Friday, 25 June 2010

IMF supports bail-out for mortgage holders?

Where have all the free marketeers gone, long time passing?

The IMF (International Monetary Fund) has declared that Irish banks – bolstered by the Nama bailout – “could” now offer support for “vulnerable” mortgage holders in arrears.   An Independent editorial on the issue even uses the phrase “suicidal nightmare” in relation to the phenomenon of negative equity.

This might sound a tiny bit flippant, right, but why not bail out those who lost last week's wages to Paddy Power too? Where does it all end?

During the boom you had half-wits sleeping all night outside booking offices so they could  put down a deposit on a “unit” which the developer had not even started building. Then there were idiot parents buying apartments for little Oisin and Roisin (aged 2 and 4) who “wouldn’t be able to afford their own places in Ireland when they got older.”

So, if gawms like these are bailed out, how are they ever going to learn?  And why should those who have acted responsibly have to subsidise them?  But that seems to be the culture in Ireland (see Nama), which has suddenly become remarkably more Berlin than Boston in the past few years.

The thing is, the IMF call is a bit of a nonsense really, and might only serve to give false hope to those who are in arrears due to greed – rather than genuine bad luck or unemployment.   There is currently a moratorium on house repossessions and, even if there was not, banks would have to sell repossessed properties at a minuscule fraction of their original mortgage valuations, anyway.  Then there's the backlog of Nama developments they are already trying to drip-feed onto the market to keep property prices artificially high. 

What the IMF called for is happening as we speak. Mortages are being extended and deferred, and arrangements are being made for those  in genuine financial difficulty - and that is right and proper. But the same should not apply to those who were pushing up prices through investment, speculation and flipping.  They were "The Market's" greatest supporters, before their sudden conversion to socialism (Irish style).

Let’s make sure we keep the distinction between the needy and the greedy.

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Anonymous said...

I see and understand exactly what you are saying GM but could I just mention three points?

(1) Even if the relevant aspects of the IMF report are wrong - and I'm not saying they are - and inappropriate why does it take an outside institution to concentrate peoples minds here? This was given prominance on news reports yesterday? Is there no resource in this country for original or thinking outside the box? Emmmm, I think thats a no.

(2) Can I come at all this issue from a different perspective? The banks as you say, are trying to tackle - to some extent - the gargantuan problem of mortgage default, thats grand and nice and all that but if they started to normalise market conditions by allowing credit to flow again, then they would help not only themselves, but the nation as a whole.

(3) You quite rightly mention the 15 year madness which took place in this country - eg buying houses for 2 year olds etc.. - when you factor into that, from all the liquidity and cash produced, the basics are still not in place to take full advantage of an up swing in market conditions. A few new motorway sections, most if not all tolled, don't count as a fully independent and integrated road and rail system. I always can't help feeling bemused when I see all those 2010 cars just sitting in traffic. I suppose thats the real tragedy.


The Gombeen Man said...

Very good points as usual, Dakota.

Just on the lending bit - Once their mortgage lending (which decides the the "value" of houses) has some relationship to reality. But that's a very bitter pill for them to swallow, as the more they accept that prices are still too high (IMO) the more they will lose on their mad loans.