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?
Overall Assessment The Bank’s 2004 Financial Stability Report identified the risk of an unanticipated and sudden fall in residential property prices, combined with an increase in the default rate among mortgage holders, as the risk that posed the greatest threat to the health of the banking system. A moderation in house price growth in the meantime suggests that, while the risk identified in last year’s report of a sudden fall in prices cannot be dismissed, this risk may have receded somewhat. However, tentative evidence suggests that this moderation may not have persisted. If house price growth were to reaccelerate, this would increase the risk of a sharp correction in house prices in the future. At present, the primary risk is considered to be credit growth and indebtedness levels. Last year’s report singled out the speed with which private-sector debt was accumulating as an especially worrying development. Since then, the rate of debt accumulation has accelerated, with virtually all categories of bank debt increasing at rapid rates. As a result, Ireland’s debt-toincome ratios are now close to the top of the European league.
later10 wrote: » By the way, on that point, I would like to explore the second part of my question: why property developer is a veritable swear word?
later10 wrote: » 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.
later10 wrote: » ...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?
LostinKildare wrote: » If he had listened to Kelly in Sept 2007 he would have had a whole year to deal with the banks and mitigate or even head off the collapse. There were others warning too, but I leave it to you to search for the dark mutterings re the banks from, for example, David McWilliams, and Alan Ahearne (aww, can’t resist – start here: http://www.nuigalway.ie/staff-sites/alan_ahearne/media.html). When Bertie was Taoiseach, Morgan Kelly wrote on 7 April 2008, “it is vital regulators introduce measures to handle impaired loans to builders; overhaul our inadequate system of deposit insurance; and monitor the real solvency of those banks that lent aggressively for speculative land purchases and building, and may now be finding themselves dangerously out of their depth.” Specific measures suggested 5 months in advance of disaster. So, in answer to your question, no Bertie is not right. He is a liar. I'm amazed that you ask.
jonnyskeleton wrote: http://www.centralbank.ie/data/FinSt...UMMARY2005.pdf Just one of several warnings, from the Central Bank no less:
The stability and health of the Irish banking system appears generally sound, according to the standard indicators of financial health such as asset quality, profitability, solvency, liquidity and credit ratings. The central expectation, based on an assessment of the risks facing both the household and corporate sectors, as well as the current shock absorption capacity of the banking system, is that the current health of the banking system leaves it reasonably well placed to withstand pressures from potential adverse developments in the short to medium term. However, there are a number of vulnerabilities, in the medium term, particularly from the very high rate of credit growth.
IrishSpeedtraps wrote: Oh yes you are!
SkepticOne wrote: » It might be worth providing some examples where it has been used in that way. Are you wondering why people might be angry at specific business failures that helped undeminlne the banks (and unfortunately the country) or is it that you think they unfairly generalise to all property developers regardless of whether or not they contributed to the current situation?
later10 wrote: » Personally I would consider developers to be (usually) failed businessmen. They didn't come up with NAMA, they probably don't tend to support the bailout of the banks (they certainly have no influence) and they didn't ask for state interference... so I'm just wondering why they are treated any differently to other failed businessmen.
Liam Byrne wrote: » How do you know they didn't ask? Were you at every golf outing ?
later10 wrote: » Why on Earth would a property developer prefer NAMA? It makes far more sense to deal with his ailing bank. Why would you suggest otherwise?
later10 wrote: » Did you read this part?
Sesshoumaru wrote: » I guess one reason developers might in theory prefer NAMA is because their assets were assigned a LTEV by NAMA. NAMA operating on this logic was never going to immediately liquidate those assets. In some cases NAMA is providing funding in order to complete unfinished developments. This contrasts sharply to what I think would have happened if the banks had gone under. With hindsight and the passage of time we can now safely say the banks would have gone under. If this had happened Irish banks would have been forced to act as Rabobank did, in other words immediate liquidation of those failed businesses. Isn't that how it works normally when businesses can't make loan repayments and the banks themselves are going under?
Scofflaw wrote: » Which is to say that NAMA is a mechanism to provide a slow deflation of some of the property development sector rather than an immediate and rapid crash which takes any remaining bits of the banking and construction-dependent sectors with it. cordially, Scofflaw
later10 wrote: » The banking crisis is seperate.
TAOISEACH Bertie Ahern has rejected the latest call to curb mortgage relief and halt planned tax cuts and says he ``won't panic just because the economy is performing so well.'' He will do nothing to dampen down growth in the economy in spite of fears about overheating, he added. Although he had ``a lot of regard'' for ESRI economist Dr John FitzGerald who warned of a looming property bust on this occasion he disagreed with his conclusions, declared Mr Ahern.``I'm not going to put my hand in the dyke and stop it,'' insisted Mr Ahern. ``We didn't panic during those bad times there's no reason we should do so now.'' Mr Ahern dismissed European warnings about overheating and rising inflation and referred to a Wall Street Journal analysis of the economy pointing out taxes had been cut from nearly 70pc to 44pc. In the ESRI report Dr Fitzgerald said the Government should halt its planned programme of attracting skilled labour from overseas but Mr Ahern rejects this and ``fully backs'' the FAS programme to attract Irish and European overseas workers spearheaded by Tanaiste Mary Harney. The ESRI said tax cuts should be delayed two to three years until after the economy slowed down. Later a statement from the Tanaiste said she wanted to ``take issue'' with the ESRI claim that tax cuts were fuelling inflation. Cuts in personal taxes were a key element of the anti-inflationary strategy being pursued by the Government, she added.
Amhran Nua wrote: » Originally Posted by later10The banking crisis is seperate. No, it's not.
Originally Posted by later10The 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?
Predicting a property crash is not the same thing as predicting a banking collapse. There are no two ways about it.
later10 wrote: » 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.
keithcan wrote: » But they have always been about short-term wins and working the political system. The Celtic Tiger years gave them a chance to disperse largesse and try to 'buy' votes with all the transaction tax revenues at their disposal. Long-term sustainable economic and social development was not their key focus. Sure some good infrastructure etc got sorted - it was sort of inevitable - but planning beyond the next election was not (with some exceptions) their priority
keithcan wrote: » the way it would have been, imo, with the alternative Govt.
keithcan wrote: » As it happens, a couple of the qualities FG have over FF are: not beholden to the construction sector and better in general on governance and rules compliance. If ever there was a time when those 2 qualities could have made a considerable difference to this country, it was the last several years. I'm not particularly gone on FG, but they were so what we needed for the last few years; they certainly wouldn't have got it all right or have stopped the recession, but their fundamental values (versus FF) were suited to our situation. Who do we blame? well who voted in FF?
Ash.J.Williams wrote: » It's all the Governments fault. They should have taken measures to ensure that "if" a crash came....we were ready for it....
ixtlan wrote: » This is true, but really we are the government. They came from us, as a nation, and we elected them, 3 times in a row. In particular we elected them in 2007 to continue the policies they had been pursuing. The opposition generally promoted the same policies for that election campaign. Spend more, reduce taxes, don't do anything to contract the economy. We need to move a bit past this "them and us" view that most people have. We seem to understand (correctly) that the government failed to lead us correctly. We are not learning about/discussing why the public failed in electing that government. Ix.
Drumpot wrote: » They wouldnt of been re-elected and we would of had a government that gave the people what they wanted to hear which is exactly the kind of things being offered by lab and FG.
Sand wrote: » This is something you appear to have difficulty grasping - the property bubble was fueled by the banks ramping up credit in the economy massively.
There is no way the property bubble can be seen seperately from the credit bubble/banking crisis. One fed the other.
Ash.J.Williams wrote: » We the people all knew some sort of big crash was coming....it was obvious... It's all the Governments fault.
It was partially, and significantly, fuelled by this, indeed. My problem is not with that statement.
My problem is with the argument that this was clear all along. In fact it was not, not least because of the banks' lack of transparency and Government culpability in its failure to provide adequate regulation. Some people on here seem to be of the opinion that I am denying the link between the property collapse and the bank collapse. Of course I am not. My point is that the link was not always advertised in the popular media, or at any level.
Surely if such a link was so blatantly obvious, other pundits would at least have alluded to it, or are people seriously attempting to suggest that any reference to an imminent banking meltdown ought to have been taken for granted and didn't even need to be, often, remotely mentioned or hinted at? Spare me the BS. The property crash was widely predicted but it was also widely assumed, often in the same breath, as I have shown, that the banks could cope - that is my point.
In retrospect, absolutely. Did you, personally, see the banking crisis coming? Because while I'm not suggesting that I'm some sort of economic guru, neither am I economically illiterate, and I didn't. Nor did anyone in finance that I know personally, nor any pundit who has been contributing to popular discourse - or at least such people had certainly not been publicly promoting the idea pre-bust.
