Who Predicted This? Who Do We Blame?

later12

I would like to begin by saying that I am not an apologist for Fianna Fáil economic policy (or lack thereof) from about 2001 onwards, nor for property developers. Nor am I an apologist for Bertie Ahern. However, one thing he said during his recent interview struck me, when he said that nobody warned himk of the banking crisis.

I presume most people guffawed at this. But actually, I have a feeling he's correct. While one might have foreseen a slowdown in property and construction, indeed one ought to have foreseen such a thing, who predicted that it would be so extreme, so rapid and as such would lead to bank meltdown in the way that it did?

I know there have been many commentators like George Lee and David McWilliams and Morgan kelly who have been talking about the property boom, but largely they didn't see this as an issue for the banks. Morgan Kelly himself in 2007 suggested that banks were well capitalised to deal with the risks and suggested that the consumer effect of a property bust would be less than seen in the US.

And what about property developers? Unless you are on of these people who doesn't believe that homes should be sold for a profit, what exactly was so wrong about being a property developer? they were, and many still are businessmen. Largely, they didn't see the bust coming so quickly and so dramatically. They didn't ask for NAMA, nor for the bank bailouts. In fact I presume most of them are opposed to both NAMA and the bailout, just like other mortgage owners.

So my question is two-fold

1. Who predicted the mess in its current form (not just the property crash) and
2. Why are we so quick to demonise property developers?

Liam Byrne

later10 wrote: »

Nor am I an apologist for Bertie Ahern. However, one thing he said during his recent interview struck me, when he said that nobody warned himk of the banking crisis.

I presume most people guffawed at this. But actually, I have a feeling he's correct.

Who did he tell to commit suicide, so ?

The high-profile nature of that comment and the resulting controversy proves that he's lying about not being warned, and I find it absolutely incredible that a "non-apologist" wouldn't spot this blatant contradiction.

noel farrell

bertie did not know much about banking he never used them:D. there were lots of warnings but we were on a speeding train the only way to stop was crash

Whiskeyjack

http://www.youtube.com/watch?v=THWbrFy5NWM

You're probably already familiar with this, but saying "I didn't know it was going to be this bad" doesn't take away from the fact that he was warned and he flatly ignored it.

ilovesleep

As far as i can remember the eu was calling for property taxes for some time which would have slowed down such a property bubble. He was warned alright.

BeeDI

They paid good money to Dr Peter Bacon, to advise them on the property market. He made sound proposals designed to cool the market. Then they ignored the recommendations.
Couple of years later they brought him back to make another analysis.
Again they ignored him.
FFS

later12

Can I reiterate that the property crash was well signalled?
I'm talking about the banking crisis that resulted.

Names? Irish names? Is Bertie right?

gurramok

Yes, a bubble always falls to grace in any country in which a bubble had occurred. FF failed to realise this. As with any bubble, the banks lose out big time due to their reckless lending to developers and mortgagees alike. They never copped on that prices may fall too.

To be honest, the first stop signs from a minority of commentators came in 2005 or thereabouts as the opposition never shouted stop either.

Dannyboy83

Figure 1. Bank lending to households and non-financial firms as a percentage of GDP (GNP for Ireland), 1997 and 2008


I find it impossible to feign ignorance in respect of the above diagram.
If Bertie didn't know, it's because he told Cowen that he didn't want to know.

Dannyboy83

AFAIK, there were also warnings from the ECB to the Irish Central Bank about the unsustainable borrowing situation in Ireland.

Warnings as opposed to action, because apparently the ECB don't actually have the ability to reprimand/control such situations. (or didn't back then at least)

BostonB

later10 wrote: »

Can I reiterate that the property crash was well signalled?
I'm talking about the banking crisis that resulted.

Names? Irish names? Is Bertie right?

In a question-and-answer session with the paper, asked if he was the father of the Celtic Tiger, he said he was “one of the parents, for sure” – but he admitted to not reading a number of reports analysing the state of the banking sector in full.
“I looked through the reports, but I have to admit I didn’t read them in their entirety,”

http://www.thejournal.ie/bertie-can-only-blame-himself-for-lax-financial-regulation-2010-10/

He had his fingers in his ears.

jimmycrackcorm

I think people knew rightly but chose to ignore the obvious. As Lenihan stated quite correctly - we all partied.

However the regulation of the banks formed the bulk of the problem. Eg how high would property prices have risen had the banks been forced to only give mortgages based on the traditional multiples of 2.5 + 1

zig

Granted, its the publics responsibility not to take out stupid loans that we can't afford. But the heart of the blame lies with Fianna Fail, and I wont deny that other parties given their situation may have went along with the gravy train too, but they weren't in that situation so we'll never know.

Heres where my blame lies ( with the most relevent at the top, and least at the bottom) :
- Fianna Fails lack of regulation during the boom, moreso ignorance actually
- Fianna Fails extension of the guarantee when clearly it was failing and was bringing the entire economy down with it, hence 10 year bond rates hit sky high.
- Anglo Irish, AIB, etc for behaving irresponsibly creating massive exposure, their profession is investment, they should know more than any of us that gambles should be handled responsibly.
- ECBs lack of regulation with its cheap credit, and foreign bank exposure to Irish banks, they were on the gravy train too if you ask me. I really dont see them as the victims of an irresponsible Irish government tbh.
- Fianna Fails spending during the 'boom' , exchequer surpluses thrown away, im sure it certainly secured their 2007 victory (unrelated to the banking crisis buts its all hand in hand now).
-Developers and property investors and to a lesser extent the public for letting themselves get caught up in the housing bubble. Cmon how many times was the words 'property bubble' mentioned during the boom. The word bubble is there for a reason.
No developer wanted to see themselves go bust but this goes back to more blame on FF for not taking a hard line on these guys.

In my last point, the reason I say , 'to a lesser extent the public', is because there was severe pressure to buy a house before the prices got even more out of hand. We are not trained economists or investors, so if we keep hearing through the media that prices are going nowhere but up and we want to buy a house in our lifetime, its only natural to feel we must buy one before things get even worse. Im tired of people bashing the public with this "we all partied too hard" line.

zig

later10 wrote: »

In fact I presume most of them are opposed to both NAMA and the bailout, just like other mortgage owners.

Thats a bold presumption, im sure the ones with good loans are fairly pissed off, but this deal suited many developers. Some of whom still seem to be living the high life while we foot the bill.
I dont know why you're putting mortgage owners in with that lot.
If you were a negative equity mortgage holder and were offered your debt to be bought off you, it would mean sacrificing your home. I doubt developers give 2 sh1ts about some half built ghost estate thats going to make no money anyway.

ilovesleep

jimmycrackcorm wrote: »

I think people knew rightly but chose to ignore the obvious. As Lenihan stated quite correctly - we all partied.

However the regulation of the banks formed the bulk of the problem. Eg how high would property prices have risen had the banks been forced to only give mortgages based on the traditional multiples of 2.5 + 1

We all did not party. But apperently I bought house here, a holiday home abroad, a new car every year, took four holidays a year too on the credit card so everybody on this island is to blame.

Last time I checked Im renting, dont have any intention of buying a house, owned one car which i bought for 800euro, walk to work now, have never been abroad, own a prepaid credit card. But Im to blame as are everyone else who did not get themselves into a mess.

BostonB

jimmycrackcorm wrote: »

...As Lenihan stated quite correctly - we all partied....

Sorry but can't agree with that. That a FF tactic of trying to shift blame from them to everyone else. Everyone did not Party as is claimed. They should be called the teflon party the way they are responsible for nothing. Even ministers don't seem to be responsible for their department.

danbohan

BostonB wrote: »

Sorry but can't agree with that. That a FF tactic of trying to shift blame from them to everyone else. Everyone did not Party as is claimed. They should be called the teflon party the way they are responsible for nothing. Even ministers don't seem to be responsible for their department.

did you ever think that their is a strange resemblance between fianna fail and the irish population as a whole , nobody's responsible for anything

later12

Second page now, is anyone going to suggest who was warning about the banking crisis (again as distinct from the property crisis)? Who saw this coming?

Because it seems to me that The government is right here. It did look like a slowdown was coming but the consequences were not seen by anyone as far as I can see. There was no economist, commentator, blogger or journalist who predicted bank meltdown. One well known commentator who has been praised for his 'prophetic' predictions only expected a 6-7% per year reduction in house prices over a sustained 9 year period. Hardly accurate. But with those kind of predictions floating around, you wouldn't seriously be expecting bank meltdown. As much as i disagree with Bertie, I think he's right on this one, although I remain open to correction once provided with credible evidence to the contrary.

Noreen1

danbohan wrote: »

did you ever think that their is a strange resemblance between fianna fail and the irish population as a whole , nobody's responsible for anything

No. Because everyone did not party. Some did, some didn't.

As an analogy: If a family of thugs moves into your neighbourhood, is the entire neighbourhood responsible for their antics?
Accordingly, why would the Irish public accept responsibility for the actions of people who happen to live on the same Island?

The Irish people elected a Government to manage the affairs of the Country. That Government failed to do so - and failed utterly.

danbohan

Noreen1 wrote: »

No. Because everyone did not party. Some did, some didn't.

As an analogy: If a family of thugs moves into your neighbourhood, is the entire neighbourhood responsible for their antics?
Accordingly, why would the Irish public accept responsibility for the actions of people who happen to live on the same Island?

The Irish people elected a Government to manage the affairs of the Country. That Government failed to do so - and failed utterly.

so when you received an excessive salary during the boom you handed it back ?, when your tax rates were some of the lowest in the world you paid extra taxes ?, or maybe you were a benificary of some the highest social welfare rates in the world,?everybody benefited in some way or other from the fake boom . nobody cried stop except maybe a few economists .

later12

danbohan wrote: »

so when you received an excessive salary during the boom you handed it back ?, when your tax rates were some of the lowest in the world you paid extra taxes ?, or maybe you were a benificary of some the highest social welfare rates in the world,?everybody benefited in some way or other from the fake boom . nobody cried stop except maybe a few economists .

The boom was not fake, it was just that - a boom, an economic bubble. It was very real. While we were in it the cost of living was also significant and very real. I would say everybody felt the effects of the good times, yes. But everybody is not equally culpable, if indeed culpable at all.

Liam Byrne

danbohan wrote: »

so when you received an excessive salary during the boom you handed it back ?, when your tax rates were some of the lowest in the world you paid extra taxes ?, or maybe you were a benificary of some the highest social welfare rates in the world,?everybody benefited in some way or other from the fake boom . nobody cried stop except maybe a few economists .

Never got an "excessive" salary in my life
Stealth taxes are high in this country, most hitting ordinary people more since they comprise a higher percentage
Neither was I in receipt of ANY social welfare

So Noreen is spot-on; claims that "everyone" is to blame are fictional deflection.

danbohan

Liam Byrne wrote: »

Never got an "excessive" salary in my life
Stealth taxes are high in this country, most hitting ordinary people more since they comprise a higher percentage
Neither was I in receipt of ANY social welfare

So Noreen is spot-on; claims that "everyone" is to blame are fictional deflection.

depends on your definition of excessive , every country has stealth taxes . fictional deflection is exactly what the majority of the Irish population is indulging in

GoldenEarring

BeeDI wrote: »

They paid good money to Dr Peter Bacon, to advise them on the property market. He made sound proposals designed to cool the market. Then they ignored the recommendations.
Couple of years later they brought him back to make another analysis.
Again they ignored him.
FFS

And they rolled him out again lately. He is the author of NAMA. Must have made a fortune for all his brainwaves.

GoldenEarring

It was Bertie's duty to know what was going on in the economy. But he was too busy tearing around the country pressing the flesh and inflating his massive ego.
The citizens' trust was in his hands. He totally betrayed us and has not even the moral courage to admit any responsibility.

later12

GoldenEarring wrote: »

It was Bertie's duty to know what was going on in the economy. But he was too busy tearing around the country pressing the flesh and inflating his massive ego.
The citizens' trust was in his hands. He totally betrayed us and has not even the moral courage to admit any responsibility.

Re the banking crisis, what economists are you saying he should have been listening to?

Whiskeyjack

I'm not sure what the point of this thread is. The property crash and the banking crisis go hand in hand, it sounds like you're trying to absolve Bertie of some of the blame by saying nobody predicted the banking crisis as if it was a completely separate perfect storm.

later12

Whiskeyjack wrote: »

I'm not sure what the point of this thread is. The property crash and the banking crisis go hand in hand, it sounds like you're trying to absolve Bertie of some of the blame by saying nobody predicted the banking crisis as if it was a completely separate perfect storm.

The banking crisis is seperate. There have probably been about 30 property crashes in the OECD in the last forty years. Property crashes do not automatically mean banking collapse, even in Ireland. Most economists spoke about a macroeconomic dislocation occuring in Ireland, not a banking collapse, as I said earlier one well known commentator (Morgan Kelly) suggested that the banks would deal with the problem just fine in 2007 and that they were adequately capitalised.

So again - who was warning about a banking crisis?

Whiskeyjack

Perhaps everyone assumed the financial regulator was doing his job when he wasn't?

later12

Whiskeyjack wrote: »

Perhaps everyone assumed the financial regulator was doing his job when he wasn't?

No serious economist, banker or businessman (indeed I wonder if any regular individual at all) would have seriously suggested that we had an appropriate financial regulatory system in Ireland, it was well known in the financial industry to be extremely lax. Does 'Wild west of European Finance' ring any bells? That less than complimentary tag came at us from the NYT around 2005. Nobody assumed the regulator was doing his job and if they did they were kidding themselves.

GoldenEarring

You would presume a Taoiseach who had previously been a Minister for Finance would have been in regular contact with the Central Bank and the Financial Regulator. This is a small country and the financial circles are small..they all know each other.
I can tell you that I with no financial expertise, as an ordinary Joe reading the papers, knew that there was corruption in political circles and that our property prices were totally ridiculous and out of step with other neighbouring countries.
The only thing I remember about Bertie's stint in Finance was his introduction of not one but TWO tax amnesties for tax cheats.
Shows the calibre of the man.
Why are you defending him?

Liam Byrne

danbohan wrote: »

depends on your definition of excessive , every country has stealth taxes . fictional deflection is exactly what the majority of the Irish population is indulging in

Well considering my idea of excessive is over €100,000 and I've never asked for, wanted or received even half that, you don't have a leg to stand on.

Also, other countries may have stealth taxes but this country has ridiculous ones - no option to pay for waste disposal on once-a-month collection basis, €850 a year in tolls for a simple bypass, and 95c of the current €1.40 for a litre of petrol, not to mention the illegal VRT.

So I'm not the one who's making up lies that we all rolled in it and were greedy and took out crazy loans - that's an FF lie.

later12

GoldenEarring wrote: »

Why are you defending him?

Typical. Anybody suggests that *shock, horror*, Bertie could be right on something and suddenly, despite saying that they're not defending him, they're defending him.

I am not defending him. I am saying that on the issue of warnings re the banking crisis, he is probably right. Not the property crash. The banking crisis. Banking.

Is he wrong? Who was warning?

Liam Byrne

later10 wrote: »

No serious economist, banker or businessman (indeed I wonder if any regular individual at all) would have seriously suggested that we had an appropriate financial regulatory system in Ireland, it was well known in the financial industry to be extremely lax. Does 'Wild west of European Finance' ring any bells? That less than complimentary tag came at us from the NYT around 2005. Nobody assumed the regulator was doing his job and if they did they were kidding themselves.

And who appointed the so-called "regulator" "because he was his friend"?

Are you suggesting that Ahern way lying about that, too? Because friends talk, especially when one of them is meant to be the other's boss.

later12

Liam Byrne wrote: »

And who appointed the so-called "regulator" "because he was his friend"?

Are you suggesting that Ahern way lying about that, too? Because friends talk, especially when one of them is meant to be the other's boss.

I'm sorry did you forget the bit where I just said I'm not, nor have I any interest in, defending Bertie Ahern. Some people read what they want to read and ignore what they want to ignore.


Who would answer the question?

GoldenEarring

Of course you're defending him. Stop kidding yourself.

later12

No, i'm not. See where this is going yet?

GoldenEarring

Well, what is the point of your question? It is to make a case that poor old Bertie was not well advised and therefore can be absolved of all blame and responsibility for our economic meltdown and retire in comfort with his hefty pensions intact.
Whereas in my book he should be behind bars.

later12

GoldenEarring wrote: »

Well, what is the point of your question? It is to make a case that poor old Bertie was not well advised and therefore can be absolved of all blame and responsibility for our economic meltdown and retire in comfort with his hefty pensions intact.
Whereas in my book he should be behind bars.

Where on Earth did you get that from in anything I have posted. I have frequently been saying on boards how little time I have for the man. You can keep up with this line if you want, but you are completely making it up.

Pointing out that nobody was really predicting a banking crisis does not mean that one is suggesting that Bertie Ahern is guilt free or anything like it. It's pretty basic.

GoldenEarring

It was Ahern's responsibility to ASK, regardless of anyone telling him uninvited. He is a supposed accountant by profession. But then that was a bit of an exaggeration apparently.
Everyone would say McWilliams, Kelly and even George Lee were pointing out how unsustainable the bubble was. Also Peter Bacon. The ESRI always seemed to get it wrong.

I will ask you: Who was not telling him?


I clearly remember David McWilliams saying at the end of a programme about the building industry collapse that the next big disaster coming down the tracks would be a banking one.

When Northern Rock was in trouble, the first thing any financial person should have done is closely examine our fiscal situation at home.

Liam Byrne

later10 wrote: »

I'm sorry did you forget the bit where I just said I'm not, nor have I any interest in, defending Bertie Ahern. Some people read what they want to read and ignore what they want to ignore.


Who would answer the question?

I just asked straight questions. Not my fault that they undermine your "neutral" stance.

If you're suggesting that Ahern was lying about why he appointed the regulator then your stance makes sense.

later12

GoldenEarring wrote: »

It was Ahern's responsibility to ASK, regardless of anyone telling him uninvited. He is a supposed accountant by profession. But then that was a bit of an exaggeration apparently.
Everyone would say McWilliams, Kelly and even George Lee were pointing out how unsustainable the bubble was. Also Peter Bacon. The ESRI always seemed to get it wrong.

This is a myth, the ESRI printed articles on the property bubble, not least Morgan Kelly's famous article back in April 2007.

I am talking about the banking crisis, the above were not warning about a banking crisis. Property crashes and banking crises are two different things with the latter rarely following on from the former, and I have already indicated all of that, read the posts.

By the way if Ahern did ask, what reply would he have gotten? I already mentioned an article by Morgan Kelly whereby he suggested that the property crash was not a threat to banks. Where was the evidence to suppose otherwise? Who predicted it? Nobody has answered that simple question yet.

Liam Byrne wrote:

I just asked straight questions. Not my fault that they undermine your "neutral" stance.

If you're suggesting that Ahern was lying about why he appointed the regulator then your stance makes sense.

I have no reason nor evidence to suggest that Patrick Neary (or Liam O'Reilly for that matter) were not appropriately qualified for the roles to which they were appointed. I have no sympathy for Bertie Ahern or any of the previous regulators who failed in their duties, I'm not defending them. I'm merely pointing out that of all of the people saying 'I told you so' now, none actually saw the banking crisis coming.

later12

GoldenEarring wrote: »

When Northern Rock was in trouble, the first thing any financial person should have done is closely examine our fiscal situation at home.

Northern Rock was in trouble in 2007. By then the game was up in Ireland. That only proves the point.

zozimus

Liam - you're so right that 'we' didn't cause this. I didn't see the celtic tiger because I was too busy working, but the boom has meant that I live a long way from work in a horrible house and I get NOTHING for my tax. No usable health service, no good route to work without tolls, no useful police service, no useful services of any kind.

I'm comparing David McWilliams' article to Brian Lenihan's in today's Indo - and it vindicates my opinion.

The Minister's is devoid of imagination and bravery and long term thinking, whereas McWilliams seems to have the ability to think outside the silo that is FF.

We need some strong, intelligent and brave leadership. Unfortunately I'm not seeing any high wattage coming from any of the political parties. Sinn Fein just want a united Ireland so they can shag off, Fine Gael are just another bunch of dribbling inbreds who want to look after their own constituencies and Fianna Fail don't seem to think ahead, ever.

theroad

I think the answer to your question "Who was warning?" lies in what you said about the state of financial regulation in Ireland:

later10 wrote: »

No serious economist, banker or businessman (indeed I wonder if any regular individual at all)...

As the person charged with running the country it was part of Bertie's job to set up the necessary checks, balances, management controls and so on to ensure the stability of the economy. His government manifestly failed to do that, for reasons that are obvious to most people now.

So who was warning? I don't know, probably no one in the right quarters. However I believe strongly that it was his responsibility as Taoiseach to find out the truth and make his decisions accordingly, and he failed to do that. It is always bad news when they start believing their own PR.

That's what astonishes me when I hear him say "No one warned me." Saying that kind-of misses the point. He should have been asking.

GoldenEarring

later10 wrote: »

This is a myth, the ESRI printed articles on the property bubble,

Which ones?

Fitzgerald even admitted he got it wrong on Marian Finucane's show.

GoldenEarring

later10 wrote: »

I am talking about the banking crisis, the above were not warning about a banking crisis. Property crashes and banking crises are two different things with the latter rarely following on from the former,

.

In our case they were not separate. They were intricately connected.

later12

GoldenEarring wrote: »

In our case they were not separate. They were intricately connected.

Who was saying that in 2006? that is the point of this thread.

/Brick wall.

later12

GoldenEarring wrote: »

Which ones?

I told you, Morgan Kelly's famous article on the likely event of an Irish property collapse in Apr 2007 was printed on ESRI paper in the ESRI by the ESRI with a cheque written to the author by the ESRI

later12

theroad wrote: »

That's what astonishes me when I hear him say "No one warned me." Saying that kind-of misses the point. He should have been asking.

Surely if there were people around then who were telling him they could come forward now? nothing? Surely if you know something like that you don't keep it to yourself or wait to be asked. Certainly nothing in the public domain. Nothing from any of the pundits who are now giving advice 7 days a week on radio and tv when it appears that they didn't know this was happening either.

GoldenEarring

later10 wrote: »

Who was saying that in 2006? that is the point of this thread.

/Brick wall.

I have no interest in continuing a discussion with an ignorant person like you.