[Gurgle]

Originally Posted by Solair

everything comes back to the banks being utterly reckless with what they were doing

It takes two to tango.

The bank official is not responsible for your personal financial decisions, you are.

They deserve the blame for the banks failing, but not for people committing to payments they can't afford.

[EricPraline]

Originally Posted by Solair

In any transaction like that, you have to assume that a normal person is absolutely not a financial expert. The bank however is supposed to be!

It's a damning indictment of the level of numeracy of the average Irish person if they are incapable (or unwilling) to reasonably estimate whether or not they can afford their single largest monthly outlay. Is this person, who has completed the Leaving Cert and a degree, unable to perform simple budgeting?

As has been said here before, it seems that many people spent more time planning holidays than they did researching a property purchase. Is that the fault of the banks?

In relation to this particular case, I'm not sure how much of a precedent it sets. There may be a very specific set of circumstances. This line in the IT stands out:

Her lawyers argued the property should have been sold more quickly, before the market fell further, though there was a dispute over when it was surrendered.

[Solair]

If the debts are unsustainable what exactly do you propose to do ?
Starve people? Lock them up perhaps in stocks on O'Connell Street ?

All that not allowing the debts to be written off / written down is doing is preventing economic recovery as these people are left with no disposable income and no prospects or, worse case scenario they will flee the loans entirely and just disappear abroad.

At EU level, the problem is that a) if the regulation hadn't been so poorly thought through this situation would never have happened in the first place.

b) The ECB in particular does not seem to be able to face the reality that the Euro is not the Deutsche Mark - its value has to reflect a basket of countries, some of which are currently basket cases. If it continues to refuse to monetise the debts, the situation is going to just get worse and worse as the countries and banking systems exposed to these debts will simply never be able to pay them down anyway.

As it stands in Ireland for example, banks are starving businesses and consumers of normal sustainable lending streams i.e. cutting flexible credit, etc which is killing the economy.

Nothing seems to add up and there appears to be absolutely no overarching policy it's all still blind panic and bickering about moral hazards which the Eurozone slowly drifts ever closer to a huge cliff.

Also, the tax payer only bears the costs of writing off these debts because the ECB and Irish Government decided that the best way to approach this was market interference and nationalizing bankrupt banks...

The tax payer should absolutely not be absorbing this debt.

Also with regard to the Euro's value. The Eurozone is one of the world's largest single economic blocs and does most of its trade with itself, so for most things the value of the currency is irrelevant as it is internal trade much like the US does.
Not only that, but when it comes to energy imports, the EU's members impose vast tax on those. So, if you devalue the Euro by a quite a few % by quantitative easing, the net result would be EU exports to China etc get cheaper, imports from the far east get a bit more expensive (helping EU companies), the price of energy would increase a bit, which could be counteracted by just reducing some of the energy taxes and the consumer market / business community wouldn't actually face that much of an adjustment.

I don't think the EU has gotten beyond thinking like a small country.

[Forest Demon]

Originally Posted by Gurgle

'They' should be training at something that will give them a hope of getting a job.
There really isn't much benefit to spending their days on boards whinging about the public sector. It doesn't add anything to the CV.

My points are valid. I don't appreciate your response. Since when did contributing your opinion on a forum become whinging. And you a mod. tut tut.

Are you typing it from your civil service job in between a games of solitaire?

I have a diploma in IT, degree in Engineering, a Masters and 17 years experience. But you are right, its more training I need so I have applied to FAS for a saddle making internship as there is a growing market for private sector workers to be rode in Ireland at the moment.

Maybe I should go and train to be a nurse or teacher or guard? Wait a second, we cant afford to employ any more of those.

[Solair]

Originally Posted by EricPraline

It's a damning indictment of the level of numeracy of the average Irish person if they are incapable (or unwilling) to reasonably estimate whether or not they can afford their single largest monthly outlay. Is this person, who has completed the Leaving Cert and a degree, unable to perform simple budgeting?

As has been said here before, it seems that many people spent more time planning holidays than they did researching a property purchase. Is that the fault of the banks?

In relation to this particular case, I'm not sure how much of a precedent it sets. There may be a very specific set of circumstances. This line in the IT stands out:

That is *EXACTLY* what happens when banks take the controls off lending. It is what happened in the United States, in the UK and in plenty of other markets that have been through these kinds of credit bubbles.

The average consumer is absolutely not financially astute and there is plenty of psychological research out there that would show that people are extremely poor at evaluating risk, long term probability etc etc.
That is why most sensible countries have pretty serious controls of bank lending policies and why, historically, banks were very careful, conservative and prudent about what they lent. They went absolutely insane in the late 90s and through the 00s.

There was also a problem in Ireland where people had become quite used to high inflation. That was true in Spain too.
Our parents generation bought houses they couldn't afford then inflation took care of their mortgages i.e. they bought a house for £24,000 in 1978 and that loan was laughably small by 1999.
So, that also entered into a lot of people's notions of how the market operated and membership of the Eurozone changed that game's rules drastically as we entered a situation where inflation behaved more like France and Germany.

[Monty Burnz]

Originally Posted by Solair

If the debts are unsustainable what exactly do you propose to do ?
Starve people? Lock them up perhaps in stocks on O'Connell Street ?

All that not allowing the debts to be written off / written down is doing is preventing economic recovery as these people are left with no disposable income and no prospects or, worse case scenario they will flee the loans entirely and just disappear abroad.

If you can't pay the debt, you go bankrupt. It's pretty simple - you say goodbye to your assets, say goodbye to your debts, and start again. Bankruptcy right now is ridiculously tough, but hopefully in a few months the reforms will come through and this will be a good option for those who can't pay. Those who won't pay will find it unattractive.

Originally Posted by Solair

Also, the tax payer only bears the costs of writing off these debts because the ECB and Irish Government decided that the best way to approach this was market interference and nationalizing bankrupt banks...

The tax payer should absolutely not be absorbing this debt.

Right right right, there's no point in going on about 'shoulda woulda coulda' stuff - the banks largely belong to the taxpayer. That's the situation today so we need to deal with it.

[Forest Demon]

Originally Posted by Monty Burnz

If you can't pay the debt, you go bankrupt. It's pretty simple - you say goodbye to your assets, say goodbye to your debts, and start again. Bankruptcy right now is ridiculously tough, but hopefully in a few months the reforms will come through and this will be a good option for those who can't pay. Those who won't pay will find it unattractive.

Right right right, there's no point in going on about 'shoulda woulda coulda' stuff - the banks largely belong to the taxpayer. That's the situation today so we need to deal with it.

Completely agree. The sooner the better they change the bankruptcy laws. Let people pay a price for their mistakes and move on. Its the only realistic way forward. The tax payer is picking up the bill anyway.

[Solair]

Originally Posted by Monty Burnz

If you can't pay the debt, you go bankrupt. It's pretty simple - you say goodbye to your assets, say goodbye to your debts, and start again. Bankruptcy right now is ridiculously tough, but hopefully in a few months the reforms will come through and this will be a good option for those who can't pay. Those who won't pay will find it unattractive.

Right right right, there's no point in going on about 'shoulda woulda coulda' stuff - the banks largely belong to the taxpayer. That's the situation today so we need to deal with it.

Unfortunately, I don't think that we are capable of dealing with it as a nation, a community of European nations, as a banking system or as an economy. The European Commission and ECB are basically showing themselves to be utterly incompetent, incapable of reacting to the crisis as it develops, incapable of identifying what the problem actually is and totally out of touch with reality and the Irish Government is locked into a situation that is totally unsustainable thanks to the previous administration's knee-jerk approach to dealing with the crisis in the first place.

I would predict that the wheels will eventually fall off. I don't know how that will pan out, but we are currently lurching from one minor crisis to another and the whole thing is being held together with the financial equivalent of chewing gum, glue and sellotape.

Something very big has to change and it has to change soon. If it doesn't, it will be changed for us by outside forces of economic reality.

[Spiritofthekop]

No problem with this in severe case's as long as...

They hand back the keys of the house & assets bought from top ups etc and they are banned from signing for any other loans or mortgages in this country for 15/20 years so they then can go out & rent & save some money like the rest of us did.

[Lantus]

Just to be clear as I'm not an expert in these matters...

Bank of Ireland lent a quarter of a million euro's to a person who it later transpires can only afford around €250 per calendar month in repayments.

I appreciate that as many have pointed out there are a lot of nuances here that the story does not tell but surely this in itself is the root cause of the problem.

If you asked a bank today for this money they would say off you go and without a smile. But at the time these 'financial experts' were all so punch drunk on the mortgage market they gave vast sums to any old person that had decided to cash in the never ending gravy property train.

People have a level of responsibility to take in what they borrow but it is the banks that asses each case and using their financial skill make the decisions. The banks need to give the money to the applicant, ultimatley they are resonsible for their actions. All people do is ask for it and hope....

[Zamboni]

This nurse is on Newstalk 106 right now with Eddie Hobbs and Jonathon Healy.

[riclad]

THIS is a nurse,she should be smart enough to know, i borrowed x amount,i have to pay x amount per month,can i afford it .I hear nurse,s wages are pretty good.
IF she work that out,i would,nt trust her to hand out medication.You need a good education and leaving cert to become a nurse.
I dont think the banks can afford to do this with everyone whos having trouble paying a mortgage.
I didn,t know 3 bed houses are going for 70k, so who would buy a 1bed apartment ,if i can buy a house for 70k?
IF a nurse cant pay a mortgage god help the people on lower wages who dont have strong unions to protect them.

[Monty Burnz]

Originally Posted by Lantus

Just to be clear as I'm not an expert in these matters...

Bank of Ireland lent a quarter of a million euro's to a person who it later transpires can only afford around €250 per calendar month in repayments.

She was earning 70k at the time - 3.5 times earnings. Then she quit to go to a job she preferred paying 50k.

I don't know where the €250 per month figure comes from. Probably a comfy figure for her to pay after her rent, and living expenses.

Originally Posted by Lantus

People have a level of responsibility to take in what they borrow but it is the banks that asses each case and using their financial skill make the decisions. The banks need to give the money to the applicant, ultimatley they are resonsible for their actions. All people do is ask for it and hope....

Sounds to me like the bank did nothing wrong at all in this case.

[Solair]

This is exactly the problem - people are incredibly naive about financial products and long term risk.

Most people just see the monthly payment at the interest rate they sign up to and hope they can make those payments and, especially at the top of the market, were just desperate to get onto the property ladder and accommodate themselves.

A lot of people are also vastly over-optimistic about their economic prospects. That's good in so far as it means people are generally ambitious, but it is not necessarily reflective of reality or prudent.

Human psychology does not do prudent decision-making very well. That is why strict financial regulation is in place to prevent markets from going crazy. Stock markets go nuts based on whims, housing markets, you name it.. once something becomes accepted practice, people all jump on the band wagon.

Also, never under-estimate the heard instinct in humans. We do make decisions by ourselves sometimes, but for a lot of issues in life, we group-think. That is what our brains are evolved to do because in a lot of situations it works well.

If a lot of people think something's correct, we tend to just accept the group's view. For a lot of things this works well, but for some things it's massively dangerous e.g. it can result in market bubbles, election of extremist organisations e.g. the Nazi party's electoral success in Germany before WWII being the most terrifying example, or the formation of cult-like views.

It is very hard to shift people's opinions when lots of people are telling them that something's correct.

In Ireland, the accepted reality was that you HAD to get on the property ladder and that prices could only increase. That's how all bubbles operate and that is exactly why you need serious and prudent regulation to prevent them and why banks are supposed to be doing their job by managing people's ability to access crazy levels of financing.

Throwing money at consumers without any notion of how they are going to ever pay it back is totally unreasonable and financial suicide and I do think the banks (and ultimately by the looks of it the entire system) will just have to accept that that is what happened. Thus, these write-downs are going to have to happen.

Originally Posted by riclad

THIS is a nurse,she should be smart enough to know, i borrowed x amount,i have to pay x amount per month,can i afford it .I hear nurse,s wages are pretty good.
IF she work that out,i would,nt trust her to hand out medication.You need a good education and leaving cert to become a nurse.
I dont think the banks can afford to do this with everyone whos having trouble paying a mortgage.
I didn,t know 3 bed houses are going for 70k, so who would buy a 1bed apartment ,if i can buy a house for 70k?
IF a nurse cant pay a mortgage god help the people on lower wages who dont have strong unions to protect them.

She's a *nurse* - she makes medical decisions, looks after patients, knows about diseases, illnesses, is probably a very caring, nice person, very people-focused, and has all sorts of great positive things to contribute etc etc.

However, she is not a trained actuary, banker, economist or financial expert.

I would not go to a bank with a broken leg, or to get an injection! Nor, would I expect a nurse to be a financial expert.

[Gurgle]

Originally Posted by Forest Demon

My points are valid.

Arguable at best.

Originally Posted by Forest Demon

I don't appreciate your response. Since when did contributing your opinion on a forum become whinging. And you a mod. tut tut.

Since 2008, all misinformed opinions based on rabble rousing media reports which claim that all public sector workers have it better than private sector are classified as whinging.
(I'm not a mod here.)

Originally Posted by Forest Demon

Are you typing it from your civil service job in between a games of solitaire?

Nope, typing it from my private sector job while the squishy bit at the back of my brain tries to figure out whether code or silicon is to blame for my current bug.

Originally Posted by Forest Demon

I have a diploma in IT, degree in Engineering, a Masters and 17 years experience.

Similarly, I've an M.Eng and 14 years experience. I'm in a good job with decent money, approx 20% more than I'd get e.g. teaching in a secondary school.

If you're unemployed then there is something seriously wrong. There are jobs out there, is it an issue of not offering what you previously earned?

Originally Posted by Forest Demon

But you are right, its more training I need so I have applied to FAS for a saddle making internship as there is a growing market for private sector workers to be rode in Ireland at the moment.

Are you dissin' saddlers?
They're well trained professionals you know, and can earn good money.

Originally Posted by Forest Demon

Maybe I should go and train to be a nurse or teacher or guard? Wait a second, we cant afford to employ any more of those.

Whinging again, see above.