It's wrong for government to force banks to cut rates

Slideshowbob

Bank heretofore are entitled to charge interest to help them pay for themselves.

If government force interest rate cuts on banks, the banks will need more government subsidies!!!

So is the government making every taxpayer poorer by this political posturing instead of just allowing to relate their income to their customers ?

woodoo

So good you posted it twice

BostonB

Keep upping the rates and people will disappear to england.

WalterMitty

yes its wrong, and sends wrong signals to people the government want to invest in banks here(some have already invested in bank of ireland). It is sheer populism and doesnt really help those in dire need much but is a windfall for those with no real problem paying their mortgage. It should have been a more targeted approach to the most needy mortgage holders if "keeping families in their homes" was the true priority of the gov which it clearly isnt and getting and keeping votes is clearly their priority.

Good loser

It's absurd - FF at its most populist never went for this (don't know about them in opposition!).

Govt is charging Bank of Ireland €470 m this year for the guarantee. Why don't they rebate them the equivalent cost and they will have no problem complying?

What will happen the next time and the next?

Aren't other commercial and personal borrowers entitled to equal care by the Govt?

Always a big risk when State owns banks. If there was an election pending? Bad precedent from FG.

waitingforBB

I think this has been either an ill advised sortie by Enda and co. or else a clever diversionary tactic.
Firstly of all the banks, AIB should be the least obliged to pass on this decrease and this was obvious to anyone informed as they had not passed on the previous two increases.
Something happened to cajole the bank into making this U turn as it makes zero economic sense.

The real question here is the disparity in the interest rates between the lenders. If the government are saying that AIB must now hold an SVR of 3%, then why should it not be the same for PTSB for example (whose SVR for LTV>80% is 5.9%).?

PTSB announced immediately that they were passing on the rate decrease to variable customers, but they are far and away the most punitive institution in the country after applying several unilateral rate increases in the last 2 years.

The government are calling for BOI to reduce their rate to 4% now?

They should be saying that all subsidised lenders offer 4%. Why should PTSB for example (even after passing on the latest decrease) be allowed to screw their very captive customer base at 5.9%, while the government make big drama of their meetings with AIB, BOI and UB....

Those three arent the real issue here and the gov need to look at the variance in rates offered by the institutions rather than this transactional reduction.

Harmonisation / standardisation of rates needs to be addressed before any investigation of legislation into forcing rate decreases happens.

So the government forced AIB to reduce their SVR to 3% (great news for AIB borrowers of course), and will try to force BOI to go to 4%. Will legislation enforcing this cover any unilateral increases from rogue lenders again like PTSB?

How can there be any justification for similarly state owned institutions (AIB and PTSB) having a differential (3% V 5.9) for the same product? A homeowner (ironic descritiption) having a 300K mortgage over 25 years with PTSB at 5.9% will pay just under 150000 more in interest than the homeowner with the same principal and same term with AIB on 3%. Thats astounding!!!!!

PTSB rates are higher than some 'subprime' lenders at the moment, while AIB SVR is lower than some trackers. I''m not for one moment suggesting that the AIB rate is the correct one, but certainly the PTSB one is way off kilter...

This should be the focus of the debate rather than whether or not the lender passed on the recent .25% rate decrease.

Villa05

What should we expect when we as a country continually vote for dumb politicians.

alexlyons

Villa05 wrote: »

What should we expect when we as a country continually vote for dumb politicians.

point us in the direction of what you would call intelligent ones

BostonB

Harmonisation / standardization certainly.

The taxpayer is paying for everything anyway. Be it though the banks, or social payments, or other schemes.

namenotavailablE

Personally, I think it's wrong that the government should find itself in the position of having to talk to the banks to pass on the lower interest rates, particularly those in majority state ownership, but also those that have received capital injections from the taxpayer.
Passing on the 0.25% rate reduction barely qualifies as a small dividend back to the taxpayer and in some cases might allow a small amount of cash -"Every little helps"- to find its way into the local economy, which no doubt would be preferred by most businesses.

melekalikimaka

i think its wrong, the banks are a business and are in the business of making money, we need them to make money, forcing them to take rate cuts is madness, socialism is well and truely gripping the people in a serious way... its depressing

sarumite

namenotavailabl wrote: »

Passing on the 0.25% rate reduction barely qualifies as a small dividend back to the taxpayer

Its not a dividend back to the taxpayer. The taxpayer doesn't actually benefit from the rate reduction. Being a taxpayer and being a mortgage holder are not one and the same.

Sticky_Fingers

melekalikimaka wrote: »

i think its wrong, the banks are a business and are in the business of making money, we need them to make money, forcing them to take rate cuts is madness, socialism is well and truely gripping the people in a serious way... its depressing

Sorry but the banks stopped being a business the second they went begging for money off the taxpayer, any appeal to great capitalist ideals and fair competition have to be couched in the argument that the banks now little more then vassal states of the DoF. Call it what you want but ensuring that the banks are not screwing their customers yet again is not IMO indicative of an impending red menace.

namenotavailablE

OK- to rephrase: mortgage holders -irrespective of their taxpayer status- will clearly benefit if rates are lowered due to the slight easing of cash flow pressures on them.
It's reasonable to assume that many mortgage holders are also taxpayers, so many taxpayers will benefit from this reduction.
The banks have undoubtedly received significant state aid which is underwritten by the people of this sovereign nation so in my view it is not unreasonable to expect them to pass on an ECB interest rate cut.

woodoo

melekalikimaka wrote: »

i think its wrong, the banks are a business and are in the business of making money, we need them to make money, forcing them to take rate cuts is madness, socialism is well and truely gripping the people in a serious way... its depressing

All that changed the moment banks started taking taxpayer money to help them out of a hole.

We aren't living in normal capitalist times. Something new is being carved out and it isn't clear where its heading.

nesf

What I find interesting is that AIB who didn't pass on the recent rate increases to customers was forced to cut rates. I mean seriously, the bank had already looked after its customers and is now being punished for doing so.

Unrealistic

namenotavailabl wrote: »

OK- to rephrase: mortgage holders -irrespective of their taxpayer status- will clearly benefit if rates are lowered due to the slight easing of cash flow pressures on them.
It's reasonable to assume that many mortgage holders are also taxpayers, so many taxpayers will benefit from this reduction.
The banks have undoubtedly received significant state aid which is underwritten by the people of this sovereign nation so in my view it is not unreasonable to expect them to pass on an ECB interest rate cut.

I think even the word 'many' is a stretch as from memory the total number of AIB mortgages is equivalent to less than 10% of our population. And then you need to exclude those mortgages on a tracker rate rather than a variable rate. So let's just say that 'some' tax payers will benefit if rates are lowered. But all taxpayers will need to pay for that subset of tax payers to benefit. €1 less coming into AIB as interest is €1 more that has to be financed by the tax payer as effectively 100% shareholder of AIB. That is before we even address the fallacy that variable mortgage rates should be in lock-step with ECB rates which conveniently ignores the fact that, while some of the banks' financing comes directly from the ECB, much comes via the state at significantly higher rates.

thebman

melekalikimaka wrote: »

i think its wrong, the banks are a business and are in the business of making money, we need them to make money, forcing them to take rate cuts is madness, socialism is well and truely gripping the people in a serious way... its depressing

Or in other words, socialise the debt, privatise the profits.

I don't think they should be forced to pass on the cuts because of arguments like Nesf but the above does not make sense.

Banks can't scream rescue us, socialise our debt or we will go under and then claim socialism is bad and we should not try to get our money back off the banks we now own.

The reality is people can't pay their mortgages so they want the cuts in rates now. If the banks feel they can't pass on the cuts or they'll need more money from the government then let them make their case to the government.

hatrickpatrick

We own these banks, remember.
Given the amount we were forced to pay for them, they'd damn well better do as they're told for once.

sharper

hatrickpatrick wrote: »

We own these banks, remember.
Given the amount we were forced to pay for them, they'd damn well better do as they're told for once.

I'm a taxpayer, I "own" the banks just as much as anyone.

I don't have a mortgage though so why am I being asked to pay more tax so loss making banks can loose even more? Why do people with mortgage get "a little bit back" and I don't?

woodoo

The government getting all hot and bothered by AIB passing on the rate cut when they were already the lowest rate in the country is a bit silly.

AIB were 3.25% they are now 3.00% after the cut was passed on.
EBS which afaik is owned by AIB are charging me 4.68%.
PTSB are at 5.66% or thereabouts.

Maybe if they are doing anything they should be looking at the rates themselves.

the groutch

I think it's stupid forcing AIB to lower the rates, and I have a mortgage with them

BostonB

Will more people in trouble lose less money than passing the rate cut on?

WalterMitty

Why doesnt the government order them to increase their savings rates so savers who are also taxpayers can get some benefit?

antoobrien

hatrickpatrick wrote: »

We own these banks, remember.
Given the amount we were forced to pay for them, they'd damn well better do as they're told for once.

How about making the people who helped bring about the destruction of the creditworthiness of the bank to heel and make them pay for the mess we're in?

That would be the people who actually took out the loans in the first place more commonly known as bank customers.

liammur

Anyone would be crazy to invest in Ireland. IL&P shareholders got hit the hardest of the banks, over capitalised them so much to the extent, that they can take any losses on the chin.
Well now that the government owns the bank, why not reduce the variable interest rates to the level of other state owned banks and let the government start taking the losses on the chin.

Unrealistic

liammur wrote: »

Anyone would be crazy to invest in Ireland. IL&P shareholders got hit the hardest of the banks, over capitalised them so much to the extent, that they can take any losses on the chin.
Well now that the government owns the bank, why not reduce the variable interest rates to the level of other state owned banks and let the government start taking the losses on the chin.

This government you have in mind, the one you want to 'start taking losses on the chin', is this a different government from the one that we all have to finance with our taxes?

liammur

Unrealistic wrote: »

This government you have in mind, the one you want to 'start taking losses on the chin', is this a different government from the one that we all have to finance with our taxes?

It's time they stood up and be counted. They see nothing wrong with imposing 99% losses on shareholders, yet there are thousands of people now struggling with PTSB's outrageous variable interest rates. The bank we were told is now so well capitalised it can withstand any stress test. Time to bring these variable interest rates down to the same as the other state owned banks.

Unrealistic

liammur wrote: »

It's time they stood up and be counted. They see nothing wrong with imposing 99% losses on shareholders, yet there are thousands of people now struggling with PTSB's outrageous variable interest rates. The bank we were told is now so well capitalised it can withstand any stress test. Time to bring these variable interest rates down to the same as the other state owned banks.

I still don't get it. You're calling for the Cabinet to fund this personally out of their own pockets? Because, if you're not, then one way or the other, your calling for taxpayers as a whole to subsidise mortgage holders to an even greater extent than they already are. Variable mortgage rates in the bailed out banks should really be at 9-10% right now. That would reflect the real cost of funding. The reason rates are much lower is because the tax payer is picking up the difference.

liammur

Unrealistic wrote: »

I still don't get it. You're calling for the Cabinet to fund this personally out of their own pockets? Because, if you're not, then one way or the other, your calling for taxpayers as a whole to subsidise mortgage holders to an even greater extent than they already are. Variable mortgage rates in the bailed out banks should really be at 9-10% right now. That would reflect the real cost of funding. The reason rates are much lower is because the tax payer is picking up the difference.

No. The bank is 1 of the most capitalised in the world, which means it has billions of € now. IL&P never needed to be bailed out, UNLESS the government wanted to help out those with losses. Now is the time to help them out.

Unrealistic

liammur wrote: »

No. The bank is 1 of the most capitalised in the world, which means it has billions of € now. IL&P never needed to be bailed out, UNLESS the government wanted to help out those with losses. Now is the time to help them out.

It wasn't bailed out 'to help those with losses'. It was bailed out because it had a messed up balance sheet and could very likely have been the the domino that finally brought the Irish banking system to a total crash if it had been left alone. It is already expected that the €2.8b the tax payer has put in will not be enough and now the tax payer will have to put in even more. So don't pretend it isn't the tax payer who has to foot the bill for your interest subsidy. Be honest. If you want the tax payer to subsidies your mortgage (even more than it currently is) then say so and make the case for it. But please stop whining about 'making the gubberment pay'.

liammur

Unrealistic wrote: »

It wasn't bailed out 'to help those with losses'. It was bailed out because it had a messed up balance sheet and could very likely have been the the domino that finally brought the Irish banking system to a total crash if it had been left alone. It is already expected that the €2.8b the tax payer has put in will not be enough and now the tax payer will have to put in even more. So don't pretend it isn't the tax payer who has to foot the bill for your interest subsidy. Be honest. If you want the tax payer to subsidies your mortgage (even more than it currently is) then say so and make the case for it. But please stop whining about 'making the gubberment pay'.

You are completely out of your depth.
1. The bank wasn't bailed out. It did NOT need the money. It was overcapitalised to protect against 'potential future losses'. The bank is expected to return to profitablilty by 2013, so now is the time to realise the losses.
2. The tax payer will have to put in more € if they don't get as much as they thought they would for Irish Life.
3. My mortgage is cleared years ago, I have no loans with this bank or any bank.
4. There is absolutely no rationale in having state owned banks with huge differences in their variable interest rates, it's like Tesco charging €2 for bread in 1 shop and €1 for the same bread in another shop.

moceri

The Government is making a big mistake in intervening. Ulsterbank are being bailed out by the British Taxpayer. In the same way, UK branches of AIB and BOI are being guaranteed by the Irish Taxpayer. There clearly are some people who way over-extended themselves. Anecdotally, one Individual bought a Huge Georgian Mansion with Stables and when faced with repossession, pleaded before the Judge that "It was the family home". People should be downsized to a more appropriate house if it is beyond their means to pay the mortgage.
Borderline cases should have the terms of their mortgage extended out, to say 40 or even 50 years, even if the mortgage has to be inherited with the property.
Once the banks are on an even keel again, there should be compulsory insurance on a mortgage, to cover negative equity losses if a vendor sells. People should be freely allowed to move mortgages, if their current lenders rates are uncompetitive.
I didn't buy a house during the boom as I couldn't afford it. I'll be dammed if I should now be expected to pay for someone else's folly.
A lot of people made huge fortunes during the early part of the boom. Good Luck to them. The people who arrived late to the game got caught. They should have evaluated all the risks. Now that things have gone sour, they are looking around for someone to blame. If things had gone differently would they have been willing to share the rewards? I think not.

antoobrien

liammur wrote: »

It's time they stood up and be counted. They see nothing wrong with imposing 99% losses on shareholders

The government didn't impose 99% losses on the shareholders the markets did.

liammur

antoobrien wrote: »

The government didn't impose 99% losses on the shareholders the markets did.

Explain that?

Mr. Incognito

wow- people have a very poor grasp of history, and economics.

The banks borrowed money on the open European Market and lent it to Speculators.

Property crashed.

Suddenly the "security" for the loans were worthless. People started defaulting. The banks had between 1-3% (depending on the bank) of actual capital compared to the balance sheet.

The government stepped in to guarantee deposits to stop runs on the banks.

Then they put in 4 billion in a "hole in Anglo" to cover these supposed bad debts. Then everything steamrolled leaving the tax payer to clean up the mess. The banks were effectively nationalised with the same clowns running them.

All the bad debts have been assumed into Nama and the banks recapitalised with 40-60% of the Celtic Tiger valuation of these properties which in some cases when some properties are worth 1/4th or 1/5th of that and still falling.

The newly capitalised banks are not lending to protect their balance sheets. Their shareholders are effectively the Irish Government and the banks with the people as the shareholders. Banks are under NO mandate to make a profit. Foreign banks knowing they could not compete in a subsidised market withdrew and the national banks have refused to pass on rates that foreign banks have as a matter of competion.

What we know have is a State controlled bank monopoly mascarading as free enterprise and who have the gall to tell their shareholders who have bailed them out to piss off.

Unrealistic

liammur wrote: »

You are completely out of your depth.
1. The bank wasn't bailed out. It did NOT need the money. It was overcapitalised to protect against 'potential future losses'. The bank is expected to return to profitablilty by 2013, so now is the time to realise the losses.
2. The tax payer will have to put in more € if they don't get as much as they thought they would for Irish Life.
3. My mortgage is cleared years ago, I have no loans with this bank or any bank.
4. There is absolutely no rationale in having state owned banks with huge differences in their variable interest rates, it's like Tesco charging €2 for bread in 1 shop and €1 for the same bread in another shop.

1. Bailout was a phrase you first used in relation to IL&P and I was only echoing your words. But that's a red herring anyway. Whether funds are provided as cash loans, promissory notes or additional share capital doesn't change the fact that it is tax payer money being used. So I think you were correct initially to describe it as a bailout and I don't understand why you changed your mind. I think you're the one out of your depth with your suggestion that 'now is the time to realise losses'. There is certainly a school of though that, if you have a bad financial year, then it is wise (from a PR point of view) to recognise losses to get them out of the system so you can look better on the rebound. But that applies to losses already incurred but not yet recorded (asset write-downs and the like). What you are proposing, in forcing IL&P to charge a non-market interest rate, is that they incur new additional losses. These losses would burn through tax payer funds (the additional capital). Funds which, if IL&P returns to profitability in 2013 (highly doubtful in my mind), should be returned to the Irish tax payer.

2. Yes, exactly. So why are you proposing something that would increase even further the additional amount the tax payer has to put in to IL&P.

3. Good for you. I'm in the same boat but I paid off a mortgage at 11% without grumbling so I find it hard to get worked up about rates of 4-5% here.

4. I agree the rate should probably be uniform across the covered banks but I think it should be uniformly higher to reflect the real market rate. I don't understand why you are arguing for the taxpayer to subsidise it down even further than it currently does?

liammur

Mr. Incognito wrote: »

wow- people have a very poor grasp of history, and economics.

The banks borrowed money on the open European Market and lent it to Speculators.

Property crashed.

Suddenly the "security" for the loans were worthless. People started defaulting. The banks had between 1-3% (depending on the bank) of actual capital compared to the balance sheet.

The government stepped in to guarantee deposits to stop runs on the banks.

Then they put in 4 billion in a "hole in Anglo" to cover these supposed bad debts. Then everything steamrolled leaving the tax payer to clean up the mess. The banks were effectively nationalised with the same clowns running them.

All the bad debts have been assumed into Nama and the banks recapitalised with 40-60% of the Celtic Tiger valuation of these properties which in some cases when some properties are worth 1/4th or 1/5th of that and still falling.

The newly capitalised banks are not lending to protect their balance sheets. Their shareholders are effectively the Irish Government and the banks with the people as the shareholders. Banks are under NO mandate to make a profit. Foreign banks knowing they could not compete in a subsidised market withdrew and the national banks have refused to pass on rates that foreign banks have as a matter of competion.

What we know have is a State controlled bank monopoly mascarading as free enterprise and who have the gall to tell their shareholders who have bailed them out to piss off.

Yes, but this is only partially true. Take bank of Ireland. Why would you encourage investors in and keep moving the goal posts? There is no strategy at all.
The government should have nationalised the banks from the outset. What did they do? Give the worst bank of all, AIB, the best deal, tell investors to come on board in other banks and then move the goal posts.

Mr. Incognito

liammur wrote: »

Yes, but this is only partially true. Take bank of Ireland. Why would you encourage investors in and keep moving the goal posts? There is no strategy at all.
The government should have nationalised the banks from the outset. What did they do? Give the worst bank of all, AIB, the best deal, tell investors to come on board in other banks and then move the goal posts.

I have no idea. It makes no sense. I think the idea is to have one "private" bank and one "nationalised" one and let them compete. This is retarded economic thinking

The boards should be fired.

An International Financial team should be running these banks.

AIB and BOI should be Nationalised fully and Merged. Until the housing market is stabilised then shouldn't be thinking of profits in any bank or foreign investors. Take the hit, bring in proper regulation and thin capitalisation rules for banks and give the financial regulator's office real powers and hire the proper experts for policy not party idiots, yes men and incompetent civil servants.

liammur

Mr. Incognito wrote: »

I have no idea. It makes no sense. I think the idea is to have one "private" bank and one "nationalised" one and let them compete. This is retarded economic thinking

The boards should be fired.

An International Financial team should be running these banks.

AIB and BOI should be Nationalised fully and Merged. Until the housing market is stabilised then shouldn't be thinking of profits in any bank or foreign investors. Take the hit, bring in proper regulation and thin capitalisation rules for banks and give the financial regulator's office real powers and hire the proper experts for policy not party idiots, yes men and incompetent civil servants.

This is true, but some american investors are after putting in big resources into B of Irl now. It's a bit rich of the govt to be telling them what to do when nationalised PTSB has much higher variable interest rates.

liammur

Unrealistic wrote: »

1. Bailout was a phrase you first used in relation to IL&P and I was only echoing your words. But that's a red herring anyway. Whether funds are provided as cash loans, promissory notes or additional share capital doesn't change the fact that it is tax payer money being used. So I think you were correct initially to describe it as a bailout and I don't understand why you changed your mind. I think you're the one out of your depth with your suggestion that 'now is the time to realise losses'. There is certainly a school of though that, if you have a bad financial year, then it is wise (from a PR point of view) to recognise losses to get them out of the system so you can look better on the rebound. But that applies to losses already incurred but not yet recorded (asset write-downs and the like). What you are proposing, in forcing IL&P to charge a non-market interest rate, is that they incur new additional losses. These losses would burn through tax payer funds (the additional capital). Funds which, if IL&P returns to profitability in 2013 (highly doubtful in my mind), should be returned to the Irish tax payer.

2. Yes, exactly. So why are you proposing something that would increase even further the additional amount the tax payer has to put in to IL&P.

3. Good for you. I'm in the same boat but I paid off a mortgage at 11% without grumbling so I find it hard to get worked up about rates of 4-5% here.

4. I agree the rate should probably be uniform across the covered banks but I think it should be uniformly higher to reflect the real market rate. I don't understand why you are arguing for the taxpayer to subsidise it down even further than it currently does?

I'm saying it's a bit rich of the government to expect ulster bank and bank or ireland to be lowering their variable rates, when PTSB which is nationalised has the highest rates of all.

How can you justify a much higher rate than the ECB's rate?

Unrealistic

liammur wrote: »

I'm saying it's a bit rich of the government to expect ulster bank and bank or ireland to be lowering their variable rates, when PTSB which is nationalised has the highest rates of all.

How can you justify a much higher rate than the ECB's rate?

Agree totally that the government has no business telling Ulster Bank or BOI (or NIB) what variable rates they should be using.

I think it's easy to justify a much higher rate than the ECB rate for our nationalised banks because only part of their funding comes at ECB rates. In the case of the recent round of capital financing I understand it was in the form of convertible preference shares with a 10% coupon. Our real marginal cost of borrowing is not the ECB rate but is actually the Troika rate plus the cost paying of unguaranteed bondholders as mandated by the ECB. If I say I'll lend you €1,000 at 3% as long as you pay Jimmy €100 that he is actually owed by Mary, not you, then the real interest rate is 13% not 3%. (Numbers pulled out of the air. Who knows what the real effective interest rate on our bailout from the Troika is but it certainly isn't 3%.)

liammur

Unrealistic wrote: »

Agree totally that the government has no business telling Ulster Bank or BOI (or NIB) what variable rates they should be using.

I think it's easy to justify a much higher rate than the ECB rate for our nationalised banks because only part of their funding comes at ECB rates. In the case of the recent round of capital financing I understand it was in the form of convertible preference shares with a 10% coupon. Our real marginal cost of borrowing is not the ECB rate but is actually the Troika rate plus the cost paying of unguaranteed bondholders as mandated by the ECB. If I say I'll lend you €1,000 at 3% as long as you pay Jimmy €100 that he is actually owed by Mary, not you, then the real interest rate is 13% not 3%. (Numbers pulled out of the air. Who knows what the real effective interest rate on our bailout from the Troika is but it certainly isn't 3%.)

Our banks would be completely gone under without funding from the ECB. Our state would be completely gone under without funding from the troika.
They've bailed us out, it's time the government starts bailing people out now.

Unrealistic

liammur wrote: »

Our banks would be completely gone under without funding from the ECB. Our state would be completely gone under without funding from the troika.
They've bailed us out, it's time the government starts bailing people out now.

The ECB has loaned us money. The Troika has loaned us money. It has to be paid back. The government isn't some separate entity with a independent source of income. It is funded by the people. All those repayments to the ECB and the Troika will have to be funded by us, the people. What you are proposing is that the wider population start bailing out mortgage holders (in the form of reduced interest rates funded by the tax payer) without even making any distinction based on how needy individual mortgage holders are. You have some cheek to be accusing me of being out of my depth when your own arguments are so completely illogical. At the end of the day the tax payer picks up the bill but you're still going on about 'the gubberment' paying.

liammur

Unrealistic wrote: »

The ECB has loaned us money. The Troika has loaned us money. It has to be paid back. The government isn't some separate entity with a independent source of income. It is funded by the people. All those repayments to the ECB and the Troika will have to be funded by us, the people. What you are proposing is that the wider population start bailing out mortgage holders (in the form of reduced interest rates funded by the tax payer) without even making any distinction based on how needy individual mortgage holders are. You have some cheek to be accusing me of being out of my depth when your own arguments are so completely illogical. At the end of the day the tax payer picks up the bill but you're still going on about 'the gubberment' paying.

We won't be able to pay that money back, only the most naive believe we will. THe ECB/troika are doing us, greece, portugal etc a massive favour. There will be massive writedowns just like in Greece.
If I were a mortgage holder in negative equity, I would hand the keys back to the government, see what they can do with it.
With your proposal to jack up interest rates thousands of others would do the same.

antoobrien

liammur wrote: »

Explain that?

It's breathtakingly simple - the government didn't turn around one day and say that the price of IL&P, AIB or BOI shoud be reduced by 99%. That was the (people in) the markets selling off shares becuase of what they saw happening.

There is a valid argument to say that the result of the government actions contributed to the 99% reduction, but in no way can the government be blamed for the drop in its entirety.

Conversely there's a valid argument that it's all the banks fault since they cause the government to step in in the first place.

liammur

antoobrien wrote: »

It's breathtakingly simple - the government didn't turn around one day and say that the price of IL&P, AIB or BOI shoud be reduced by 99%. That was the (people in) the markets selling off shares becuase of what they saw happening.

There is a valid argument to say that the result of the government actions contributed to the 99% reduction, but in no way can the government be blamed for the drop in its entirety.

Conversely there's a valid argument that it's all the banks fault since they cause the government to step in in the first place.

Not at all, in the case of IL&P, there was a leak that they were to be nationalised, then they had to be suspended until the actual stress tests were released, then the govt (nationalised) bought over 99% of the company at 6c. Why the government decided to pay 15c for AIB that cost the taxpayer over €20bn is beyond belief. It shows they weren't fair and had no strategy.

Unrealistic

liammur wrote: »

We won't be able to pay that money back, only the most naive believe we will. THe ECB/troika are doing us, greece, portugal etc a massive favour. There will be massive writedowns just like in Greece.
If I were a mortgage holder in negative equity, I would hand the keys back to the government, see what they can do with it.
With your proposal to jack up interest rates thousands of others would do the same.

It is probably correct to say that we won't pay all the money back, whether it is through a straight write down or inflation eroding the cost in real terms, but that doesn't change the fact that it is taxpayer money. And you are proposing that it be given to mortgage holders, irrespective of need, at the expense of the wider tax payer. You've proposed this a number of times now but failed to justify it. Please explain why you believe that someone on minimum wage should pay additional tax to subsidise the interest rates not just of the 10% of mortgage holders in trouble but also of the 90% of mortgage payers who are still able to service their mortgage. Why should someone living in a three bed semi in a nondescript area pay additional tax to subsidise the mortgage of someone living in a five bed detached house in a prestigious area?

My suggestion that market interest rates should be charged would indeed mean that more people end up in trouble with their mortgages but then resources could be targetted at those people rather than being thrown at all mortgage holders as you are proposing.

Unrealistic

liammur wrote: »

Not at all, in the case of IL&P, there was a leak that they were to be nationalised, then they had to be suspended until the actual stress tests were released, then the govt (nationalised) bought over 99% of the company at 6c. Why the government decided to pay 15c for AIB that cost the taxpayer over €20bn is beyond belief. It shows they weren't fair and had no strategy.

It's a bit rich to be accusing other people of being out of their depth and then make such a basic error as comparing the share price of two different companies without any reference to market cap. If you have two companies worth €1m but one has issued 100,000 shares and the other has issued 50,000 shares the fact that shares in the first company are valued at €10 each and shares in the second company at €20 each doesn't mean that the shareholders in the first company are less well off than the others.

The fact that the current share prices of the rump free float of both AIB and IL&P are about €0.08 and €0.035 respectively shows two things (in as much as a such an illiquid market can show anything).
1) The government overpaid by a factor of two for both companies.
2) People who are prepared to put their money where their mouth is agree that the intrinsic value per share of IL&P is half that of AIB.

liammur

Unrealistic wrote: »

It's a bit rich to be accusing other people of being out of their depth and then make such a basic error as comparing the share price of two different companies without any reference to market cap. If you have two companies worth €1m but one has issued 100,000 shares and the other has issued 50,000 shares the fact that shares in the first company are valued at €10 each and shares in the second company at €20 each doesn't mean that the shareholders in the first company are less well off than the others.

The fact that the current share prices of the rump free float of both AIB and IL&P are about €0.08 and €0.035 respectively shows two things (in as much as a such an illiquid market can show anything).
1) The government overpaid by a factor of two for both companies.
2) People who are prepared to put their money where their mouth is agree that the intrinsic value per share of IL&P is half that of AIB.

The Government should NOT have paid for AIB, by a factor of 2 is utter nonsense. They had an offer of nearly €1bn for EBS but gave it to AIB, gave them €20bn and you think they were overpaid by 2 ?
If you are that concerned for taxpayers money, this is where you should begin your quest.
As for interest rates, you are tying yourself up in knots. Raising interest rates will close the country down. We won't/can't pay back the troika half the money we owe them.

Unrealistic

liammur wrote: »

The Government should NOT have paid for AIB, by a factor of 2 is utter nonsense. They had an offer of nearly €1bn for EBS but gave it to AIB, gave them €20bn and you think they were overpaid by 2 ?
If you are that concerned for taxpayers money, this is where you should begin your quest.
As for interest rates, you are tying yourself up in knots. Raising interest rates will close the country down. We won't/can't pay back the troika half the money we owe them.

Agree. The government shouldn't have paid for any of them. Just wound them down and sold off the shells like the Swedes did. But that money is spent and you are now proposing throwing good money after bad. Any explanation yet for why you want a minimum wage earner to pay extra tax to subsidise a mortgage holder who is still earning €100k+ p.a.?