Brian O’Kelly and I have a new policy paper on Eurozone bank resolution; it is in the Special Papers series produced by the Financial Markets Group at LSE.
Category: Banking Crisis
What is it with these economic historians? Schularick and Taylor cast a dim eye on UK economic performance here.
HT Paul Krugman.
The Director of Credit Institutions and Insurance Supervision at the Irish Central Bank, Fiona Muldoon, has been widely praised for her speech to the Irish Banking Federation, calling for faster action by the banks in dealing with the mortgage arrears crisis. The speech makes clear that the damaging nexus of the former Fianna Fail government, linking the politically connected property development industry to the banking industry and an overly compliant bank regulator, is no longer in place. The Irish Central Bank is now able and willing to stand up to the industry that it regulates in order to protect the public interest, and it is supported in this stance by the ruling coalition. This is an important positive outcome.
The speech was a step forward, but it was not an unusually brave speech, despite the impression one gets from the wide praise it received in media coverage. A truly brave speech would not be widely praised, since it would need to unsettle people rather than confirm their existing beliefs. The speech ignores a big part of the reason for the mortgage arrears crisis – the deep-seated Irish political aversion to house repossessions. Without facing up to this big part of the mortgage arrears crisis, there will be no solution. Here is an extra paragraph, offered with proper humility, which might have changed Fiona Muldoon’s partly brave speech into a truly brave speech. I have kept the “teenagers” motif, which was a clever oratorical device in the original speech.
“I cannot come here and give a speech about mortgage resolution without once mentioning repossessions; that would be cowering. The notion that 167,000 mortgages-in-arrears can be resolved without a substantial proportion of repossessions is delusional. We on the senior Central Bank staff could give speeches ignoring this reality, thereby pandering to political sentiment, but we will not do so. Meanwhile, the government’s most recent attempt at reforming Ireland’s repossession laws was a shambles, and virtually the entire law was declared invalid by the Justice Dunne ruling in July 2011. This has left Ireland, and it’s banking system, with virtually no repossession system at all since that date. Rather than fix this urgent legislative cock-up of its own creation, the government has chosen to ignore it and pretend that it will go away. The ruling coalition is acting like a bunch of teenagers; blaming everyone else in the household for their problems while neglecting to do their own homework.”
Landon Thomas outlines some of the reform ideas doing the rounds in policy circles and profiles some of the key participants in this NYT article. He includes the ESBies idea proposed by our euro-nomics group and a member of our group Markus Brunnermeier, as well as Daniel Gros and Graham Bishop.
I am not entirely sure if it belongs in a post with this title heading but Hans-Werner Sinn makes his own proposal in this FT op-ed.
In a piece in yesterday’s Sunday Business Post my colleague Dr Niamh Hardiman makes a plea for better understanding of the roots of our current crisis in weaknesses in governance institutions. Such an understanding is a precondition for effective reform. She addresses weaknesses in parliamentary scrutiny, the capacity of the civil service for appropriate engagement over policy making, and the effectiveness of the public service itself. She highlights institutional explanations for tendencies for public policy to favour sectional interests, but argues that understanding the institutional weaknesses is the key to addressing them. The article is behind a paywall, but a fuller, multi-author examination of the issues is available in a book arising from a UCD project on governance, Irish Governance in Crisis, edited by Niamh Hardiman (Manchester University Press, 2012).