Brian Lenihan's audacious deal has earned him nation's respect

jetski

Its an absolute joke how many people that are talking down the property market with absolute rubbish statements, people giving shock titles to interviews like the one below such as "Brian Lenihan adjustment in house prices has to take place" when is you read it trough its actually more like

BL: "what we have seen in the Irish market in recent years is a radical adjustment of prices downwards and that process has to happen."

That process started over two years ago but with insinuations that its just starting is totally tripe.


Brian Lenihan's audacious deal has earned him nation's respect
After his historic bank initiative last week that staved off economic catastrophe, left the United States in awe, Britain in fury and EU bureaucrats in utter frustration, the Finance Minister spoke to Aengus Fanning

Sunday October 05 2008
A man in the eye of the storm, on the fastest learning curve in our recent history, Brian Lenihan last week began to show the world that he possesses that elusive political quality called 'bottom'.
The audacious initiative to stave off catastrophe had the US in awe, Britain in fury, and the EU in frustration at the fait accompli delivered to them before they could get their techno-bureaucratic dead hands on a brilliantly conceived plan.
The dire necessity was there, and we came up with the necessary invention, earning the admiration of Henry Paulson and the grudging respect of the rest of Europe. It has done a lot to lift the morale of a deeply worried people, and that alone is something big. One hardened journalist said last week: "It is one of the rare occasions when I could say I was proud to be Irish."
Success has a thousand fathers, so it is to be expected that there are many rumours about whose idea it originally was, with speculation about possible progenitors from Charlie McCreevy, to JP McManus, to Dermot Desmond, to Attorney General Paul Gallagher. Be that as it may, the buck stops with Brian Cowen and Brian Lenihan and they are the ones who deserve praise, just as they are the ones who will be blamed if it goes wrong.
When I met Brian Lenihan on Friday afternoon, he had been working around the clock for nearly a week, but the adrenaline of the fray was coursing through his veins and he looked like a man on the top of his form.
Mr Lenihan's innate abilities have never been in question, but last week he showed a depth of character that can only give heart to a fretful people. I discovered later that evening that he is truly a chip off the old block. When I found that some important bits of the interview were not on tape, I rang him shortly after 9pm with my problem.
"Can you be in the Department of Finance in 15 minutes?" he asked. I certainly could, and I was. With Lenihan good grace he went over the parts of the interview that were missing, and with near total recall.
I think it was Hemingway who called this grace under pressure. I was in a hole, and Brian Lenihan got me out of it with no fuss and the best of good humour. I won't forget him for it.
AF: Well Minister, these are hectic times. First of all, and I mean this, I'd like to congratulate you on the radical plan announced last Tuesday morning -- it was imaginative, original, innovative and has set a template for the rest of the world though there are risks inherent in it.
BL: Of course there are risks inherent in it and of course we can't be complacent about it, it is only the first step in the reform of our banking sector, it is the essential first step to bring back confidence and liquidity into the system and protect the Irish banking sector when it was under huge stress
The stress experienced by the Irish banking sector was experienced by many banks in other parts of Europe in the days preceding last Monday. But of course our position in Europe was unique in that there were six domestic banks, or six domestic financial institutions in Ireland, four of them banks and two of them building societies, who would have been orphaned if the Irish Government did not take a swift decision to protect their position.
And on Monday, as you know, the share prices were pounded in the Irish Stock Market, the Irish bank shares were pounded, there was a real danger that by Tuesday the Irish banking system could have entered into a systemic collapse.
AF: Can you make any assessment of the risks involved in this radical initiative?
BL: Well, you know, I don't believe there are great risks to the taxpayer in this initiative at all. Naturally and properly opposition deputies in the Dail raised that question but the reality is that you have to have a banking sector in any country.
A bank will always have assets and liabilities in any country. The assets of the Irish banks are clearly in excess of the liabilities -- even allowing for the assets and the loans which are poor in quality. I think every economist would agree with that. So I don't see any exposure to the taxpayer in that sense in this legislation and I think that argument was somewhat talked up, if you like.
I think the real hazard for the state in this legislation is that we are so deep into the institutions and that we have to ensure that the institutions comply with the highest standards of commercial good practice.
AF: Did you get any reaction from Britain?
BL: Of course the British government have concerns. The United Kingdom government are concerned about how this may impact on certain UK institutions and we have told them we will address those issues, but we had to look after our own six domestic banks first, if we didn't they would have been left as orphans of the storm.
But certainly we will look at the position of the United Kingdom banks who trade here and are subject to our regulation. We do have to examine that issue and we will examine it and I have made that clear to the Prime Minister.
I spoke to the Chancellor of the Exchequer twice during the week and made that clear to him.
AF: And what did Mr Darling say to you?
BL: Well naturally Mr Darling asked me to look at the position of the Ulster Bank in particular and I undertook to look at that position.
AF: What do you assess as the public reaction to the initiative?
BL: I am very heartened by the public reaction. I got a tremendous, spontaneous reaction around the country. It is always great to get a good public reaction, but that is not as important to me as the international reaction.
The reaction in North America is very positive to this announcement and I think we often forget how many good friends we have in the United States.
AF: We will be publishing the Sunday Independent in Boston from next Sunday.
BL: We have such good friends in the United States and we should never forget that. I believe that everyone from the Secretary of State down was very impressed by our approach in this matter and it has created a very positive impression that Ireland could get its business done.
AF: On television during the week I saw a City of London analyst, apropos the banking problems in Britain, saying at the heart of it all is the price of a house. Would you agree?
BL: I think that is correct, and what we have seen in the Irish market in recent years is a radical adjustment of prices downwards and that process has to happen. And one of the reasons we have become uncompetitive as a country is because of our high house prices -- it put a terrible burden on people who wished to acquire a house for the first time -- and that adjustment in house prices has to take place.
AF: But there is also commercial property.
BL: I think the commercial property market is important in any country. Here in Ireland we have a frozen commercial property market and again that is a problem and it has followed on from the illiquidity of the banks.
AF: In a way, is it over simplifying it for me to say that the Government and the Irish taxpayer have a deep interest in the Irish property sector, both residential and commercial?
BL: The Government always has to have a deep interest in the property sector, both residential and commercial, but you have to be very careful. I have said this before this Budget and I am not going to anticipate anything in this Budget, but interventions in the housing market have to be very carefully calibrated.
AF: There seem to be people who intrinsically think that the construction sector/developers are all evil.
BL: That's wrong. I must say I am as surprised as any.
AF: When people are assessing the construction industry is there anybody who is neutral and objective or are they making moral value judgements about X developer or Y developer?
BL: People should stop making these very moralistic judgements and look at the record around the world. There is nothing unusual internationally in a boom, bust cycle in the property market. They have happened all over the world and we should study from what's happened in other countries and see how it happened so we can prevent it happening in the future and ensure that we have a stable construction sector.
I think what is unusual about Ireland is that we never had a cycle like this in our economic history and I think it is very new for us. I think if you look at other countries, this has happened in Britain several times, it has happened in the US many times.
It is not, as an economic cycle, unusual. People like property, they like getting assets -- I got into trouble for saying that somewhere recently -- and you know they can be over exuberant about acquiring them and the market can become overheated and that is what happened.
AF: This week's Exchequer returns were severe.
BL: Very severe. My department estimated a €6.5bn shortfall in the estimate of receipts this year and this is very serious for the State and for the funding of the State. Your journal highlighted throughout this year the substantial decline in economic activity which took place and this is reflected in the assessment of the Central Bank that we may have negative growth next year, so this is a very serious development for the economy.
At the time of last year's budget all of the commentators suggested the growth rate this year would be 2-3 per cent and I can assure you my department's figures reflected that economic consensus among commentators. I am sure you have no difficulty in recruiting an economic commentator to give a different view today, but it might be worth going back to last winter and seeing what was prophesied then.
AF: There are those who say, Minister, with the Budget, you have this deficit, falling revenue, increases in spending, in social welfare in particular, but that the predicament we are in requires more than a balancing of the books or the Budget .
BL: We need a strategic framework, I agree with that, but I don't want to go into budgetary matters today, as you appreciate I am making a statement on Tuesday week and I have had a lot of meetings with colleagues alongside this banking crisis.
This will be a tough Budget and that is all I will say about it.
I mentioned the fact that we are going very deep in as far as the banks are concerned, now I have already ensured that I have spoken to all six banks in relation to their governance structures and, as I indicated, there will have to be a director of the bank representing a public interest dimension because the state is now involved in the banks in this relationship and that has been made clear to the banks.
In addition to that, I think there will have to be a far closer scrutiny of the risk assessment in relation to the lending and depositing practices of these institutions. That is a very important point.
AF: The consensus of economic forecasters for 2008 was wrong in the sense that they were too optimistic. Is there any possibility that the gloomy forecasts for '09 could be somewhat wrong as well?
BL: Well, like yourself I'd hope they are, but I can't prepare a Budget on that basis.
AF: The optimistic signs -- we have to give people hope and confidence -- what are they, oil prices?
BL: The signs of optimism are oil prices are falling and clearly next year interest rates, which are not under my control, but you would envisage interest rates will be decreasing given the general economic trends. But it is very difficult to predict because as you can see with the banks we appear to be in the middle of a global storm.
AF: What would you say to the people who are worried right now?
BL: The Government will take whatever decisions that need to be taken to ensure that Ireland will continue to flourish and realise its potential.
AF: Can you make any guess as to when the turning point might come?
BL: No, we're in the eye of the storm and who can predict the destination of the ship in the eye of the storm?


http://www.independent.ie/opinion/analysis/brian-lenihans-audacious-deal-has-earned-him-nations-respect-1490268.html

punchestown

Its an absolute joke how many people that are talking UP the property market with absolute rubbish statements, people giving credence to interviews with vested interests such as Austin Hughes (IIB Banks) or Geoff Tucker (Hooke & McDonald) when is you read it through its actually more like

BL: "what we have seen in the Irish market in recent years is a radical adjustment of prices downwards and that process has to happen."

That process started slowly less than two years ago, has gathered pace over the last 12 months but the truth is that there are much greater falls to come over the next 24+ months.

jetski

Im not talking up the market, im perfectly happy to post any stories on negative news. i just cant stand annoying jabs that are a wast of my time an everyone elses

jackal

Newspaper Headline in Sensationalism Shocka!
:rolleyes: