This post was written by Philip Lane


Half-Day Central Bank of Ireland Conference: 13th February 2013, Institute of Bankers, North Wall Quay, Dublin 1

8.45 – 9.00 Opening Remarks

Patrick Honohan, Governor, Central Bank of Ireland

9.00 – 10.30 Session 1: The experience in the United States

Paper 1: Dealing with a mortgage crisis: A comparison of the response by US and Irish authorities

Kieran McQuinn (Central Bank of Ireland) and Anthony Murphy (Federal Reserve Bank of Dallas)

Paper 2: Foreclosure externalities: Some new evidence

Kris Gerardi (Federal Reserve Bank of Atlanta)

Paper 3: The US mortgage crisis – are there lessons for policymakers

Michael Fratantoni (Mortgage Bankers Association) and Michael Moore (International Monetary Fund)

10.30-10.45 Coffee

10.45- 11.45 Session 2: Some Irish perspectives

Paper 1: A distressed mortgage market: Could a fiscal stimulus help?

Robert Kelly and Kieran McQuinn (both Central Bank of Ireland)

Paper 2: Understanding Irish house price movements – a user cost of capital approach

Frank Browne, Thomas Conefrey and Gerard Kennedy (all Central Bank of Ireland)

11.45- 1.00 Session 3: Panel discussion

Moderator: Alan Ahearne (NUI Galway and Central Bank Commission)

To confirm attendance, please e-mail: lisa.malone@centralbank.ie or kieran.mcquinn@centralbank.ie


  1. seafóid Says:

    “Dealing with a mortgage crisis: A comparison of the response by US and Irish authorities”

    Presumably food stamps will get a mention.
    And how many Americans sleep on friends’ couches these days ?

  2. John Corcoran Says:

    Some invitees might include the distinguished members of the Society of Chartered Surveyors,the editor of the Irish Times,the property editor and other Irish Times property journalists–the soft landing economist’s association etc etc.

    Property has two prices;

  3. Gtfaway Says:

    Google paper 2…….foreclosures good..

  4. What Goes Up... Says:


    The guys who didn’t see it coming, who kept zombie banks alive and, to this day, still haven’t sanctioned any senior banker are going to hold a conference on how to fix the problem they helped cause???

    Guess they gotta find ways to justify those salaries… seeing as doing their job isn’t one of them.

  5. Gregory Connor Says:

    @Gtfaway - thanks for the link, that paper alone sounds worth attending the conference to hear it.

    “… we look at foreclosures and find that both judicial foreclosure and the right-to-cure law have a dramatic effect on extending the foreclosure timeline. A year after a borrower enters serious default, which we define as becoming 90-days delinquent, lenders had auctioned off only 14 percent of properties in judicial states compared to 35 percent in power of sale states.”

    .. and they find that the end result of the longer forbearance policies is no net improvement in economic outcomes. Interesting to consider these findings in an Irish context.

  6. John Corcoran Says:

    The surveyors/auctioneers i.e the property professionals are a self regulated organisation which in Ireland means no regulation. These property professionals were responsible for three practices which created the bubble.

    First the valuation error i.e valuing all 5 euro notes as 20 euro
    Second the ruinous commercial property lease law organised by a criminal cartel.
    And third ,ninty five per cent of all property sold in the state is sold by surveyors/auctioneers.
    They controlled where the property advertising money was spent. Almost all of it was spent with the broadsheet media and the Irish Times, the mouthpiece for the property industry and owner of MyHome.ie , got the lion’s share. These property professionals. controlled the Irish Times property propaganda and all the other broadsheet media property propaganda. They had enormous influence in these papers editorial policies.

    This third item was the fatal one–the media faciltating this propaganda. There were other useful idiots like the soft landing economists etc etc.

  7. John Corcoran Says:

    Suppose a smart economist in 1999/2000/2001/2002/2003/2004/2005/2006 and 2007 had told all members of the Society of Chartered Surveyors and all the Irish Times property journalists that there was a massive property bubble in Ireland–what would these responsible professionals do?

  8. Eureka Says:

    Could somebody check the maths for me:
    1,900 CF patients in care
    190 would be eligible for the new drug treatment
    Total cost per year is 47.5 million Euro.
    Total cost by 100 years is 4750 million Euro or 4.7 bn Euro.
    So our bank bailout could have bought this drug for 1,000 years
    I must be wrong with the maths (help!)

    And then I ll make the point that saving our property market is such a sh**y trade off for the state we’ve landed ourselves is

  9. Tullmcadoo Says:

    Be interesting to see if Iceland or Argentina are going to be able to afford this CF drug at 250k per annum per patient for 30 years.

  10. Eureka Says:

    @ Tull
    Point taken. But doesn’t there come a time when you have to ask why.
    All this talk about billions to bondholders and banks is kind of sexy. I get it. It appeals to testicles. But when it comes to making a 13 year old cough a little less and live a little longer - to be honest I don’t think it grabs our politicians as much.
    In the UK they’ll spend 20 million on an Apache helicopter to blow up some old Afghani 20 year old who has nothing but Jihad to give his life a meaning. How far would that 20 million go on health care.

    My fundamental problem is this - the financial industry messed up like a shower of 2 year olds but because they have the money and power we are drawn back to them. We seek to please them above all others. Now, I know they’re necessary. And some of them are very bright (but no better than a very good teacher or doctor) but we actually don’t need about 70% of them.

    Argentina is being shafted - but if you took the ridiculous central bank backstops in the EU and US out of the equation their bonds might not look so bad after all. Time to let the big boys of finance face the music. You f**k up you pay up. End of. The rest of the world can be financed quite simply by taking 40% of the wealth generated in a country and using it for public services (including drug development)

  11. Eureka Says:

    Apologies if the last post was offensive to anyone - serious apologies. Sometimes you hit the send button before you think.

    Point still stands though - we need to THINK about what we want for the world

  12. foodyjohn Says:

    The Wall Street Journal comes to bat for us, while not buying the history re-write regarding the Gaurantee.


  13. Brian Woods Says:

    @ Eureka: I am neither offended nor embarrassed.

    The truth (and very inconvenient it may be) must come out - despite all the heroic efforts of the PR slugs (our PR Guy excepted!) with their greasy words as they seek to displace, dis-assemble, mis-represent, use untruths and outright falsehoods and finally indulge in ad hominem abuse.

    Anger is a most correct response to a total failure of those who could have explained our disastrous economic situation, but are self-serving, self-protecting craven cowards. And its the sheer magnitude of the hypocrisy that really rankles, allied with the personal realization that the only viable behaviour is a display of personal anger.

    A strong display of righteous anger surely embarrass some folk, but it sends a unmistakable message to others: which is exactly the point. You make your point crystal clear; “I’m rightly p*ssed off with you and your sh*ite, so STOP your messing, NOW!” It rarely stops their bad behaviours, but they do become at lot more wary of you. And if you’re careful, you attract support. Most folk may be easily fooled, but they are not fools.

    “If you encounter these commonplace frauds, hypocrites, paternalistic ideologues and so-called Anger Management Buddhas - SLAY THEM!” They cause untold mischief and much human suffering.

    “We need to THINK ….!” God I wish!

  14. John Corcoran Says:

    ” Housing prices should not outstrip inflation in the long term because,except for land restricted sites,house prices should tend towards building costs plus normal economic profit” Bob Schiller

  15. seafóid Says:

    How are prices in Nevada and Arizona doing? Nevada seemed to be closest in meltdown type to Dublin a while ago.

    I see from last weekend’s FT that investment funds are piling into residential property- something else that doesn’t happen in Ireland as it seems to be on a cultural par with eating horse meat.

    So how good a comparison is the US ?

  16. Brian Woods Says:

    @ seafóid: “So how good a comparison is the US ?”

    Practically useless. Each state has to be considered separately (different laws and regulations). Some states have very large metropolitan areas, some have smaller ones. East and West coasts may be similar, but the interiors are diverse. Population demographics are also diverse and sectoral industries and employments vary greatly. West-Virginia is a dirt-poor state: Ireland in the 1950s??

    So who is doing all this alleged buying then? Good question. But the res property market(s) in the states is in a very questionable state. Federal gov is involved in massive injections of new credit in an attempt to goose the market(s) - to create a ‘wealth effect’. If the res property market(s) really crash its very bad news for the financial sector.

    On balance? Useless - but that won’t prevent some critters trying. “Buy a bucket of popcorn.”

    ps: Olivia O’Leary (RTE Drivetime) gave John Corcoran a great mention and castigated FG for its continued support for ‘up only’ rents.

  17. Eureka Says:

    @ Brian
    Thanks for that comment.
    On Prime Time 23.5 million Euro per year <1/10 of the promissory note.
    The lads here don’t seem to care too much about this. Says quite a lot

  18. John Corcoran Says:

    Thanks for your support

    “The cartel responded immediately and began to mobilise the oligarchs. Ireland First and Property Industry Ireland(PII),aka the Fine Gael Landlords Association,were the cartel lobbyists,among others,to ensure this reform would never be implemented. PII was established in June 2011 and many of it’s directors were Fine Gael grandees and large party donors including a former Fine Gael Taoiseach’s son Mark Fitzgerald MD of Sherry Fitzgerald auctioneers a cheerleader of the property bubble,and the Cork based developer Michael O’Flynn. Kieran McGowan Chairman PII and David Went Chairman of the Irish Times,who together had presided over the bankrupting of Irish Life and Permanent Plc,agreed that the Irish Times would arrange the propaganda. The income from property advertising is a very significent part of it’s business model. The property editor Jack Fagan organised Bill Nowlan(W.K.Nowlan and Associates),Ann Hargaden(Lisney),Duncan Lyster(Lisney),Pat McArdle(economist) and CBRE, half page opinion pieces every wednesday. These were the cartel’s mouthpieces. Nowlan referred to the over-rented tenants as chancers and made the Zimbabwe,Banana Republic,Armageddon comparisions”

    It was the Irish Times and the Fine Gael Landlords Association who made the decision. Comrade Gilmore of the Nicolae Ceausescu wing of the Labour Party gave the thumbs down “drop dead retailers we’re with the landords.”

    The only reason this country had this feudal commercial lease law was because the state signed them–we live in a propertyocracy not a democracy.

  19. John Corcoran Says:

    @Brian Woods

    The only reason we had this feudal lease law was because the corrupt politicins organised state leases for the bagmen pals–it was institutionalised political corruption. Follow the money –it always leads to Leinster house.

  20. chris Says:

    Giovanni Favara now at the Fed Board is working on a paper that looks at the relationship between foreclosure rates and bank concentration in the US. This may well be relevant to Ireland.

  21. Brian Woods Says:

    @ JC: Thanks for the mention.

    Falling afoul of Ms O’Leary is not a good career move. Let’s watch this space.

    The sad fact is that post-1937 Irish governments are elected dictatorships, and this is a very uncomfortable truth. Proto-government political parties are well aware of this - and will do nothing to reform it: it may be their chance next time! We are stuck unless there is an electoral earthquake followed by an equally devastating political tsunami: a Black Swan event. They happen! Let’s hope.

    I got a good (distressing) laugh out of the headline above:-


    … but cringed when I read the menu. Is it my imagination or what? Do these so-professed, self-elected, self-opinionated, self-selected experts, consultants and academics have their cognitive equipment so firmly wedged into the nether regions of their respective fundaments (ie: they’re Fundamentalists!) that they are quite incapable of observing the reality around them, and coming to a modest objective conclusion about it? “Sure looks that way!”

    I can think of (at least) three contributors to this site who could propose an appropriate ‘fix’ for the Irish property gambling casino. Don’t see their names on the menu. Now I wonder why?

    I propose, Brian’s Six Pee Rule:-

    Prudent Protocol (to) Prevent P*ss Poor Performance 8-)

  22. John Corcoran Says:

    @Brian Woods

    Why did no other eurozone country have a massive commercial property bubble?

    The eurozone is a group of seventeen countries with a combined
    population of three hundred and thirty million citizens. All member
    countries have the same currency,the same central bank,the same
    interest rates and the same commercial property lease law except one,Ireland.
    Ireland has very different commercial property lease law to all other eurozone
    countries. The three components of all countries commercial lease law
    is the length of the lease,the rent determination process and lease exit
    strategies/break clauses. In all other eurozone countries lease lengths
    are short,say three to ten years,with break clauses and rents are
    indexed annually to changes in the consumer price index. In Ireland
    lease lengths are long,say twenty five years,with no break clauses and
    rents are reviewed every five years using the ratchet upward-only rent
    review process. This review process used the highest rent as evidence
    against all tenants and was open to malpractice and corruption.

    Irish commercial lease law was a twin headed monster which incentivised
    the over-renting of tenants and more damaging,it was the rocket fuel
    for the commercial property valuation model which created the monster
    commercial property bubble. When this bubble burst it destroyed the
    entire Irish banking sector. Reckless Irish banks lent tens of billions
    against these ruinous leases,not against the properties. If Ireland
    had had regular eurozone commercial lease law it would have been almost
    impossible to have had a commercial property bubble.

    The only reason Ireland had these feudal leases was,because the state signed them for the politicians major donors.

  23. Paul Ferguson Says:

    We submitted a paper on this in which we tried to address the distressed housing market issue at what we see as the root of the problem.

    ‘A Solid Foundation for The Housing Market’ can be downloaded from:

    In the paper we discuss how mortgages have reached their limit of duration, taking two incomes around 30 years to repay. As such we can no longer expect homeowners to become ever increasing carriers of debt, something which is needed to keep our current debt-based monetary system running smoothly.

    We conclude along the lines of exponential growth in the M3 money supply is no longer feasible. While the central bank can do all they can do encourage people to take out bank loans, they cannot force people to borrow and as such a publicly created source of money is needed to stimulate the property market.

  24. What Goes Up... Says:

    Here you go - the how and why property markets got distressed:
    The Untouchables



  25. Brian Woods Snr Says:

    @ WGU: Great stuff! Saw it earlier.

    @ PF: “… a publicly created source of money is needed to stimulate the property market.”

    Paul, I’ll part company with you on this one. That would only create another asset bubble. What we actually need is a sharp price drop in some sectors of the residential property markets in order to encourage buyers. The number of sales needs to be dramatically increased (more sales at lower prices).

    A significant decrease in res property prices (in some locations) will leave many owners in a dire financial situation (unemployment), whilst others will be stressed with a toxic combination of negative equity and declining incomes. And some fortunate owners will not be impacted at all. It is the former two categories that have to be sorted out, quickly - and with as little bureaucratic fuss as possible. I do not believe that there is either political pressure or courage to attempt this and the current situation will continue to fester for some time.

    If the widely, and enthusiastically anticipated ‘recovery’ fails to materialize (and I have no doubt it won’t) a ‘fundamental re-think’ may occur. We’ll see how our politicians and their financial supporters rationalize the situation whereby an increase in the real existing, and increasing debt burden, will be sustainable using probabilistic, futuristic incomes.

  26. John Corcoran Says:

    Guess why Ireland went bust?

  27. John Corcoran Says:

    Follow the money it always leads to Leinster House;

  28. Michael Hennigan - Finfacts Says:

    ‘Foreclosure externalities’ seems interesting but there are many domestic issues such as planning and that taboo subject — land rezoning — that should get attention.

    Apart from John Corcoran’s commercial leases concern, the bust was upon us when the Dublin City Council gave attention to minimum space issues.

    It was interesting to pass the Gas Works apartment development on the DART, with units selling in the range €400 to €500k and see that residents had to park bicycles on balconies.

    A report in 2009 said Ireland had worse housing conditions than other countries with similar living standards, with floor areas per person of around a fifth less than the western European average, even though a large number of dwellings (45%) were detached houses.

    We were short of land!!

    Ireland was a low-tax country but the State’s slice of the cost of a new house in taxes and levies was 28%. Add in the stealth tax, through the creation of an artificial scarcity of development land in a country that was 4% urbanised.

    About 42,000 hectares of land rezoned for housing by 2009, represented an oversupply of 4.5 times of what was actually needed for that purpose. It was space for 1.5m houses.

    Farmers took 23% of the national roadbuilding budget — but the equivalent was just 12% in England, 10% in Denmark, 9.4% in Greece and 1% in Iceland - - and The Irish Times reported in March 2012 that the State spent €30m on goodwill payments to landowners for not obstructing agricultural land sales for road projects between 2007 and 2011.

    Payments for not obstructing - - shakedown is surely an apt term.

    Shakedowns by individuals and resident associations were also the norm during the bubble.

    There are some plans to reform planning.

    That strange concept in Ireland - - conflict of interest — has been of no consequence.

    RTÉ’s Prime Time programme in November 2007 disclosed statistics about the involvement of elected representatives in the land development and property business.

    A total of 22% of councillors dealt in or developed land through their day jobs as estate agents, landowners and builders. In Mayo, that figure rose as high as 45%, in Offaly it was 44% and in eight other counties it was 33% or more.

    Prime Time found that in Clare, declarations of interest showed that 97% of elected members had no beneficial interest even in their family home. In ten counties, two-thirds or more of the councillors had not declared an interest in the family home.

    Recent developments…


  29. seafóid Says:

    Understanding Irish house price movements


  30. Paul Ferguson Says:

    @ Brian Woods Snr,

    Sorry I only spotted your reply now.

    Just to elaborate on the sentence, what we are suggesting is that we would have ‘everlasting’ publicly created money which rarely gets deleted like today’s money is on a continuous basis through loan repayments.

    As such banks would have to lend existing money only and there would be a limit to how much they would be able to lend since there would be a limit as to how much we could collectively ‘put aside’. Under this system house prices could not rise continuously and there would be less asset bubbles and subsequent recessions.

    If the euro zone transitioned to this system alone the central banks would monitor house prices in their main trading partners dealing with the ‘old’ system. For a detailed description of our proposal and how we could move smoothly to this smoother system you can have a read of:

    http://sensiblemoney.ie/data/documents/A-Guide-To-Full-Reserve-Banking-In-The-Eurozone.pdf (37pages!)

  31. Brian Woods Snr Says:

    @ PF: Thanks for the comment and link.

  32. John Corcoran Says:

    Straight talking Bill says property market to recover in 2010;


  33. John Corcoran Says:

    March 14, 2010
    Straight Talking, Bill Nowlan - Seeds of the next property cycle are germinating
    All indications are that the market will bottom out in 2010 followed by a slow recovery in values in the years ahead
    We all know property values have crashed but the anatomy of that crash has become clear with the recent publication of the Society of Chartered Surveyors/Investment Property Database (SCS/IPD) figures and in particular those for the past two years. This is a database of institutional properties and their valuations from a number of banks and pension funds going back for nearly 30 years.
    The first most striking feature is that for the typical institutional property portfolio, values are back at where they were in September 1999. That value would have risen to almost 2.25 times its September 1999 value by December 2007 before crashing back over the past two years. In other words, if it had been possible to invest €1,000 in a typical fund, that €1,000 would have reached a value of €2,250 in 2007 but would be back to being worth only €1,000 today.
    The second most striking feature is that if €1,000 had been invested at the height of the boom in September 2007, it would be worth only €447 today. (All figures are without any gearing/borrowing).
    So, with hindsight, it is easy to see why many people and the banks have a problem. They would have bought and borrowed right through the build-up of the bubble and few would have got out before the bubble burst in 2008. Much of the buying was done in the period 2003-2006.
    Further analysis of the SCS/IPD figures shows that the technical driver of the price bubble was what property professionals call yield compression. This is the process whereby buyers are prepared to pay more and more for the same income. In 2002, the typical yield on an office block would have been about 6.4% but by 2007 this yield had fallen to less than 4.3%. This yield would move the rent multiplier from about 15.6 to 23.3, resulting in a 50% increase in the value of the property. Rents did move upwards but not anything like the same rate – with the exception of retail, where rents rose very significantly.
    The third important message from the SCS/IPD figure is that what is bad for capital values is good for the income of acquiring investors. The figures show that income yields fell from just over 6.5% in September 1998 to 3.8% in 2007 but are now back to about 7% and still rising. This is because as yield compression reverses and values fall, then income yield increases.
    The fourth striking feature of the IPD figures going back to 1983 is how clearly they depicted the property bubbles over that period. The first up to 1990, the second up until 2001 and our current one just ended (peaking in September 2007).
    In reality, the current boom began in the early 1990s, was temporarily interrupted by 9/11 and the dotcom bust and finished in 2007, almost 14 years later.
    But if property cycles are normal phenomena, can we use this cyclical pattern to predict when we might get out of the current depressed situation?
    I believe we can if we understand the elements of a property cycle. Each property cycle is self-correcting. The normal process is that in recession, rental levels fall to the point that the market accepts the new ‘norm’. Then yields rise to levels that are also accepted as the new ‘norm’. This norm is set against yields from other forms of investment such as shares, bonds, deposits etc, adjusted of course for the normal property risks and cost factors. As values and rents fall, then new development becomes uneconomical because the cost of new development is more than the value of the finished buildings. This chokes off the new supply of buildings.
    At this point, the fall in values generally bottoms out. The property market bumps along the bottom while the economy gradually absorbs the oversupply of built space. Those adjustments have been happening in Ireland for the past two years.
    The big question is, are values at the bottom or have they further to fall? This is where I move from being an analyst to being a forecaster.
    I believe we are almost at the bottom. Yields have reached a new level where investors are prepared to buy quality property let at market rents. The fall in rentals has slowed down and in some sectors, such as quality offices, is levelling off.
    One has to look at what is happening in the real economy. The demand for floor space comes from business. While long-term property investors are patient and usually prepared to invest ahead of a recovery, the issue of their confidence in an economic recovery is critical. We may have reached a valuation floor but this will only hold for as long as investors and businesses believe that there is a real recovery in prospect.
    I have to add a second caveat, which is that there is good, bad and ugly property out there as a result of the banking and development excesses. The IPD index has an in-built bias toward institutional or quality property so the messages from this database only apply to good property.
    With these caveats, I believe that we will see a further fall of 3% to 5% by year-end before a bottoming out of property values in 2010. However we will see a slight recovery in values in the next few years of about 3% to 5% a year.
    But remember, property investment is, or should be, more about income than about capital appreciation and definitely will be for the next few years.
    Real property investors, as opposed to property speculators, are focused on income. Reliable income will be the key focus of the new breed of investors. Such investors, many from overseas, are currently watching Ireland and are ready, willing and able to do deals.
    The seeds of the next property cycle are in the ground and slowly germinating as the detritus of the last boom are cleared away.
    Bill Nowlan is a chartered surveyor and town planner and manages a property asset management advisory company, WK Nowlan & Associates, in Dublin

  34. John Corcoran Says:

    Straight Talking John Corcoran gives his forecast for the Irish property market in December 2011;

  35. John Corcoran Says:

    Straight Talking John Corcoran gives his forecast for the Irish property market in December 2011;

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