Creating "bad banks"

nesf

Deleted User wrote: »

Better I think, to regulate the agencies who issued credit. Once (and if) the public adjust to a lack of cheap and easy credit, the markets should settle down without the need for extra regulation.

Put a legal ceiling on salary multiples allowed in mortgages, x3 or x3.5 maybe? This is only efficient if you don't have large variations in the interest rate though.

Clytus

...suppose back to the days of 90%mortgage...and this time backed up by legislation.

But what I wondered was Banks that maintained a conservitive lending policy.... would they have been abadoned by investors for underperforming during the boom years?

nesf

Clytus wrote: »

...suppose back to the days of 90%mortgage...and this time backed up by legislation.

That wouldn't do anything, 100% mortgages were only around at the very end of the boom. You'd have to restrict it to 80% or 70% to curb things.

Clytus

nesf wrote: »

That wouldn't do anything, 100% mortgages were only around at the very end of the boom. You'd have to restrict it to 80% or 70% to curb things.

Do you think that if mortgage lending was restricted to a max of lets say 80%LTV it would have resulted in a more stable property sector??

Blackjack

Flamed Diving wrote: »

I think everybody is to blame. Government, banks and individuals. Everyone must take responsibility.

Absolutely. Lets not forget the unreasonable desire to own the latest Merc, Beamer or ridiculous 4 x 4.
Why people insisited on buying such high priced and quickly depreciating assets never ceases to amaze me. Fine, everyone likes a nice car, but given you lose 20% of the value of a new motor I can't understand how we got to the stage we did.

As for the fixation with 4 x4's, I mean seriously. The only hope of ever getting the proper use out of these is if you happen to have a Gravel driveway or perhaps need to travel the current N3 as far as Navan while the M3 is being built.

You may as well just pile your cash and burn 20% of it right there. Might not be as comfortable as driving an S-class, but the net effect is pretty much the same.

And as regards to any right to own a house - there is a sense of entitlement in this country about that. You have a right to a roof over your head, you have no absolute right to own one unless you can afford to pay for it.

Sorry if ranting.

nesf

Clytus wrote: »

Do you think that if mortgage lending was restricted to a max of lets say 80%LTV it would have resulted in a more stable property sector??

It would have slowed prices somewhat but there probably would still have been a bubble I think.

Blackjack wrote: »

You may as well just pile your cash and burn 20% of it right there. Might not be as comfortable as driving an S-class, but the net effect is pretty much the same.

2nd hand S-Class Mercs, all the comfort with avoidance of the worst of the depreciation.

Flamed Diving

Off-topic again, but I'm keeping an eye out for a new place to rent. Good lord, the prices have taken a mighty fall!

Yay for the recession!

Afuera

youcrazyjesus! wrote: »

Can anybody qualified comment on this article in relation to nationalising Anglo:

http://www.irishtimes.com/newspaper/opinion/2009/0120/1232059661333.html

It makes extremely serious allegations against the Government, particularly in the current economic situation.

I find this paragraph most startling:

"According to a source of mine very familiar with what happened at the meeting, extending the liability guarantee to Anglo Irish and Irish Nationwide was strongly opposed by representatives of the Central Bank and the Department of Finance (who reportedly came into the meeting with a draft Bill to rescue only four institutions). However, I am told they were overruled by the Taoiseach and the Minister for Finance, who were supported by the Financial Regulator and the Governor of the Central Bank on the grounds that a sudden liquidation of Anglo’s assets would not be in the national interest."


Can anyone think of a reasonable explanation for why the government and regulators would ignore the advice given by their own economists?

Afuera

D.S. wrote: »

I'm simply advocating that we should cease incentivising home ownership and do the converse, incentivise a renting culture. It would aid the economy particularly in the current climate by steading income flows for landlords and in turn help stabilise the banking system.

This is an interesting observation. I strongly suspect that weak tenancy laws may be one of the biggest reasons that long term renting is looked badly upon in Ireland. In many case a landlord can evict tenants with minimum notice simply because they want to move a family member into the property. Not exactly what you'd call security of tenure when you compare with other countries where renting is more common!

On the plus side, if my suspicions are correct, we could quickly encourage a renting culture simply by changing the necessary legislation.

Blackjack

Afuera wrote: »

I find this paragraph most startling:

"According to a source of mine very familiar with what happened at the meeting, extending the liability guarantee to Anglo Irish and Irish Nationwide was strongly opposed by representatives of the Central Bank and the Department of Finance (who reportedly came into the meeting with a draft Bill to rescue only four institutions). However, I am told they were overruled by the Taoiseach and the Minister for Finance, who were supported by the Financial Regulator and the Governor of the Central Bank on the grounds that a sudden liquidation of Anglo’s assets would not be in the national interest."


Can anyone think of a reasonable explanation for why the government and regulators would ignore the advice given by their own economists?

Not to mention the Governor of the Central Bank.
I find that statement a little hard to believe to be honest. It's about as good as a friend's mates cousin's girlfriend said......

Note the source is apparently familiar with what went on, as opposed to having been present, so it's hearsay at best.

Afuera

Blackjack wrote: »

Not to mention the Governor of the Central Bank.
I find that statement a little hard to believe to be honest. It's about as good as a friend's mates cousin's girlfriend said......

Note the source is apparently familiar with what went on, as opposed to having been present, so it's hearsay at best.

I agree that the way it is worded makes it a sound a bit wishy washy. If it was in the Sun or something I don't think I'd give it a second thought.The fact that it is in the Irish Times though certainly gives it more weight.

johnnyskeleton

Yes.

No bank will regain its trustworthiness until it has purged itself of all bad debt and any toxic or other asset that is seen as risky.

It is better to take the hit on a bad bank and at least restore confidence than to take the hit on several failed banks and still have no confidence. Also, specialisation of labour means that a bad bank should be more efficient at recovering as much as possible out of the bad debts than each of the banks having separate debt collections systems.