely hungry and homeless populace, yet this is what is happening all over the globe: the theory is more precious than reality to those who get to make the decisions. We have government by so-called “technocrats” who are devoted to an idea rather than their subjects. And the idea is ridiculous.

The answer to all this is redeemable money that can exist and be newly issued apart from being loaned. But to get there from where we are will require a jubilee, because all the debt that has piled up cannot be paid back.

And it will take a constitutional amendment.

But this is a good thing. People need to recover their sense of self-government.”

@Stephen Kinsella @What goes up

Good post and relevant.

The reason this post is relevant is not so much the circumstances. We do not really know what they are.
Ulster bank are testing the water here.
They want an easy win. Cut and dried. They will even be delighted to use this as a test case for the courts.

Notice how the first one in is not a €1,000,000 property bought in early 2007 that now worth €500,000 or less. I’m sure there are plenty of those on their books?

PS
How many home owners with multi million debts unpaid and no mortgage paid have had the sherriff at the door.

@Stephen@all

Maybe I am reading this too quickly but the repossession figures for residential properties (600?) do not seem to distinguish between owner occupied and residential properties used for other purposes such as holiday homes or “letting out”.

IMHO this is a very responsible site which does not usually indulge in sensationalism or scare mongering. I also have enough repect for you (Stephen Kinsella) to know that he would not allow himself to be a “cipher” for vested interest who either want to “squeeze” distressed mortgage holders or politicians who want to manipulate this fear.

It is important that we recognise that repossession of owner occupied properties are extremely rare in Ireland and usually involve “voluntary surrender” or abandonment.

There are enough sensational type stories in the media without a site feeding into this frenzy. A lot of people are genuinely scared about thier homes when they do not actually have to be.

This kind of fear among people who are genuinely trying to honour commitments can be equated with the unnecessary fear created by the revenue commissioner recent screw up by sending out letters to elderly people and the fear among over 70`s with relatively low incomes who continue to pay private health insurance even though they do not need to.

Please be kind enough to bear in mind that within any society (even mature democracies like Ireland) there is a very thin line between irrational fear and anger which has the potential to turn dangerous.

It also would be good if we bear in mind that this site is read(and often quoted) by very many people within Ireland, thoroughout Europe and around the world.

Best…..L 🙂

@livonian,
As I said, this isn’t about praising or condemning (or boosting for that matter) any interest group, it’s about a serious issue relevant to the Irish economy and so of interest to the readers of this blog. I’m not attempting to be sensationalist or a cipher in any way.

@Johnny
Where is the real production bit in a mortgage contract ? – the underlying good has already been produced.
Where is the value in over paying for a product that is in a extreme glut ?

Therefore what economic value is there in a mortgage or paying that mortgage – I would suggest mortgage paying subtracts from future economic activity and distorts the function of a efficient market.
I.e. resourses are not freed up for future economic activities – they are infact continually destroyed to maintain this artifical equilibrium.

You cannot reinstate nation state like tax levels and yet expect people to continue to pay market state private taxes otherwise known as Mortgages.

You either have a nation or a market state – you cannot have both operating at the same time.
Its impossible as little money will be available for commerce in such a absurd envoirment.
These 20 / 30 year Transactions needs to be declared null and void as they serve no productive function.
Its as simple as that it many ways – THEY SUBTRACT FROM THE PRODUCTIVE CAPACITY OF THE STATE.

Ps why would you want mortgage lending to start again ? – have we not enough houses ?

@Dork@Johnny@all

IMHO the hindsight of history has an uncanny way of making what seems “normal” at a certain point in time (e.g. the present) appear absurd.

While I rarely agree (or for that matter understand) you I am gald that you post your opinions on this site. When they irritate or confuse me (which is not often) I just “scroll on by”. Having said that, and with all due respect, I am glad you have eased up on posting links.

It would be interesting to ponder what history will eventually make of the whole concept of “mortgages” and the strange type of “commercial lending” which occurred in the western world in the years immediately prior to 2008.:-)

@Livonian
Yeah well the Hills sooth my savage…….. & sometimes repetitive soul.

Anyway how will economists deal with this glut problem ? – maybe many units have a negative or near negative value as they require substantial costs to return to a agricultural nature.
I.E. – even if a property sells for 1 Euro its input costs maybe higher then its potential output for many decades.
Maybe Bankers need to consult with ecologists who may give reasonable accurate timetables for natural topsoil creation.
http://www.youtube.com/watch?v=vA9VqHNjoTU

@ Stephen

reading the Laois Nationalist’s take on it, this guy fell into arrears pretty shortly (in relative terms) after topping up his original loan and well before the “crash”. He subsequently offered to pay around 1/5th of the required mortgage. He was then three years later ruled against by the courts, and then three years later again they’re trying to actually evict him. So he’s been in arrears twice as long as meeting his mortgage, and the system has let him remain on the property for six years whilst being in arrears. I’m not sure this guy is the poster child for “dont evict” movement, or even the debt forgiveness movement (he can only service 20% of a relatively small loan).

His example is essentially a green light for anyone and everyone to ignore any personal debts and personal responsibility. Basically this guy should be in a council owned house and be receiving social welfare, as our system has been designed to look after the vulnerable in our society, but instead people are suggesting we give him a free farm. Mildly nuts.

@Bond
You are pretending to have a shopkeeper like view of the State and the money system operating withen it.
When money is no longer payed for dead credit goodies then it frees up that money to be taxed.
I would suggest after a bank credit jubilee appropriate taxes could be used to reduce out energy import dependencey relatively dramatically.
But you can’t tax money that ain’t there.

This farce is distorting whats remaining of the physical economy – preventing people & the country from recognizing the real problem – energy imports & money exports.

@ Livonian
With regards to the Dork
The Dork is a modern day Bard, He holds up a mirror to our economics and will only be truly appreciated after the fact.
Still do not understand anything he writes but it is poetic!!

@Shaun@Livonian

“The Dork is a modern day Bard, He holds up a mirror to our economics and will only be truly appreciated after the fact.
Still do not understand anything he writes but it is poetic!!”

+1 🙂

We can just inject another 30bn into the 2 pillar banks via a PN and fund it by an ELA. Then we can reschedule the lot out to the 22 rd century. In for a penny….

@EoinBond

The basic problem with your stance to this issue (and most issues as far as I can see) is that you come to the table with a very closed set of views. In the case of the individual in Laois did it ever occur to you to ask the basic question which I and others have been repeating on this site and elsewhere for years and that basic question is:

Why did a Regulated entity lend money so seemingly carelessly in the first instance?

The property market is not a cash market. Please before you go to your bed tonight remember this basic fact. The property market is a market utterly dependant on credit/leverage and the providers of that key ingredient are the lending banks.

It’s the lending banks day job to say ‘no’ when the time is right in any property deal, I’ll repeat that just so you’re clear, the bank always have the opportunity to say no BEFORE the lending event.

Most comments including Johhny Foreigners above seem blissfully aware of the fact that banks have (or at the very least ought to have) resposibilities to ensure the market which feeds them maintains its long run integrity. This is not a eureka event that strikes banks after they have lent the cash – its something they are paid to analyse before the lending event.

Lending money, as they did, in the billions, at less than 1% net rental yield in many parts of Dublin for instance from late 2005 through to 2008 does not strike me as responsible, particularly when risk free alternatives such as German 10 year bunds were paying investors 350% better returns over the same period. The banks always have the choice to say ‘no’ to any potential customer. The fact that they continued on their merry way and allowed this to continue and were full square complict in a massive mis pricing of the market for a decade IS A BANKING ERROR. Making mistakes in a commercial organisation costs. Our Laois friend is just the fallout of such dire decisions.

Equally, financing the pollution of the country with excess housing product and essentially taking a punt on peoples ongoing property stupidity is not the action of a responsible and well Regulated lender(s).

The vast majority of folk who walk into the property shop with the intention of buying do so on average c2 times in their adult lifetime. I’ve absolutely no doubt the comparison you’d make today in your own job between the first or second time you picked up a phone to buy or sell a security on behalf of one of your clients versus today when you’ve probably completed millions of these deals is, well lets say it kindly, not the same. Don’t expect the novice property buyer to be in any better shape than you were on your first day in the job.

In basic language the normal Joe is completely clueless about what supposedly represents ‘value’ or not in the housing market. This is not the case for the lending banks. They control the prices in the market which their leverage is utterly dependant on.

Its a banks job to recognise that lending money in the manner that they have done over the past decade was dire from top to bottom. Peak to trough price falls when they eventually settle – on my numbers – will see falls of 75% to 80% on average with recovery likely to be L shaped thereafter. Any idiot will tell you that the providers of the key ingredient to any market with that sort of expected correction have made a balls of it, and deserve their lot.

Even aside from the fact that the taxpayer has been forced to recapitalise these institutions, results such as those mentioned above are just a natural consequnce of dire lending decisions in the first instance.

Banks simply have zero authority in trying to enforce recourse loans when by their very actions they have ensured; the economy is screwed up for a generation, the market on which their long histories were built have been completely decimated and by suffocating the market with 150k of excess product thereby ensuring the normal ‘out’ of a stressed cutomer is denied i.e. the ability to sell his/her house.

And to top it all we have the likes of you somehow endorsing their contractual rights under these mortgage contracts which were given to a complete novices in the overwheleming majority of these sad cases, up and down this sorrowful island.

Please wise up and open your eyes and your mind. You know as well as I do that buisnesses which make such fundamentally bad decisions deserve to fail. Allowing them to remain with breath in their lungs does, as the Govt has shamefully done, does not entitle them to assume that all their previous decisions were the correct or the right ones and carry on regardless.

@Yields or Bust
The pillar banks are now owned by the State .The banks cannot renounce their mortgages ,even a small part of them ,because the State is broke ,whether it is fair or unfair is besides the point.

BEB

I do not think YoB is taking issue with the principle of lending against security, as such, but rather that the lenders in this debacle should still enjoy the usual standing in the legal process. The objection is to stealth taxation, in the form of inflated property prices/stamp duty etc which only became visible post hoc. In other words, it is held the lending and repayment deal constituted some sort of fraudulent conveyancing. That is a big claim, with big political implications, if I understand YoB’s position correctly.

It is obvious that here has been a hideous failure of governance in Irish banking. The shareholders (principals) were wiped out by the actions of their senior management. These agents, who were a fairly small group, were able to seize control of the business, and set its corporate strategy in a way which suited their personal interests. That required the maximisation of short term profits and the boosting of share prices.

The key to that was to maximise lending, which was achieved by setting lending targets, with bonus incentivisation, at all levels of the business. The resulting credit fiesta led, as intended, to asset inflation in the property market, resulting in a long term sting to the mortgagee and taxpayer. Bank management received the benefits up front, and if they were smart, sold their own bank shares early doors.

What happened, in effect, was that Irish banks (and not just Irish ones) ceased to act as prudent lenders in the traditional ‘ right mind’ sense that you define , and instead adopted the stance of borrowers. They were facilitated in that transition by their bondholders, because the principal agent problem had also taken hold throughout the financial services ‘industry’. The Dork is cryptic, but he is rightly scathing about the processes involved. The ECB is as cynical, and as captured by stakeholder interests, as the Vatican. Adam Bhide’s ‘ AS call for judgement’ is a carefully researched analysis of what has gone wrong in global finance.

You state that no bank in their ‘right mind’ would lend without security. Firstly, unsecured lending has always been part of banking. Secondly, some massive commercial property loans were made here without proper title in place. The bankers were in such a hurry to collect bonuses that couldn’t keep their lending d&**Ks in their pants. One of the purposes of NAMA, of course is to make sure all of that professional negligence and malfeasance is kept from public view. Retrospective documentation is an art form in Ireland.

I have never had a mortgage, but I know a scam when I see it. Banks have brought banking into disrepute, but because our government, self-regulating professions and property interests colluded fully, no one can be held to account. Maybe there is some truth in the saying ‘ we all partied’ but YoB is right to protest that people who simply wanted to buy a home should not have been offered the financial equivalent of cocaine.

@ Paul Q

you state, that i state, “You state that no bank in their ‘right mind’ would lend without security”.

I did not state that. What i stated was as follows: “No bank on earth will lend into a market which does not at least protect the right to seize the underlying security.”

ie the legal right to enforce security (whether assets or a personal guarantee, which recourse lending, even if unsecured, effectively is), where given, must be maintained. Even if the security is close to worthless, you must still be allowed seize it where no other agreement can be reached, and where due legal process has been adhered to. In this case, he offered to pay 20% of actual, and has had 6 years of non-payment.

Much of the criticism about foreclosure and seizing/eviction of property seems to come back to “the lending was mistaken in the first place”, but that seems to me about debt forgiveness rather than the right to retain use of the underlying asset. Evict and clear them from bankruptcy in a fair manner if you want, or let them stay so long as they can pay some sort of “fair” amount to the institution involved. As i said, this guy is not the one you want to be using as your poster child for “dont evict”.

@Paul Q

You understand my position correctly. With regards however to fraudulent conveyancing sadly its the not the case, its the nature of a leverage driven market where rising prices are a boon to all parties except the end consumer. This is not necessarily fraudulent its more akin to self serving to the leeches that require an ongoing bull run to support their business models. There is no doubt however that as a bull run gets its feet firmly under the table fraud and stupidity may indeed colour common sense – and thats what happened in our case. The common sense loss being the valuation models the banks were using to justify crazy lending practices, which eventually morphed into the same thing.

@BEB

I never suggested that our Laois friend be the poster boy of the don’t evict movement I’m simply stating that the likes of whats happening in Laois is quietly happening all over the country because of the banking errors made.

A bank which seeks restitution to assets under the terms of a mortgage contract that is in breach of repayment terms normally means seizure of the assets. This much I agree with.

But does it not seem somewhat odd that with c109k owner occupier mortgages effectively in breach (not to mention the buy to let disaster) of agreed terms that the courts would not be full to the brim with such cases as we’re seeing here?

The underlying reason that this is not happending of course is that the banks know there is no market for these properties were they to seize them. They don’t have the ability to relend, there aren’t enough new customers in the first instance to take up the slack and the social problems this could cause would be biblical. The banks through their inaction in this regard are fessing up in many respects to their errors of the past.

In normal times the banks lent with their heads firmly fixed to their shoulders and wouldn’t think twice about enforcement procedures. With their heads firmly up the arses for a decade the daylight that now inflicts their world is suggesting the errors of the past decade cannot be solved by invoking the old seizure solutions. You are correct this will ultimatley involve a massive debt forgiveness program and the scale of the actual pricing error will then be known, its mathematically daft to suggest this problem can be solved by any other means knowing now the scale of all debt in the economy.

The ordinary Joe’s can’t support the loan agreements now or most likely into the future.Whether you or CMcC, as stated on the Sindo believe this to be fair or otherwise is immaterial. Fairness is not a solution nor is hope in another bubble market to get thousands out of their misery. I’m afraid despite all the hoopla it will eventually come down to paying these mortgages off or writing them down to a realitic model valuation based on a long run rental multiple that stands to scrutiny over time. My money is on the latter and let the banks take the pain and the cost – as stated above commercial errors as overseen and initiated by the banks eventually cost.

@ John Regan

I would agree with your post re: liquidity trap.
Do you know any good sites for monetary theory? It seems to me that this crisis is systemic rather than cyclical and that ultimately the monetary system is the root cause.

@ BEB
Sorry for the sloppy misquote. I am not challenging the legal notion of securitised lending per se, but rather the way in which the recourse principle has been abused at a systemic level. See below.

@ YoB
Yes. I am no lawyer but I did know that ‘fraudulent conveyancing’ wasn’t a correct categorisation of the individual transactions involved. What is lawful may still be wrong, often because certain things in society have always been taken on trust, and no law to combat the relevant abuses has been seen as necessary. Even laws to correct abuses, such as Glass Stegall, can be overturned by lobbyists. Mancur Olson has it right about the power of small well-heeled groups.

I never held bank shares, but I can see that bank shareholders were gobsdmacked to find that their ‘terrific’ CEOs has actually thrown prudent practice out, in favour of a model which brought in the quick buck. They were even more dumbfounded to see that auditors, and other professionals, had chosen to sing dumb about the glaring balance sheet and related risks.

The root of the Laois problem is the credit bubble, as described by the likes of John Mauldin, and the supposedly brilliant business practices which gave rise to it. The global credit crisis arose in large part from too-clever-by-half valuation models, of which Irish property valuation models are just one small, and rather old fashioned part, but locally lethal, part.

The rot started at the top, which was Wall St, but an awful lot of institutions and individuals were corrupted along the way, and the trail of victims is widening by the day. As a nation, and as a regional grouping of nations, we have simply refused to look at the reality, and are waiting like children for another few waves of Signor Draghi’s Magic Cloak. His can-kicking act serves mostly to confuse the public further, and it will be a very long time before trust in financial ‘advisers’ or the ECB, is restored. That is going to be a massive problem for the real economy.

I’ve seen the video, but don’t pretend to understand the legal arguments, so I’ll focus on the economics

Let’s say this guy gets his way.

Ulster Bank (foreign owned, so presumably they are more aggressive chasing bad loans). Have something on their balance sheet under “guy in laois” in asset. If the guy gets his way then their asset becomes 0. If this continues it will threaten depositors. Ok an extreme scenario, but that seems to be where people are heading with the argument (“blame the banks”). Should depositors who took no risk pay for this nonsense?

It’s a foreign bank so who cares, the British taxpayer will cover any bank/depositor losses? May not go down well politically….

How about the guy signed a contract (an agreement between TWO parties) with the bank of his own volition, saying he would give over his house, if he couldn’t pay up. Well he can’t pay up. It need not be a question of making him homeless. Ulster Bank allows him to live there and gets the deed, and he pays the bank rent.

I don’t think even the most reckless bank (except maybe anglo!), would sign off on stuff until all the legal paperwork was in order and they had security on the property.

If he really valued his house so much, many he shouldn’t have doubled down. You don’t have to be an expert in banking to think about the risk you’re taking.

The CSO said in an analysis of Census 2006, that there were 266,000 vacant dwellings in 2006 representing 15% of the total housing stock.

Of these, 175,000 were houses, 42,000 were flats and 50,000 were classified as holiday homes. County Leitrim had the highest percentage of vacant dwellings (29.3%) while 11.7% of dwellings in Dublin City were vacant at the time of the census.

There were 140,000 vacant housing units according to Census 2002.

The number of vacant units exceeded 300,000 by 2008.

Goodbody Stockbrokers said in Oct 2008 that since April 2006, there had been some 148,000 housing units completed in Ireland, but only 86,500 mortgages were paid out for the purposes of purchasing a new home.

The stats to date…. >104k views, 1721 likes…. 61 dislikes

If they’re not paying their mortgage why is there an expectation that they’d pay rent?

If ownership was surrendered and they’d stay on as tenants, could they then be evicted for not paying rent? If not, can other renters also get away with not paying rent?

If another person wanted to rent the house and would be willing and able to pay a higher rent could/should the house still be reserved for the defaulter?

sorry, 61,500 properties sold *for cash*

@PaulQ@BEB

“The shareholders (principals) were wiped out by the actions of their senior management. These agents, who were a fairly small group, were able to seize control of the business, and set its corporate strategy in a way which suited their personal interests.”

@all
IMHO it would be a good idea if readers actually re-read and contemplate what Paul has written as it would be a pity for the important message contained in this awful truth to be lost within the rest of his comment.

After contemplating it readers may begin to understand why most reasonable people on the Centre Right and Centre Left throughout Europe are finding themselves fighting on common democratic ground.

@Jesper

“……reserved for the defaulter?”

these are good questions but actually IMHO the last bit has already been answered.

The deeds of the dwelling remain with the lender until the loan is amortised.

However in all cases (including,I have no doubt, if we “dig” deep enough into the small number of non domestic banks operating in the Irish mortgage market)the lenders who originally borrowed the money have effectively defaulted at the expense of shareholders, taxpayers and other stakeholders.

Therefore since the dwelling has already been “reserved” for the original “defaulter” (the bank) it starts to become interesting to speculate whether precedence dictates that the second “defaulter” (the mortgage holder) has a reasonable expectation to expect similar treatment.

Whatever way we look at it one thing we can be sure about is that : “it is economics Jim but not as we know it”. 🙂

@John
I am not talking about MMT stuff – or the symbiosis of money (Treasury) and credit (banks / CB) into some optimum level judged by responsible bankers whatever or whoever they are
No I am talking about going all Henry the 1rst like.
Producing money as a token of state and not a loan in any form.
Deficits or at least internal defecits do not matter in this form as there is no interest to be paid on this token of symbolic value.
Its value is the wealth of the country divided by the amount of tokens issued and thats it baby.
If you want to speculate on investments you are on your own mate.
The Handmaiden of the commercial banks – the CB would become instantly redundant.

Do you not need a Kings whim to balance the whims of Bankers ?
All money is a token (not bank credit) – even Gold.
Goverment Debt for example is a asset created out of nothing – it does not need a mortgage to justify its existence so therefore at the moment it is the only accurate measure of leverage simply because it is a nothing , a abstract , a token.

Anyway not sure the US congress or Modern Monetory Kings Collective creates real debt when it increases its internal sovergin debt if you know what I mean , it just increases the amount of tokens that may replace lets say bank credit as it is being paid down.

The FED now merely holds it , sticks a interest rate on the stuff and gives most of the interest back to the Treasury , ditto for Americans holding US treasuries as they spend the stuff back into the economy eventually.

Its a terribly obtuse system but the Bankers and the State are locked into a deadly embrace – its called the Nation State I believe.

The FED bailing out private bank & international “investments” is a different matter of course.
Thats the global Imperium role of America & the problematic $ reserve which goes far beyond its capacity or role as a normal nation state with defined borders.
This is the international crevice through which bankers gain much of their power – by playing one nation off against another.

As for my personel views on where this will end up – well I will stick to my belief that everything will deflate against the $ or inflate against Gold as much of the Bank credit at least post 1971 , perhaps before destroyed rather then created wealth.
In the end there can be only one………..

@JohnRegan@Bond

“We might argue about what the solution to this is, but one thing we should not be arguing about is what the solution is not: making large numbers of people at the bottom homeless. This accomplishes nothing, in addition to being socially destructive and gratuitously cruel.”

+1

Here’s how it could ruin FDI.

A union of mortgage strikers is formed, refusing the pay banks. Banking capital is wiped out a second time. Depositors realise they’re next. Bank run starts, banks have to sell assets at fire sale prices to pay off depositors.

Ultimately banks can’t do this, banking system collapses. Google and other multinationals has to pay its staff with bartar.

Think this is extreme?

Just look what the troika is doing to Greece.

Property bubble bursts in the order of 30-50% are systemic events which last 15 to 25 years. Political economy is the apt subject.

Vehicles like NAMA and the banks extending and pretending exacerbate the problem.

What needs to be protected is the primary residence of every family. No forced foreclosures allowed, in the event of inability to pay the lenders must refinance at market value with previous obligations forgiven. The Gov’t particularly the DoF, Financial Regulator, Central Bank and the Banks themselves played a major role in ruining families. We are Irish. some of us with religious leanings combined with a social conscience and a sense of justice should be able to recognise when people making over Euro 250,000 per year gamed the trusting and innocent.

Great believers in the markets that we are it is just and fitting that the banks face up to the present value of their assets (collateral).

Well if you are an economist and do find yourself evicted, there’s always this nice little six month gig in Qatar at UK£1,100 per day

http://www.exec-appointments.com/Jobs/ad.aspx?adID=204335

By the way, if you suddenly hear around 10.03 ET today that Greece has defaulted, it’s just some guys on Zerohedge experimenting with trying to bring down the markets using Twitter. Why you would want to leave it that late on a Friday…..

Who organised the valuations ?
Who controls the broadsheet media property propaganda?-the property advertising revenues of the auctioneers and surveyors.

95% of all property sold in this state is sold through members of Society of Chartered Surveyors or auctioneers. They control which broadsheet gets the advertising revenue. They had the power. They controlled the broadsheet media. Can you recall an Irish Times editorial saying there was a property bubble? Their property advertising revenues would have finished the same day. In every loan file there is a valuation from the property professionlas. They are the property experts.

The property professionals controlled the country.

The losses reported by Ulster bank yesterday, and today by Lloyds, in Irish property implies that domestic banks receiving state support may be ‘containing’ another shoal of bad loans that have yet to break the surface. Evictions and repossession will become a more regular occurrence by the end of the year – factoring in ESRI projections that employment will probably shrink again. How can it be otherwise?

@Bond: “this guy has had 6 years to find a new place to live. The council housing list isn’t that long. In most countries the process of evicting and foreclosing is much shorter. I believe in Denmark, which has an extremely efficient and stable mortgage system, the process is completed no later than 6 months after you miss your payment.”

You’re missing the point. An “efficient and stable mortgage system” is not a good thing.

@ All

FYI. (Appropriately enough, one of the US programmes has the acronym HARP).

http://www.bloomberg.com/news/2012-02-24/why-renters-rule-housing-market-part-3-commentary-by-a-gary-shilling.html

@James J
“Property and rental property in particular, need to be considered like any other business rather than being clouded by rather emotional language.”

I fear that transactions concerning peoples homes are more than just “business”. Wishing it otherwise doesn’t really help. And who exactly has this “need”? And does this “need” conflict with other considerations where the property in question happens to be dwellings? And if there are conflicts how should they best be resolved?

“As to who would consider Irish law had failed to protect an invester: just about anyone who was thinking of doing business here.”

In the midst of chaotic failures by many parties in Ireland in many aspects of life not just property failures of the law to afford protection to property or bank investors is a small part of the whole. Personally, I am grateful that things are not worse on the island right now than they are, and that FDI is still flowing.

Required reading for the Emerald Isle – and the US too:

http://www.bloomberg.com/news/2012-02-20/icelandic-anger-brings-record-debt-relief-in-best-crisis-recovery-story.html

@John Regan
Shelter is a pretty basic human need.Having a shelter does not mean owning it.Germans and Swiss are mainly renters,close to half of the French are too.The passion for home ownership which created the housing bubble is an Irish specificity that is irrational.

In Germany and a few other European countries the rental market is dominated by housing cooperatives. Entry is by buying a share or shares in the cooperative which then rents you a unit. Eviction is unheard of, although on your death your shares can be sold to pay off what you owe the cooperative. Even in ordinary rental situations it is quite onerous to evict renters. In many countries there is very little multi-unit building for rent. The multi-unit building market is dominated by condominiums where the units are sold to individuals. When an owner wants to evict a tenant they simply give the tenant notice that they will be moving into the unit and the tenant is compelled to leave. This means that increasingly tenants are vulnerable to eviction without cause.

In countries where rental housing dominates and the tenants have votes the laws reflect the power of the tenants. Ireland with its high level of home ownership and council housing does not have good tenant protections in place.

I remember reading a musty Victorian investment advice book from the Carnegie Library which strongly advised against investing in multi-unit rental buildings in England due to the influence of renters through the ballot box on Socialist Governments.

@ Mickey Hickey

The word ‘may’ is missing before ‘be’ in the last sentence.

The relevant element in the Indo report is;

“But the “enhancement” to the bailout programme is also likely to include a plan to resolve the uncertain future of Permanent TSB and deal with the issue of unprofitable tracker mortgages that are weighing down bailed-out banks”.

There seems to be a certain understandable reluctance to actually establish – publicly – the true state of the Irish property market.

@James J: I understand the rationale for putting people out of their homes when they don’t pay their mortgage quite well. No need to explain.

I am aware that they agreed to forfeit the home if they did not pay their mortgage. I am also aware of many agreements that are breached for which there are no real consequences to the breaching party. This happens all the time – constantly – at the top of the socio-economic ladder. A strict not to say draconian application of the terms of “legally binding” agreements is reserved for those at the bottom. This disparity of treatment has been especially prominent since the “crisis” began.

It is indefensible.

I don’t agree that for the umpteenth time in the last 50 years the solution is some showy criminal prosecutions of whatever malefactors at the top the other malefactors at the top decide to hang out to dry. This has happened over and over in recent history and quite predictably will accomplish nothing other than crucify a few select people, deserving though they may be, while the vast majority of them skate in style by virtue of their ample swiss bank accounts. In the end nothing can be done about those people at this point that is worth doing.

An asset/property has two values, the price you can get for it,or the net present value of it’s future cash flows. If somebody auctioneed a 5 euro note on Grafton Street and an unwise person bidded it up to 20 euro, then a surveyor would value all 5 euro notes as 20 euro notes. Now we know the net present value of a 5 euro note is 5 euro. Likewise if an unwise person paid 2 million euro for a house whose net present value was 0.5 million euro ,then a surveyor would value all other similar houses in that housing estate at 2 million euro.

The commercial property market was similar. If an unwise tenant on Grafton Street paid a world record rent for a shop, then all the other shops on the street would be obliged to pay this rent, and surveyors would value all shops on Grafton Street accordingly.

Almost all of the Irish banks reckless lending was done using surveyors/auctioneers valuations. These valuations were as good as money. This is the valuation error than created the property bubble and bankrupted the country.
John Corcoran
M.Sc. Economics London School of Economics and Political Science.

@Bond: No, it’s not fair. This is not a debate about absolute unfairness v. absolute fairness. There’s more than enough unfairness to go around. We’re in the position where unfairness is going to happen – IS happening, and we have to choose which unfair scenario we want to live with.

An across the board debt forgiveness is quite imperfect, but it leaves everything where it is and people can go on. There are many problems with it, but one problem it does not have is multitudes of homeless people, which is what you are going to have if all debts are enforced. Creditors will lose, but their debts will be forgiven them, too.

And as it stands all debts will not be enforced, and have not been enforced. What is determining the difference right now is who is powerful and connected and who is not. For those who are not, we say pay up, or you and your children will be out on the street. What an irresponsible wretch you are. For those who are, we say here’s $12 trillion or so to bail you out, watch those bonuses don’t get out of hand, oh, okay what’s $10 or $15 million among friends?

Surely this arouses disgust at some point. Surely we have some basis on which to conduct our affairs other than limitless indulgence to the well-heeled and draconian exactitude pressed upon the weak.

I would not suggest that any of this is easy. But if you want an outline of a solution where we don’t wind up destroying ourselves, here it is:

http://strikelawyer.wordpress.com/2011/12/27/saving-the-world-revised-edition-part-ii/

http://strikelawyer.wordpress.com/2011/12/27/saving-the-world-revised-edition-part-iii/

A memento of my foray into Irish politics and economics over here:

http://strikelawyer.wordpress.com/2012/02/26/the-irish/

My thanks to the generous host and fellow commentators. Perhaps some good will come of it all.

John Regan
February 26th, 2012 at 12:07 am

You seem to believe your views are difficult to understand which they are not, just not based on economic sense. You are putting forward a proposition that is designed to appeal on the grounds that financiers and others got away with misconduct so no one should be punished.
Our legal and political class must take a more strategic view, although in the case of our political class this is unlikely, and enforce the contractual liabilities of mortgage holders in order to preserve Ireland’s reputation in the future.
Debt forgiveness of mortgage defaults will only make people sitting on half a million Euros of unpaid property wish they were sitting on a million Euros of unpaid property.
Those that can’t afford to pay should seek alternative, probably rented, accommodation. Ireland has a glut of accommodation it just needs to be made available.
Life is not a bowl of cherries and if you make a serious mistake it has serious consequenc

@ James J.

I presume that a debt Jubilee would result is a significant (further) decline in residential property asset values (and sales prices) to something close to their mid 1990s levels (ie. before the property boom started). All credit cards would have to be be voided and withdrawn and bank lending, for all purposes, would have revert to the plain vanilla boring old stuff it was. Interest rates would be around 6% – 8%. So, anyone selling a ‘500,000 residence’, would only expect to get around 70,000 or so – if their residence was in a good location. Otherwise they could expect a much lower amount. And here’s the kicker. The purchaser would have to have 25% of price in cash, on deposit, in the lending institution. That might take a while to accumulate. The residential property market would be virtually static for almost a decade. New (olde style) credit game. There would be lots of ‘lunches’. Just no ‘free ones’.

@James J. Some interesting points you raise. I have a nasty suspicion that our legislators may have some hand in the decline of ‘standards’ and responsibility for one’s actions. Mind you, the media have helped a bit.

The dye has been cast on the mortgage/debt matter, and the colour fixed. The outcome is either bad, or worse. Its not a question of ‘winners’ and ‘losers’; its a question of the stability of our society in an era where politicians can no longer make reckless promises about future spending. All have got to face that unpalatable prospect. We can only fund gov spending on the basis of what comes in in taxation. Borrowing for current spending has got to stop – before a stop is forced.

If residential property is treated as a means of shelter, and not a tradable asset. A real fixture, not a virtual financial derivative – then progress will have been achieved. Unwinding the last 4 decades of financial chicanery will not be a ball of laughs – for anyone, least of all politicians. They either deal with the predicament as adults, or behave like feckless adolescents. So far its been the latter.

Just keep a close eye on the spot oil price. Its in the economic Red Zone. If it remains there, we have major political trouble in prospect.

@alchemist

They should never have employed a local valuer,who were valuing 5 euro notes as 20 euro and who were part of a cartel using the most anti-tenant commercial lease law in the world,to exploit and destroy Irish commercial tenants. These were the exact crew who destroyed the country. Nama lost all credibility once they employed these people. Failure should not be rewarded.

@Yields or Bust

Precisely –property has TWO values-the price you can sell it for–or–the net present value of the future cash flows. So,if an innocent naive person gave you 20 euro note for a 5 euro note an Irish valuer would value all other 5 euro notes at 20 euro. This was the fundamental error that bankrupted Ireland. It’s as simple as that.

John Corcoran
M.Sc.Economics London School of Economics and Political Science