“Developers need to be fairly judged now”?

There was a fairly lengthy piece in the Saturday Weekend Review of the Irish Times about the philanthropic developer and businessman Niall Mellon.  I have a lot of time and admiration for Mellon’s energy, entrepreneurship and housing development works in South Africa.  However, his views about the causes of the crash and the role of developers in Ireland’s woes seems way off-beam and, at times, contradictory.  On the one hand, developers apparently played little or no role in the collapse and have been the victims of a witchhunt and, on the other, they have a duty of shared responsibility to pay back debts.  Here’s a selection of what he had to say:

“What happened” was the collapse of the Irish banks in 2008. One day he was a developer worth more than €150 million; the next he had nothing. “The night the banks collapsed I went to bed a hero and woke up a villain. That’s what the Irish State did.”

Two years after what he passionately describes as a “witch-hunt” against developers, he surrendered his Mount Merrion home on five acres to Nama. “And – what people couldn’t understand – I also handed over another dozen properties I owned, unencumbered, with no bank debt whatsoever, any of which would have paid my mortgage for several years.” …

“Irish people need to remember there was no property crash in Ireland; there was a bank collapse that caused a property crash. Two different things. Fianna Fáil were desperate to blame anyone except themselves and heaped pain on developers. It was an absolutely disgraceful effort by the then government, and it hasn’t been much better under this one. But this year Frank Daly, the current chairman of Nama, came out and said it was the banks, not the developers. So developers need to be fairly judged now. Everyone is forgetting developers only built to satisfy demand.”

The last paragraph is the one that many people will have problems with.  The conventional reading would be that the banks collapsed because they had over-extended themselves by lending finance to developers in a bubble and oversupplied market (unlike elsewhere where banks were caught in the maelstrom caused by the complex deriatives of the US subprime market).  Given that developers sought this finance, to intimate that they are an entirely innocent part of the banking collapse or that the fault lies simply with banking practice and government policy appears disingenuous.

It was developers who drove property development and borrowed the money for ambitious and risky property schemes; it was developers that contributed donations to political parties and strongly lobbied government about laissez-faire planning and finance; it was developers who drove up land prices and helped egg-on property prices; it was developers that flooded the market with excess housing and commercial property; it was developers who build estates compromised with poor building materials and weak safety standards. Developers did not only build to satisfy demand – they created huge oversupply with respect to residential and commeercial property which still exists and will do for quite some time in many parts of the country. And commercial property has been as much the problem as houses and apartments.  The legacy of unfinished estates, zombie hotels, ghostly retail parks and office developments, pyrite-infected homes, and a reading of Breakfast with Anglo or Anglo Republic or Ireland’s House Party or Namawinelake attests to all of this.

Admittedly, not all developers were the same and they ran their businesses in different ways and with varying ethos.  Nevertheless, as a collective group developers do share responsibility in the collapse in the country’s fortunes along with banks and government.  The idea that developers are simply innocent victims of the crash is delusional and smacks of an attempt to re-write the narrative of history so that they are more favourably judged.  It simply doesn’t wash.

Mellon himself does seem to accept this notion of shamed blame and responsibility.  He continues:

“I wanted to accept my share of the responsibility. Part of that was moving out of a big house. Part of it was keeping unencumbered assets and giving them to Nama.

“There has to be a shared responsibility and a shared approach to solving this. So if you borrowed money you sell your assets to pay back as much of that loan as you can, and when you’ve done that you should be set free, in recognition of the fact that there was a systemic collapse of the financial governance system with the Irish banks.”

He could have opted for “the easy choice” of bankruptcy in the UK but decided against it. Pride was one factor; another was a sense that he could do a better job disposing of assets than a receiver. He has also managed to pay “95 per cent of debts due to a few hundred small creditors. So that’s nearly finished,” he says.

And fair dues to him.  Unlike other developers who have run for the hills or have sought to shift assets or fight Nama, Mellon has seemingly got on with addressing his various obligations.  Having read the piece, I’m inclined to try and judge him fairly, but at the same time I’m not prepared to accept many of his assertions with respect to the innocence of developers in creating the conditions for the crash or to rewrite history.

Rob Kitchin

Advertisement

 

Online television programmes and videos about the Crisis in Ireland

We thought it might be useful to share a timeline of online television programmes and videos about the crisis in Ireland which we’ve assembled for a third year undergraduate module we co-teach, Geographies of the Crisis.  We have tried to use official channels where possible, otherwise the links are to uploaded YouTube videos that have been created by others.  Most of the videos relate to the crisis in general and banking, property and migration issues in particular, as well social movements and protest.  They all concern Ireland rather than the wider European and global financial crisis.  Over time we’ll keep adding to the resource.

Documenting and Explaining the Crisis

Prime Time debate.  What an earth is happening to house prices?  David McWilliams versus Austin Hughes, 16 October 2003, Part 1 , Part 2

Futureshock – Property Crash RTE programme on future of housing market, 16th April 2007

Prime Time on property bubble: soft landing or crash?  Morgan Kelly, UCD, and Jim Power, Friends First, debate the state of the property market in April 2007

Bertie Ahern tells naysayers to commit suicide, July 3, 2007

Primetime Investigates – “The Pressure Zone“, Planning and land zoning, November 26th 2007

Prime Time on Bank Guarantee, Discussion by Brendan Keenan, Morgan Kelly, Kevin McConnell, 30 Sept 2008

Prime Time, Pat Neary, The Financial Regulator, 18th October 2008

Al Jazeera, Immigrants hit by Irish downturn, 26th November 2008

Primetime Special, RTE.  Banking crisis, 12th February 2009

RTE, How We Blew the Boom, documentary, March 2009 (YouTube version)

ABC Australia, Ireland feels full impact of global financial crisis, 4th March 2009

Prime Time Investigates, RTE. After the Goldrush.  The impact of the recession on ordinary families. 25th May 2009

Prime Time, NAMA 30th April 2009, 13th Aug 2009, 17th Sept 2009 and 3rd November 2009

Joseph Stiglitz on Nama, Nobel Prize winning economist Joe Stiglitz gives damning indictment of NAMA on RTE’s Prime Time, October 7^th, 2009.

Prime Time Special, Emigration, 12th November 2009

RTE Primetime Investigates on the banking system: Meet the Bankers, 21st December 2009 (on YouTube, Part 1, Part 2, Part 3, Part 4, Part 5, Part 6)

Primetime, RTE on debt and mortgage arrears, 2nd February 2010 (on YouTube, Part 1 , Part 2)

France 24 report, Leaving home: young Irish find the grass is greener 24th March 2010

Al Jazeera, Irish economy in sharp contraction, 26 Mar 09

RTE, Aftershock, week-long series of programmes seeking to capture the transformation over the previous 18 months, to take stock, and to try to identify ways to recover.

RTE, Ghostland documentary (part of Aftershock), 9th May 2010 (on YouTube, Part 1, Part 2, Part 3, Part 4, Part 5)

BBC News, ghost estate reports, May 2010 (report 1, report 2)

Prime Time, RTE, The property trap.  15th July 2010

Prime Time, RTE, A haunted landscape, 29th July 2010,

Reuters, ghost estates report, 30th July 2010

Prime Time, RTE, Second anniversary retrospective on bank guarantee scheme, 28th September 2010

Prime Time, RTE, Fiscal Flatline.  19th October 2010

TV3 News, Ghost Estates – Riverside Portarlington, Nov 2010

AFP, Ghost estates haunt Irish landscape, 26th November 2010

CNN report, Ireland haunted by ghost estates, 30th Sept 2010

Prime Time, RTE, Troika arrive The European Central Bank, the European Commission and the International Monetary Fund have arrived in Dublin, 18 November 2010

Journeyman Pictures, Let Them Eat Cheese, November 2010

BBC News, World Have Your Say, Ireland economic special, 19th November 2010 (Part 1, Part 2, Part 3)

Prime Time, RTE, EU/IMF and Anglo Look at the fine print in the EU/IMF deal and how Anglo Irish Bank brought a country to the brink, 30th November 2010

France 24, Irish crisis: the spectre of emigration, 30th November 2010

ABC Australia, Journeyman Pictures, Irish Despair, 6th December 2010

Fintan O Toole, Fintan O’Toole on Ireland – SpunOut.ie Interviews 13^th December, 2010,

Euronews, Ireland’s ghost estates, 10th December 2010

Prime Time Investigates.  Carry on Regardless, 21 Dec 2010.  How developers lives have been affected or not by the crash. (YouTube, Part 1, Part 2)

BBC Panorama, How to blow a fortune (Ireland’s real estate bust), 21st February 2011

ABC Australia, Journeyman Pictures, Goodbye My Ireland, 28th February 2011

Geophiles report, Ghost towns, 30th March 2011

Prime Time, RTE, Home Truths on negative equity, 5th April 2011

Prime Time, RTE, Bank Rupture, Nyberg Report, 19th April 2011

Prime Time, RTE, Regeneration, May 3^rd 2011

Prime Time, RTE, Quinn versus Anglo, 14th June 2011

Prime Time, RTE, Namaland.  6th September 2011 (on YouTube)

PressTV, On the Edge, Irish economic crisis, 23rd September 2011

Immanuel Wallerstein, Capitalism Collapse? ‘Cash grab system cannot survive storm’, 9^th October 2011

US Debt Crisis – Perfectly Explained, 

Prime Time, RTE, What lies beneath.  Priory Hall, 18th October 2011

AFP, Ireland considers new law to reposess ghost estates, 24th October 2011

Joseph Stiglitz, Lessons from Iceland’s Economic Crisis, 26^th October, 2011

RTWEthepeople, Decisions that Shaped the Irish Economy with Conor McCabe, 30th October 2011

INET Economics, Stephen Kinsella – Irish Crisis Demands New Economic Thinking, 29th November 2011

Prime Time Special, One year on the bailout, 28th November 2011

Joseph Stiglitz on Ireland, Stiglitz on Ireland, 6^th December 2011

Prime Time, RTE, Troika Time, January 19th 2012

Al Jazeera, Collapse of the Celtic Tiger,  January 19th 2012

Punk Economics, David McWilliams series, January-July 2012 (Lesson 1: Crisis in Ireland and Europe; Lesson 2: ECB’s massive cash for trash scheme; Lesson 3: Playing games with liquidity; Lesson 4: Irish Referendum Preview; Lesson 5: China Panics, US ‘Recovers’ and Germany Flinches

Prime Time, RTE, New Departures on emigration, March 15th 2012

Prime Time, RTE, The Mahon Report – The Tribunal, March 2012 (on YouTube in general, re. Bertie Ahern)

Robert Skidelsky, The Impact of the Global Economic Crisis on the Future of International Relations, April 2012

IIEA, Karl Whelan on Ireland’s Bank Debt and What Can be Done About It? – 29 June 2012

Tom Healy, Nevin Economic Research Institute, Claiming Our Future Launch Plan B, 25^th June 2012

Longford Leader, First NAMA property demolished, 24th July 2012

Social movement/protest

BBC report on protests, February 21st 2009:

The March – Documenting the march against the IMF bailout, 2^nd December, 2010,

PRI: Ireland’s woes through the lens of art, 7th Dec 2010

Pretty Vacant, PrettyvacanT, Permission to Land, Unused and Unloved, Shoot the Tiger, April 2011-July 2012

Darragh Byrne Videography, Occupy Dame Street, 22nd October 2011;

Spectacle of Defiance and Hope in Dublin, 3rd December 2011,

Naomi Klein, Fake “Debt Crisis/Bankruptcy”: We are NOT Bankrupt! Tax the Rich! 7^th October 2011,

RTWEthepeople, Audit NAMA, 23rd Nov 2011

Irishtimes.com, €1.4bn house is a work of art, 24th January 2012

Irish Times.com ‘Occupy Dame Street’ protesters removed, 8th March 2012

Romantic Ireland, Romantic Ireland from the Streets, 17th March 2012

Dole TV, Unlock NAMA, 4th April 2012

Mandate: Vote No to the Austerity Treaty, 21 May 2012

Irishtimes.com, Claiming our Future, Plan B, 26th June 2012

TASC: Fr Peter McVerry: New economic model must involve a more just sharing of power as well as wealth, June 2012

Rap Nuacht na hEireann, Episode 1, 24th July 2012

Radio Documentaries

BBC Radio 4, Olivia O´Leary on economic crisis and post-crash identity, June 12, 2009 (Part 1, Part 2, Part 3)

BBC Radio 4, Dan O’Brien, Bailout Boys go to Dublin, 24th April 2011

Newstalk, Deserted village.  Documentary by Jane Ruffino.  24th March 2012

If you have any suggestions for other programmes/clips to include please put in a link in the comments box.

Rob Kitchin and Rory Hearne

 

An Irish Social Silence?

Gillian Tett, in her book on the global financial crisis entitled “Fool’s Gold”, points to the concept of a social silence (a concept outlined by French anthropologist/sociologist Pierre Bourdieu in his work Outline of a Theory in Practice) as a possible factor in facilitating and perpetuating the global credit boom that eventually burst with the collapse of Lehman Brothers in September 2008. Bourdieu’s social silence, as Tett explains, allows an elite group to control society not just by controlling the physical means of production but also by influencing the cultural discourse. Crucially, influencing the way society talks about itself also influences what is left unsaid – i.e. that which is regarded as impolite, taboo, boring, or taken for granted. Such silences can arise through overt strategies, but often come about less deliberately through social conformity or shared ideology and assumptions. According to  Bourdieu, all that is required for the ideology to establish itself in this way is a complicit silence. Tett speculates that such a social silence may have been pivotal in the general acceptance of the idea that financial markets could regulate themselves. What is more, the opacity that surrounded seemingly sophisticated financial instruments, deterred non-specialists from gaining a fuller understanding of the workings of the financial markets and created a self-contained silo of financial activity and knowledge that only financial experts could penetrate.

To what extent could this idea of a social silence explain the perpetuation of the Irish property bubble and reckless banking  practices of the late 1990s and early 2000s? After all, there does seem to be a general feeling of “we all saw it coming” yet only a handful of commentators warned of the dangers (and they were roundly dismissed as “talking down the economy”). Of course the social silence analogies don’t stop there: it could also be argued that, in the subsequent bust, the quality of debate over the Irish bank guarantee of October 2008, the implementation of NAMA, the capital injections into our ailing banks, whether or not to wind up Anglo Irish, and the risk of an Irish sovereign default has been anaemic at best, with only pockets of academics and media commentators really grappling with the details of these policies (in part, as illustrated by the difficulty in assessing the cost of winding up Anglo Irish bank,  due to a lack of full information).

So, are we trapped in an Irish social silence? And if so, how do we turn up the volume?

Declan Curran

 

NAMA and the Public Sector. What’s the connection?

Am I alone in feeling puzzled as to why revelations about the scale of our banking crisis seem to be followed so swiftly by outpourings of rancour towards the public service?  (The chart shows how interest in the public sector, measured by number of web searches from Ireland, surged after the first anouncement of the bank guarantee scheme in September 2008, and again after the publication of the NAMA legislation in September 2009.  The current surge, following the fallout from Minister Lenihan’s speech and the conclusion of talks on the proposed public sector agreement on March 30^th is too recent to appear clearly on the chart). After all, there is no direct connection between the financial burden that the failings of bankers have imposed on the state on one hand, and the perceived failings of public servants on the other.  There is, of course, a fiscal connection: the property bubble that fed reckless behaviour in the banking system also promoted (through its accompanying stamp duty receipts) the political fantasy that it was possible to increase spending on public services and reduce taxes at the same time.  But it is unclear why this mismanagement of the economy should have resulted in such extraordinary levels of hostility to the public sector as a whole.

The argument in favour of urgently addressing the ‘structural deficit’ created by the collapse of the property market through dramatic cuts to public expenditure – even as the state makes almost unimaginably high financial commitments to the banking sector – appears to centre on the reaction of the notorious ‘bond markets’ which, we are told, will punish us if we don’t mutilate our society in this way.  I am unqualified to comment on the merits of this argument – although Michael Taft has an amusing commentary on it over on progressive-economy.  But even assuming that the argument is correct, and that we have no choice but to reduce our public services and lower the standard of living and working conditions of our public servants, why should the process be accompanied by such bile?

There are two kinds of explanations discernible in public discourse.  One is that there has been a spontaneous upsurge of mass anger at the extravagant terms and conditions prevailing in an inefficient and ‘bloated’ public sector.  But there are reasons to be more than a little suspicious about this.  The hostility has come in surges marked by subtle but interesting changes in the terms of the debate – from a focus on the supposed ‘pay premium’ to one on the security of tenure enjoyed by (some) public servants and on our ‘gold-plated’ pensions.  The argument about pay differentials appears to have lost some energy in the face of unarguably severe reductions in pay, and also, I suspect in the context of the reversals of pay cuts to senior civil servants, and of pay increases at NAMA and Anglo-Irish Bank.  Furthermore, research showing that pay differentials between public and private employees were greatest at the lower end of the income scale must have increased the risk that people might begin to think unacceptably bad terms and conditions in segments of the private sector formed at least part of the problem.   The current hyperbole surrounding job security and pensions will likely diminish in the face of similar ‘real world’ insights.  It will dawn on us that not all employees in the public sector enjoy permanent positions.  We will remember that security of tenure is indeed one of the reasons why, historically, so many Irish families encouraged their children (daughters in particular) to enter the public service – but that these are our relatives, friends and neighbours.  And anyone who takes a deep breath and thinks calmly for a moment will realize that the absence of pensions in the private sector is the real pension problem faced by the country.

So what other explanation is there for the waves of public sector bashing?  Members of the union leadership have suggested that anti-public sector hysteria has been cynically orchestrated.  They have argued – as Jack O’Connor did on Monday’s ‘The Frontline’ – that the underlying motivation has been to reduce pay across the board, in the private as well as the public sector.  A venerable strand of labour market theory in sociology suggests that employer groups are better able to foment divisions amongst employees when the workforce is ‘split’ across ascriptive social categories like race and ethnicity.  So what, if anything, makes the public/private divide in Ireland so amenable to this kind of manipulation?  The recent growth in public sector occupations has largely taken the form of an increase in professional female occupations.  The numbers of people employed in public administration, education and health grew by about 180 thousand between 1998 and 2007, but fully 130 thousand of those people were women working in education and health. (The data are derived from Table 1.2 in a report by the ESRI to the Equality Authority. Women comprise the great majority of public sector employees (about 70 percent in 2007 if we treat those three sectors as a rough approximation; 64 per cent in 2006 according to an analysis of the National Employment Survey).  Correspondingly, the public sector accounts for a substantial proportion of all female jobs (about a third in 2007).  In this context, a comment reported from one of the recent teachers’ conferences  – “We are not overpaid babysitters” – is telling.  I believe that when the history of the present moment is written, the anger directed at the public sector will be understood as part of a wider pattern of social contention surrounding the transformation of social care and education from a vocation – associated mainly with religious organizations and with women whose primary role was perceived to be that of unpaid worker in the home – to a set of modern professional services.

There is more to it, of course.  The cynical amongst us will think it rather convenient that the public should be so distracted when vast public resources are being transferred to zombie banks and ghost developments.  And it must be acknowledged that some commentators are sincere in their belief that the private sector is always and everywhere superior to the public sector, even though their unwavering faith in this dogma seems extraordinary in the face of the global financial crisis.  But it is no coincidence that, over the coming weeks, so much will depend on the votes of teachers and nurses.

Jane Gray

 

“New Anglo”: Forthcoming Attractions in the Irish Banking Sector

If, like me, you are curious about what exactly €40 billion buys you these days, then perhaps you were keen to see what revelations would be contained in the Anglo Irish Bank Annual Report released today. If so, I strongly recommend you read the Group Chief Executive’s Review (pp. 4-6), where we get a glimpse of Anglo Irish Bank’s future plans. You just couldn’t make this stuff up! At first, I actually thought that maybe Mario Rosenstock had written it. But alas, it would be funny if it wasn’t such a never-ending fiasco. Here are just a few of the pearls of wisdom provided by the Group Chief Executive, Mike Aynsley:

First things first: “The ‘new bank’ will in time be profitable, well funded and maintain strong capital and liquidity ratios.” Thanks, lads.

“Our aim is to create a medium-sized commercial bank with a well contained risk appetite and stable funding base, operating in Ireland, the UK and the US.” Steady on, lads! Wasn’t it that “risk appetite” that got us into this mess in the first place?

Thankfully, however, help is on the way: “The restructured organisation will have a role to play in the national recovery, acting as a domestic and international fundraising platform for the Irish economy and providing commercial banking services to assist Ireland’s recovery and growth”

“Finally, I would like to thank the Minister for Finance”….. so would a lot of subordinated bondholders, I suspect!

Declan Curran

 

Investment magnet for Islamic finance?

Buried in the new finance bill is a measure designed to help kick-start the IFSC back into life as a finance investment magnet – the amending of tax laws to enable of Shari`ah-compliant financial transactions (as noted in the Irish Times and Islam Online).  According to Islam Online, ‘Islam forbids Muslims from usury, receiving or paying interest on loans. Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.  Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.  The new provisions will treat returns on Shari`ah-compliant products as interest for taxations purposes. The measure covers a range of credit transactions and allows for the creation of investment securities similar to sukuks (Islamic bonds).’  

 

Being “hard-nosed” with property developers is only half the battle

The chief executive of the National Asset Management Agency, Brendan McDonagh, has stated that the organisation would be adopting a ‘hard nosed” approach in dealing with major borrowers. Apparently, work has already been completed on the top ten borrowers in the country who had the most complex loans with multiple institutions and, in Mr. McDonagh’s words, NAMA has held ‘open and frank’ discussions with members of the construction industry. But what do we know of NAMA’s approach to dealing with the banks  availing of the scheme?

 

NAMA staff exempt from public-sector pay cut

If we didn’t already have our suspicions about the state creating divisions between different sectors of the labour force, the Department of Finance has announced that NAMA staff will be exempt from the public-sector pay-cut due to come into effect today.  The rationale for this exemption, as reported in the Irish Examiner, is that the National Treasury Management Agency (through which NAMA has been established) has always set its own pay rates “ in order to compete with the private sector for high-calibre employees”.  The Department of Finance is quoted as saying;

“The NTMA has been excluded from the scope of the act because it has, since its inception, acted independently with regard to the setting of rates of pay for staff with a view to ensuring its ability to employ and retain the staff necessary to perform its tasks”

What this rather circular argument does is to reinforce the perception that those working in banking and finance are worth more to the country than groups such as nurses or Gardaí.  It is also a bit of a slap in the face to those who have taken pay cuts so that NAMA can be set up, when the agency’s staff will not be obliged to take a comparable hit.  All of this does not bode well for the prospect of major political and social change in Ireland in 2010.  The NTMA did suggest, however, that it would facilitate any staff that wished to take a voluntary pay-cut.  Perhaps the NAMA office will be swept by a wave of social consciousness and good will, brought on by New Year resolutions, and we will see a swift uptake on this option.  Here’s to 2010. Happy New Year!

Cian O’ Callaghan

 

The cold snap is here to stay for SMEs and home owners

Two recent data releases show just how cold the climate has become for both SMEs and home owners.  On the SME side, a report commissioned by the Department of Finance has found that banks are refusing more loans to small and medium businesses than they are reporting. The five banks surveyed – AIB, Bank of Ireland, Anglo Irish Bank, National Irish Bank and Ulster Bank – report refusal rates of 14% but the report undertaken by accountancy firm, Mazars, suggests the real figure is 18%. The report points to inadequate recording of refusals by frontline bank staff as a reason why refusal rates have been underreported. This also raises the question of what constitutes a “refusal” – for example, if a bank offers a borrower a lesser sum than originally requested, or less favourable lending facilities, is this a refusal? The credit situation facing SMEs may be more precarious than headline figures suggest, particularly as SMEs’ revenues continue to take a pounding.

 

Irish Times article on NAMA and bank lending

The Irish Times today (Dec 17th) features an excellent opinion piece (here) by Karl Whelan dispelling the myth of NAMA’s abilility to “get credit flowing”.  A number of recent developments in the “NAMA-story” outlined in the article give a glimpse of how the key actors have been weighing up the odds. In particular, the comments emanating from AIB and BOI indicate that their  interest in NAMA is along the lines of gaining perceived credibility in the eyes of the international financial markets rather than increasing domestic lending, while it seems the ECB wants to see the Irish government take an ECB-endorsed course of  action but without the ECB itself  being called upon to bankroll it. None of this augers very well for the general public, of course. What’s more, as Karl Whelan notes, it seems that the problem of undercapitalised banks (which NAMA was created to tackle) still hasn’t been addressed.

Declan Curran