The Week in Politics: Patrick Honahan

nesf

Utterly fantastic. I literally sleep better because I know we've got some real technical talent at the head of the Central Bank. Great interview, very interesting, sensible refusal to answer some questions as to not prejudice as proceedings.

Well worth watching on RTE Player if you missed it!

imme

didn't see it, but saw him before the Oireachtas Finance Ctte, the other day on Oireachtas Report *yawns* the other night, it was late.
He knows his way around the economy and around the system.
He's an exemplary Public Sector worker;). I hope his idea for a Banking Crisis commission gets off the ground.
might check out rte Player.

nesf

He brings an international perspective on banking crises that is very welcome. We need to learn from what previous countries have done in dealing with their banking problems if we're to come out of this with a stronger, better and more stable banking system with all the wider economic benefits this brings to ordinary people. It's not going to be an instant process and will take years to fully filter trough to the real economy but such is the nature of these things, there's not much anyone can do about this.

imme

nesf wrote: »

He brings an international perspective on banking crises that is very welcome. We need to learn from what previous countries have done in dealing with their banking problems if we're to come out of this with a stronger, better and more stable banking system with all the wider economic benefits this brings to ordinary people. It's not going to be an instant process and will take years to fully filter trough to the real economy but such is the nature of these things, there's not much anyone can do about this.

why are you talking around this nesf. We need a banking inquiry imo. We need a healthy banking system. The near-meltdown this year threatened our economy, can we allow this happen again? 'Ordinary people' as you call them don't have much time for banks, they open an account, get a mortgage, that's about it. If anything 'ordinary people' were let down by the drunken/greedy conduct banks, and now have to pay for it.

We need a banking commission.
I'm going to contact all TD's and senators.

nesf

imme wrote: »

why are you talking around this nesf. We need a banking inquiry imo. We need a healthy banking system. The near-meltdown this year threatened our economy, can we allow this happen again? 'Ordinary people' as you call them don't have much time for banks, they open an account, get a mortgage, that's about it. If anything 'ordinary people' were let down by the drunken/greedy conduct banks, and now have to pay for it.

We need a banking commission.
I'm going to contact all TD's and senators.

I don't disagree with you. The biggest issue is that ordinary people don't understand what will really be necessary through no fault of their own. Yes pressure should be put on TDs over this and we need a inquiry into the crisis in my opinion but not to apportion blame or to find out who ****ed up but to discover exactly what happened and how we can prevent it happening again to protect ordinary people from bankers **** ups in the future.

imme

nesf wrote: »

I don't disagree with you. The biggest issue is that ordinary people don't understand what will really be necessary through no fault of their own.

what would be wrong if people who messed up are held to account. a commission wouldn't be a court of law so couldn't convict.

It was a case of greed/one-up-manship/gambling that did for our banking crisis. There ya are, no need for a commission, it's all been resolved here on Boards.:D
Contracts for Difference and similar piles of shi*e should also come under scrutiny.

nesf

imme wrote: »

what would be wrong if people who messed up are held to account. a commission wouldn't be a court of law so couldn't convict.

It was a case of greed/one-up-manship/gambling that did for our banking crisis. There ya are, no need for a commission, it's all been resolved here on Boards.:D
Contracts for Difference and similar piles of shi*e should also come under scrutiny.

Sure yes but that isn't the only part of this! One serious issue that needs to be looked at is whether people need to be protected from themselves in the residential housing market. People were practically queuing to sign onto enormous mortgages for a large multiple of their income for years. Why was this happening and how should it be addressed? Do banks need to be more tightly regulated as to the earnings multiple they can offer to clients? (i.e. they offer you a mortgage within a certain multiple of your salary, should this be hard capped or should there be strict guidelines on what's acceptable banking side) On the other side of the question how can be educate people to help them understand what they're getting themselves in for? These are adults who weren't any duress or pressure to sign for these mortgages. We can't operate as a society if people can't be expected to honour their financial commitments and what elements of psychology etc were the driving forces behind this bubble on the "ordinary person" side of the equation need to be figured out so we can look to see how we can reshape how we do things in order to mitigate future bubbles in house prices to some extent.

Focusing purely on the commercial lending side with developers won't solve our problems because developers were only responding to market demands for more housing! Yes there was undoubtedly plenty of wrong done in commercial lending but at its core this bubble was driven by the people, not the developers! Without mass obsession on property, none of this could have happened and should we look to ensuring that future generations are made aware of the dangers of it? Will we make sure that the next generation of home buyers won't make the mistake we made? And so on.

Permabear

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FlutterinBantam

We got ahead of ourselves, huge salaries throughout the economy for all activities.That's why we had to import to staff our shops and less well paid jobs.

Guys driving around in Beemers and Jeeps who had no education, qualifications,and little training,just got into 'construction'.

Maxed themselves out as most people of their age group never had experienced recession.


Huge amounts of cheap money readily available forced people to pay over inflated prices for houses actually worth about 40% of the asking price.

mad money paid for developement land fuelled by all the above.

Wages and cost driven up by ATM economics.. just ask and you'll get it.

Unions cashing in on weak Govt who just threw money at any problem without any regard of consequences down the line.


Then the house of cards collapsed, and here we all are.

Basic ,I know, but a fair assessment.

Dr Galen

agree with much of what your saying Flutt. ATM economics is a good way to describe what happened.

Honohan impresses me a lot. You can see that he sees things in a bigger picture type of way, and I'd say he'll be well able to play "the game" needed to get things done and push through reform. I thought it was particularly interesting when he talked about his vision for an inquiry and mentions that he sees it not just being about people shouting across tables but involving sociologists and the like, to examine the who, what, why and when of everything that happened.

Friends and family are sick of me by this stage, constantly bleating on about personal responsibility and how the people need to take some responsibility for whats gone on. Yes there are regulatory issues, yes there were bank governance issues and yes there were definitely issues with the government of the days but that doesn't tell the whole story. I think over the next 12 months we'll see a lot more talk of how as a country and a population we let ourselves down, got caught in a frenzy of cheap credit and lost sight of what it actually means to be successful in the real world of business and indeed economic policy.

For anyone here who trots out the mantras of jail the bankers, cut the Public Services, we didn't cause this we shouldn't have to pay or get O'Leary in to run things, take the 20 minutes to watch that interview and read some of Honohans writings on banking and regulatory issues across the world and see what you think. Even if you only understand 10% of it, you'll have a different perspective on things and how we'll fix the mess WE created

P. Breathnach

donegalfella wrote: »

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Interpretations of events tend to be coloured by the values and beliefs of the person doing the interpreting. I really do not believe that borrowers' or lenders' behaviour was influenced by presumptions about government rescue. I am fairly sure that, in the best tradition of economic bubbles, people did not believe that there was risk, that losses were possible. The existence of a state apparatus that might possibly intervene in a crisis was not, in my opinion, a significant factor.

I'm not personally a fan of the paternalistic state, because in my view the government shouldn't be in the business of preventing people from making dumb financial decisions. On the flip side, if the government were less interventionist, both borrowers and financial institutions would have to live with the consequences of their own decisions—and might act more responsibly as a result.

It can be argued that one of the reasons why we have such problems now is that the government did not do enough to prevent people from making dumb financial decisions. I do not see the relationship between a major financial institution and an individual home-buyer as an equal one, and I think the inequality has often been exploited by lenders in an unfair way. People did not necessarily like their bankers, but they have tended to trust them, often in a begrudging way. I am statist enough to believe that it is the proper business of government to regulate matters where people with great power take unfair advantage of those with very little power.

One of the points that Honohan made was that "products" have become very complicated. I used to have a fairly good understanding how banking worked, because it was once fairly simple. Over that past 30 years or so, it has become increasingly difficult to understand the mechanisms. Yet most of these complex arrangements have little to do with the core business of banking (borrowing from me and lending to you, or vice versa): they have been created to generate profit-making opportunities mainly for speculators. Let us remember that speculation is a zero-sum game for which the economic justification is slight: the amount of speculation that happens is vastly greater than the amount that is commercially needed to smooth out risks.

jmayo

nesf wrote: »

Utterly fantastic. I literally sleep better because I know we've got some real technical talent at the head of the Central Bank. Great interview, very interesting, sensible refusal to answer some questions as to not prejudice as proceedings.

Well worth watching on RTE Player if you missed it!

nesf, you really believe this guy will change everything ?
You, and a couple of other posters around here, believe that the way to do it is to bring in a fleet of academics to delve into the reasons for the bankiing meltdown and that they can overhaul the entire system ?

Remember one big thing that hasn't happened.
All the gimps, bar the top two, in the central bank and financial regulators office that were there throughout the whole bubble and the days of all the dodgy Anglo deals are still there.
All the ones that were resposnible for overseeing the banks, investigating information from insider tip offs are still the same.
Of course the ones at the the top may try and actually do their job, but will the underlings ?

On the other side all the top banks are still run by the insiders, well bar Anglo who actually have an outsider and what appears to be a good guy at the helm, but they aren't capable of f***ing up anymore.

On the auditing side the same big company auditors, you know the type of ones that claim they missed the director loans in Anglo, are still out there auditing.
According to accountants I know one of the first things auditors ask is what are the directors' loans and what has the transactions being like on these loans. Thus you can check if they were paid off two weeks prior to auditing.

Of course maybe they only do that when auditing a small company, it might not apply to banks worth billions of euro. :rolleyes:

Do you seriously think any of the people responsible for the dodgy deals will go to jail ?
Maybe Seanie to satisfy the mob, but that's about it.

I dispair because despite the fanfare little has changed in dodgy Ireland. :mad:

PS P Breathnach, the things that f***ed up our banks were not fancy products, derivatives, sub primes repackaged.
It was just good old fashioned loans, based on over optimistic valuation of assets being used as security and over optimistic profit streams from development of these assets.
It was pie in the sky valuations, all buuble pricing and the banks just threw logical prudence out the window.
The opnly place CFDs came into play was in Anglo, and with or without them, that bank was up the creek.

P. Breathnach

jmayo wrote: »

... PS P Breathnach, the things that f***ed up our banks were not fancy products, derivatives, sub primes repackaged.
It was just good old fashioned loans, based on over optimistic valuation of assets being used as security and over optimistic profit streams from development of these assets.
It was pie in the sky valuations, all buuble pricing and the banks just threw logical prudence out the window.
The opnly place CFDs came into play was in Anglo, and with or without them, that bank was up the creek.

I largely agree. That is why I put the point about products in a separate paragraph. The international banking crisis was largely caused by these new products, and that crisis triggered the bursting of our domestic bubble. I wonder if we might have had a softer landing without the international problems.

Permabear

This post has been deleted.

woodseb

P. Breathnach wrote: »

One of the points that Honohan made was that "products" have become very complicated. I used to have a fairly good understanding how banking worked, because it was once fairly simple. Over that past 30 years or so, it has become increasingly difficult to understand the mechanisms. Yet most of these complex arrangements have little to do with the core business of banking (borrowing from me and lending to you, or vice versa): they have been created to generate profit-making opportunities mainly for speculators. Let us remember that speculation is a zero-sum game for which the economic justification is slight: the amount of speculation that happens is vastly greater than the amount that is commercially needed to smooth out risks.

I don't see how you can introduce a statement like this by stating that you don't understand the topic due to its complexity and then state that these products were created for speculators with little economic justification?

Fact is most complex derivatives have their genesis in the aim to mitigate/spread risk and improve market efficiency ie CDS and the ability to short are a good examples of that. Unfortunately, the law of unintended consequences takes over in some cases.

ei.sdraob

imme wrote: »

why are you talking around this nesf. We need a banking inquiry imo.

we have plenty of inquiries, reports and tribunals in this country

they account to nothing but a giant waste of time and money

imme

ei.sdraob wrote: »

we have plenty of inquiries, reports and tribunals in this country

they account to nothing but a giant waste of time and money

do u not see any difference between a report, an inquiry, a tribunal.
2 tribunals (Mahon & Moriarty) went on in this country for 11 years. Both were set up by Bertie, he delayed the work of one of them by constantly going to the High Court (his right). I don't believe anybody in their right mind would advocate the setting up of a similar tribunal EVER again. They're over legalistic, cost too much and take too long.
Governor Honohan advocated the setting up of a 9/11 style congressional investigation. I agree with him.

P. Breathnach

woodseb wrote: »

I don't see how you can introduce a statement like this by stating that you don't understand the topic due to its complexity

Where did I say that? I implied that my understanding was less good than it used to be. That's not the same as saying that I don't understand the topic.

and then state that these products were created for speculators with little economic justification?

Fact is most complex derivatives have their genesis in the aim to mitigate/spread risk and improve market efficiency ie CDS and the ability to short are a good examples of that. Unfortunately, the law of unintended consequences takes over in some cases.

The only way to reduce any financial risk to which I am exposed is to get somebody else to take that risk from me. A speculator.

Many markets have effectively become dominated by speculators rather than by the type of business that they supposedly exist to service. I don't see how that can be avoided.

jmayo

imme wrote: »

do u not see any difference between a report, an inquiry, a tribunal.
2 tribunals (Mahon & Moriarty) went on in this country for 11 years. Both were set up by Bertie, he delayed the work of one of them by constantly going to the High Court (his right). I don't believe anybody in their right mind would advocate the setting up of a similar tribunal EVER again. They're over legalistic, cost too much and take too long.
Governor Honohan advocated the setting up of a 9/11 style congressional investigation. I agree with him.

Why did he have to invoke the 911 enquiry when he could just as easily have said the DIRT enquiry ?
Or would he rather us forget that the organisation which he not heads were not doing their job as far back as the 80s ?

ei.sdraob was right to a large degree.
We have had enquiries into beef, blood transfusion, planning, politicans getting money, abuse, etc.
Yes we have learned a fair bit about what happened, but how many have resulted in people being held accountable and actually going to jail for some of the criminal activity that occurred ?

P. Breathnach

donegalfella wrote: »

This post has been deleted.

Yes, there can be unfair advantage. First, organisations like banks have, until quite recently, had a reputation for caution and for applying strict standards in giving loans, both in their own interest and in that of their customers. Many people trusted banks in the way they trusted their doctors, as professionals acting in their best interests, and being rewarded for it. Over time, banks changed their practices: they lent a higher percentage of the price of a property; they lent over a longer period; they changed the ratio between income and amount they would lend; they contrived to inflate what constituted qualifying income; they had short-term reduced interest. And they did all this pretty well on the back of their reputation for cautious and sensible lending. For most borrowers, it was a first or second venture into the property market, so they were far less experienced than were the bankers, and they tended to trust the banks. The banks' reputations, earned in the past with some justification, gave them an unfair advantage.

I do not suggest that a person unable to meet mortgage commitments be gifted a house. But what is to happen? If a bank exercises its charge and takes possession of a house, evicting a family, what is to happen that family?

Sleepy

P. Breathnach wrote: »

I do not suggest that a person unable to meet mortgage commitments be gifted a house. But what is to happen? If a bank exercises its charge and takes possession of a house, evicting a family, what is to happen that family?

While I would agree that there needs to be a change to our bankruptcy laws (i.e. handing the keys back should end the debt); if a family could afford the mortgage during the good times I can see no reason why they can't afford to rent (perhaps a more modest abode) in the current rental market.

If they can't, the government has no reason to not be able to provide social housing when we've such a large overhang of property. It may not be in the area in which the family wish to live but imho, if the state is having to provide a home for your family are you really in a position (moral or practical) to say 'no thanks, I don't want to live in meath'?

P. Breathnach

Sleepy wrote: »

While I would agree that there needs to be a change to our bankruptcy laws (i.e. handing the keys back should end the debt);

Perhaps for new loans. I don't think it is justifiable for existing loans.

if a family could afford the mortgage during the good times I can see no reason why they can't afford to rent (perhaps a more modest abode) in the current rental market.

If a family has become dependent on social welfare, it becomes a matter of whether we, rather than they, who can afford the rent.

If they can't, the government has no reason to not be able to provide social housing when we've such a large overhang of property. It may not be in the area in which the family wish to live but imho, if the state is having to provide a home for your family are you really in a position (moral or practical) to say 'no thanks, I don't want to live in meath'?

So the bank evicts the Smiths and puts the house up for sale. The local authority has an obligation to house the family, and finds a suitable property on the market. It buys it, and puts the Smiths back into the house from which the bank had them evicted. Neat.

imme

jmayo wrote: »

Why did he have to invoke the 911 enquiry when he could just as easily have said the DIRT enquiry ?
Or would he rather us forget that the organisation which he not heads were not doing their job as far back as the 80s ?

ei.sdraob was right to a large degree.
We have had enquiries into beef, blood transfusion, planning, politicans getting money, abuse, etc.
Yes we have learned a fair bit about what happened, but how many have resulted in people being held accountable and actually going to jail for some of the criminal activity that occurred ?

I'm not sure JM, my mind reading abilities aren't what they were. Maybe if people hear DIRT inquiry, they might wonder why other issues that led to the Banking Crisis were uncovered/not touched upon.
The terms of any inquiry will be crucial.
Lawlor and Burke went to prison as a result of the tribunals. The tribunals have also shown the public what certain public figures thought was acceptable. They still get elected though, biscuit-tin Bertie springs to mind. The people are revolting, eh?

woodseb

P. Breathnach wrote: »

Where did I say that? I implied that my understanding was less good than it used to be. That's not the same as saying that I don't understand the topic.

I used to have a fairly good understanding how banking worked, because it was once fairly simple. Over that past 30 years or so, it has become increasingly difficult to understand the mechanisms.

well that's the way i read it so i guess we'll agree to disagree....

P. Breathnach wrote: »

Many markets have effectively become dominated by speculators rather than by the type of business that they supposedly exist to service. I don't see how that can be avoided.

can you give an example of where this happens and why its so bad so we can debate it properly because you're being a bit vague?

Sleepy

P. Breathnach wrote: »

Perhaps for new loans. I don't think it is justifiable for existing loans.

We're in agreement on that.

If a family has become dependent on social welfare, it becomes a matter of whether we, rather than they, who can afford the rent.

So the bank evicts the Smiths and puts the house up for sale. The local authority has an obligation to house the family, and finds a suitable property on the market. It buys it, and puts the Smiths back into the house from which the bank had them evicted. Neat.[/QUOTE]
I'd imagine most Irish families are living in far more luxury than they might expect in a social housing scheme. e.g. each child having their own bedroom and a spare room to boot. Sell the home, sell it's contents, move the family into social housing. Or, probably more realistically since most families still have one income, let them rent what they can afford on the rental market.

Or would you propose doing away with social housing entirely? Personally, I'd remove the responsibility for this from Local Authorities and centralise it, moving those who rely on it to wherever cheap housing is available. IMHO, the Irish government missed a real trick in not selling much of their inner city Dublin social housing to developers during the boom. They could have had modern housing built on the outskirts of Dublin as part of the price, improving the quality and numbers of available social housing whilst pocketing the difference...

woodseb

Sleepy wrote: »

IMHO, the Irish government missed a real trick in not selling much of their inner city Dublin social housing to developers during the boom. They could have had modern housing built on the outskirts of Dublin as part of the price, improving the quality and numbers of available social housing whilst pocketing the difference...

....and then having to spend the money again to buy them back through NAMA;)

Flamed Diving

I can't find the link.

Got it:

http://www.rte.ie/news/2009/1220/weekinpolitics_av.html?2671864,null,230


Just watched it. The man is an absolute legend, I wish we had more like him in positions of power. I had the pleasure of having him as a lecturer and I must say he is a gent, to boot.

P. Breathnach

woodseb wrote: »

well that's the way i read it so i guess we'll agree to disagree....

No, we will not agree to disagree. My saying that something is becoming increasingly difficult to understand is not saying that I do not understand it.

P. Breathnach

Sleepy wrote: »

... I'd imagine most Irish families are living in far more luxury than they might expect in a social housing scheme. e.g. each child having their own bedroom and a spare room to boot. Sell the home, sell it's contents, move the family into social housing. Or, probably more realistically since most families still have one income, let them rent what they can afford on the rental market.

I am sure that many families are in more luxurious homes than others might consider appropriate. I am less sure that it is true of most Irish families.

Or would you propose doing away with social housing entirely?

No.

Personally, I'd remove the responsibility for this from Local Authorities and centralise it, moving those who rely on it to wherever cheap housing is available.

Would you move large numbers of city people to Leitrim? Or would you have some rules or guidelines?

IMHO, the Irish government missed a real trick in not selling much of their inner city Dublin social housing to developers during the boom. They could have had modern housing built on the outskirts of Dublin as part of the price, improving the quality and numbers of available social housing whilst pocketing the difference...

I have no particular opinion on that. It's moot now.

Valmont

donegalfella wrote: »

This post has been deleted.

Purchasing a Nintendo Wii is hardly a dumb financial decision.

Sleepy

P. Breathnach wrote: »

Would you move large numbers of city people to Leitrim? Or would you have some rules or guidelines?

If that's where the state can cheapest provide social housing, yes. My view on social housing would be similar to that of my view of the dole. It's a safety net for the short term, not a lifestyle choice. If you want to live in a particular place, earn enough to live there.

I'd love to live in Greystones, unfortunately I don't earn enough to rent even a modest 3 bedroom there for my family. So, we'll live out in Brittas. It's not the state's job to ensure that everyone has everything they desire.

Flamed Diving

What of the people who suddenly find a council estate plonked next to them? What effect would this have on the value of their home, in the long-run? When these housing estates were being planned, I assume they were showcased as homes for professionals, not council housing. Would locals have any right to object here?




I am tempted to write at least five caveats or footnotes, but we will see what happens.

ei.sdraob

Flamed Diving wrote: »

What of the people who suddenly find a council estate plonked next to them? What effect would this have on the value of their home, in the long-run? When these housing estates were being planned, I assume they were showcased as homes for professionals, not council housing. Would locals have any right to object here?




I am tempted to write at least five caveats or footnotes, but we will see what happens.

thats another version of why are hardworking taxpayers handing money over to some people who sponge of welfare

woodseb

P. Breathnach wrote: »

No, we will not agree to disagree. My saying that something is becoming increasingly difficult to understand is not saying that I do not understand it.

If you want to get pedantic fair enough.....i'd rather discuss the issues - you seem to have difficulty staying on topic when called to explain your point

Flamed Diving

ei.sdraob wrote: »

thats another version of why are hardworking taxpayers handing money over to some people who sponge of welfare

No, it isn't.

parsi

Valmont wrote: »

Purchasing a Nintendo Wii is hardly a dumb financial decision.

It is if its adding to a truckload of debt.

It used be a rite-of-passage (almost) that when you started work you went mad with the spending and hammered your (small) credit limit. After a year or two sanity tended to prevail and you got your act together.

For a good while , however, the entire country went on this splurge, hammering their large credit card limits, mortgaging and remortgaging up to the hilt and there wasn't anyone there to cry "halt". It was almost your patriotic duty to buy goods, spend on useless services , "climb the property ladder" and saving (or providing for the future) be damned. New houses were fully furnished and kitted out before people moved in (no living for a few months with cardboard floors and empty rooms).

It was like a mad session - everyone around saying "go on", no barman saying "go home" and now folk are waking up to a terrible morning after.

nesf

jmayo wrote: »

nesf, you really believe this guy will change everything ?
You, and a couple of other posters around here, believe that the way to do it is to bring in a fleet of academics to delve into the reasons for the bankiing meltdown and that they can overhaul the entire system ?

We don't believe that he will change everything. We just can't think of someone better qualified for this position. Would you prefer someone from the Dept. of Finance at the helm which would be traditional?

Flamed Diving

nesf wrote: »

We don't believe that he will change everything. We just can't think of someone better qualified for this position. Would you prefer someone from the Dept. of Finance at the helm which would be traditional?

It's the typical response from someone who has no reasonable line of approach. They will take your position, push it to its extreme, and then proceed to attack that. I mean, I would be astonished if any of "these other posters" believed that Honohan was going to turn the entire system upside-down. I doubt even Honohan would, if he could. A more reasonable person would see what you and I are actually saying, which is the best man for the job is in the seat, and he is making the right moves to push things in the right direction. Will he accomplish his goals? Only time will tell...

P. Breathnach

Sleepy wrote: »

If that's where the state can cheapest provide social housing, yes. My view on social housing would be similar to that of my view of the dole. It's a safety net for the short term, not a lifestyle choice. If you want to live in a particular place, earn enough to live there.

I'd love to live in Greystones, unfortunately I don't earn enough to rent even a modest 3 bedroom there for my family. So, we'll live out in Brittas. It's not the state's job to ensure that everyone has everything they desire.

Jaysus! I thought I was throwing you a rhetorical challenge in order to tease out the limits. So if a family in a Walkinstown three-bed semi lose their main income and as a consequence cannot meet mortgage commitments, you would be happy to relocate them to Carrick-on-Shannon. Never mind that it might entail a second adult in the home having to quit a job, or kids having to lose contact with school and friends, or even with grandparents down the road.

I think I'd favour a somewhat more accommodating social policy.

nesf

parsi wrote: »

It is if its adding to a truckload of debt.

It used be a rite-of-passage (almost) that when you started work you went mad with the spending and hammered your (small) credit limit. After a year or two sanity tended to prevail and you got your act together.

For a good while , however, the entire country went on this splurge, hammering their large credit card limits, mortgaging and remortgaging up to the hilt and there wasn't anyone there to cry "halt". It was almost your patriotic duty to buy goods, spend on useless services , "climb the property ladder" and saving (or providing for the future) be damned. New houses were fully furnished and kitted out before people moved in (no living for a few months with cardboard floors and empty rooms).

It was like a mad session - everyone around saying "go on", no barman saying "go home" and now folk are waking up to a terrible morning after.

Exactly and this is one of the things that needs to be examined in depth and hopefully we can figure out some way to discourage people from such credit excesses in future.

nesf

P. Breathnach wrote: »

Jaysus! I thought I was throwing you a rhetorical challenge in order to tease out the limits. So if a family in a Walkinstown three-bed semi lose their main income and as a consequence cannot meet mortgage commitments, you would be happy to relocate them to Carrick-on-Shannon. Never mind that it might entail a second adult in the home having to quit a job, or kids having to lose contact with school and friends, or even with grandparents down the road.

I think I'd favour a somewhat more accommodating social policy.

I kinda agree but I do think there needs to be some cost associated with the move from a mortgage to social housing. It would introduce serious moral hazard to "convert" a private mortgaged home into a social housing home with far lower repayments for a family. It would simply encourage people to take out very excessive mortgages in the good time with the knowledge that if it all goes pear shaped then sure won't the Government bail us out and we'll get to keep our home and pay for only a fraction of its cost in the long run.

P. Breathnach

nesf wrote: »

I kinda agree but I do think there needs to be some cost associated with the move from a mortgage to social housing. It would introduce serious moral hazard to "convert" a private mortgaged home into a social housing home with far lower repayments for a family. It would simply encourage people to take out very excessive mortgages in the good time with the knowledge that if it all goes pear shaped then sure won't the Government bail us out and we'll get to keep our home and pay for only a fraction of its cost in the long run.

I think it is a real challenge. Many people have taken on very large mortgages to purchase homes that might be considered of moderate quality, and possibly no better than they might have allocated to them as social housing. That was why I chose Walkinstown as my example: there are many houses of that type there (yes, I know the area, and I know that there are also superior quality houses there -- so if anybody reading this lives in Walkinstown, please don't get huffy).

Perhaps the cost of the transition might be two-fold: (1) the former mortgagor, now tenant, might never be allowed acquire ownership rights in the property; (2) the rent might be subject to strict review and be increased to a full market rent whenever the tenant's circumstances improve. You might even design in a third cost, by allowing the state to re-assign housing units when family circumstances change, and move a couple to a smaller unit when the children grow up and leave home.

At some distant future date the state would have a stock of houses to meet social housing needs or to sell on the open market.

The problem with any such proposal is that the state's resources at present are very limited. But I am driven back to the question: if we do not social housing for people who lose their homes, what do we do instead? On my right: rock; on my left: hard place; straight ahead: precipice.

Sleepy

P. Breathnach wrote: »

Jaysus! I thought I was throwing you a rhetorical challenge in order to tease out the limits. So if a family in a Walkinstown three-bed semi lose their main income and as a consequence cannot meet mortgage commitments, you would be happy to relocate them to Carrick-on-Shannon. Never mind that it might entail a second adult in the home having to quit a job, or kids having to lose contact with school and friends, or even with grandparents down the road.

I think I'd favour a somewhat more accommodating social policy.

Using your example, the second adult's job should be able to meet the rent of a similar 3 bed semi or a 3 bed terraced house in, or near, Walkinstown. If it doesn't, I'd imagine the family would qualify for FIS and through this, would be able to afford to rent somewhere preferable.

Why should social housing be convenient? As far as I can see, the current approach just encourages people to never leave state housing. Welfare is a safety net and imho, it shouldn't be pleasant to be dependant on the state. As far as I'm concerned the state is obliged to meet your basic needs when you can't meet them yourself but it is also obliged to ensure that this is done in the most cost effective fashion possible so that you're not overly burdening the tax payer.

Riskymove

Sleepy wrote: »

Why should social housing be convenient? As far as I can see, the current approach just encourages people to never leave state housing. Welfare is a safety net and imho, it shouldn't be pleasant to be dependant on the state. As far as I'm concerned the state is obliged to meet your basic needs when you can't meet them yourself but it is also obliged to ensure that this is done in the most cost effective fashion possible so that you're not overly burdening the tax payer.

you forget that social housing is not just about people who lose a job and cant pay a large mortgage

its also there for people in pretty bad circumstances, perhaps from abusive homes as an example, who have nowhere else but the streets...do you think someone like that should just be removed from their entire life, friends, conncections, etc and out in ahouse in a remote, rural part of the country because thats where cheap property is?

As far as I can see, the current approach just encourages people to never leave state housing.

now that is an issue, poverty traps are real and certainly have that effect, but I dont think the location of the housing would change that

however, the conditions might, perhaps you believe that the most cost-efficient answer must be the best one. Perhaps for example, if we placed all single parents in a large state-run institution, like an industrial school or a laundry...cant see what might go wrong there?

Sleepy

Riskymove wrote: »

you forget that social housing is not just about people who lose a job and cant pay a large mortgage

From what I can see the majority of social housing in Ireland is populated by people who've never had a job and probably will never have one.

its also there for people in pretty bad circumstances, perhaps from abusive homes as an example, who have nowhere else but the streets...do you think someone like that should just be removed from their entire life, friends, conncections, etc and out in ahouse in a remote, rural part of the country because thats where cheap property is?

A fair point but I don't think anyone would disagree with using some of the savings made on the majority to fund social housing in existing communities for the minority who are in those pretty bad circumstances.

now that is an issue, poverty traps are real and certainly have that effect, but I dont think the location of the housing would change that

Well, if it's so awful to be away from friends and family, I think there's a pretty big incentive to find a job and move closer to where you desire to live. An extra incentive to break the poverty trap cycle can't be a bad thing?

however, the conditions might, perhaps you believe that the most cost-efficient answer must be the best one. Perhaps for example, if we placed all single parents in a large state-run institution, like an industrial school or a laundry...cant see what might go wrong there?

I'd suggest looking at means of making it practical for single parents to work first: affordable childcare etc. There are plenty of single parents in this country who aren't sponging off the state.

Riskymove

Sleepy wrote: »

From what I can see the majority of social housing in Ireland is populated by people who've never had a job and probably will never have one.

well your wrong and thats why your other thoughts are off the mark

Permabear

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P. Breathnach

donegalfella wrote: »

This post has been deleted.

You are broadening the discussion from the focus I had on mortgage finance. But I will stick to my guns. Large numbers of people are pretty well clueless when it comes to financial matters, and that includes people who might in other areas might be considered very savvy and competent. It's a cultural thing, just as trusting banks was (until recently) culturally underpinned.

I don't think the average borrower is as naive, credulous, and trusting as you are making out. This is not about the vultures preying on the innocent little lambs. You don't need much more than primary school maths to understand the concept of a mortgage, after all.

I don't find mortgages difficult to understand. It does, however, involve a bit more than primary school maths. But I do not buy into your image of an equal relationship between borrower and lender. It's contrary to my experience among the people I know, and it's contrary to the accounts we learn about through the media. Banks assured people that things would be all right, and borrowers believed them.

That family can then rent a modest home that is well within their means—just like all the other families that did not take out enormous mortgages during the boom years. Here in Donegal, you can now rent a nice 3-bedroom semi-detached for €100 a week or less. Contrary to all the drama in the papers, it's not as if banks are chucking people out on the street! A temporarily damaged credit rating and a bit of wounded pride is the worst that will befall them. However, I absolutely do not believe that people who cannot meet their mortgage repayments should be allowed to remain in "their" homes, for the reasons of moral hazard that nesf outlines above.

I thought it was harsh enough to take a Dublin suburban family and relocate them to Leitrim; now you are implying that they should go to Donegal. These are places that your archetypical Dubs visit for holidays, not to take up residence.

You are very much downplaying the impact on the borrower of being unable to meet mortgage commitments. It's quite a bit more than a temporarily damaged credit rating and a bit of wounded pride.

I am not advocating that people should get off scot-free. I do believe in personal responsibility. What I am trying to work towards is an approach where we can mitigate the damage that people might suffer. I don't have the answer, but I don't find your one very convincing.

Sleepy

P. Breathnach wrote: »

I thought it was harsh enough to take a Dublin suburban family and relocate them to Leitrim; now you are implying that they should go to Donegal. These are places that your archetypical Dubs visit for holidays, not to take up residence.

I think donegalfella's point was that there's plenty of cheap accomodation available in the private sector. Here's one in a dublin suburb for €130 a week which shouldn't stretch a family on welfare too badly, particularly when rent supplement is taken into account:

http://www.daft.ie/searchrental.daft?search=1&s[cc_id]=ct1&s[a_id]=&s[mnp]=&s[mxp]=600&s[bd_no]=3&s[search_type]=rental&s[furn]=&s[refreshmap]=1&limit=10&search_type=rental&id=778493

Riskymove

Sleepy wrote: »

I think donegalfella's point was that there's plenty of cheap accomodation available in the private sector. Here's one in a dublin suburb for €130 a week which shouldn't stretch a family on welfare too badly, particularly when rent supplement is taken into account:

http://www.daft.ie/searchrental.daft?search=1&s[cc_id]=ct1&s[a_id]=&s[mnp]=&s[mxp]=600&s[bd_no]=3&s[search_type]=rental&s[furn]=&s[refreshmap]=1&limit=10&search_type=rental&id=778493

and people on welfare may well be doing that

so whats your point?



EDIT: just noticed that this house is, in fact, in Longford

should they be in rural remote Ireland or not?

Sleepy

Apologies, the ad was misleadingly entered. Here's a three bed being advertised for €650 a month in Kimmage to illustrate the point instead: http://www.daft.ie/searchrental.daft?search=1&s[cc_id]=ct1&s[a_id]=&s[mnp]=500&s[mxp]=700&s[bd_no]=3&s[search_type]=rental&s[furn]=&s[refreshmap]=1&limit=10&search_type=rental&id=784009

My point is: if you can't afford your mortgage, you can still put a roof over your family's head by renting, even if you've lost your job and your partner has lost theirs and you're living on welfare. We shouldn't need social housing for people who are capable of working. If we're to provide it anyway, I'd rather it was at lowest cost to the taxpayer rather than lowest inconvenience to the tennant.