June 30, 2008

Time for the banks to cut ties with their builder mates

Posted in Banks · 37 comments ·
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The longer the banks go on protecting their developer clients, the bigger their problems are eventually going to be.

The Irish banking system is facing meltdown. The choice for the banks is now simple: they allow one of the big developers to go under or they risk going under themselves.

At the moment, the banks are frantically engaged in a game of bluff with the property market. Many of their builder-developer clients -the former crown princes of the boom – have no cash and cannot service the loans they took out in the past five years. Sites they paid fortunes for – confident that they could flip them on to a ‘‘greater fool’’ after they got planning permission – are now worth a fraction of what they paid.

Many sites are lying idle as no one wants to build, now that residential demand has fallen away. Huge debts are mounting and former high-flyers – the ‘Algarve and blacked-out Jeep brigade’ – haven’t a farthing.

The simplest way of getting the cash back (or at least some of it) would be for the banks to force the developers to sell sites and property. However, the banks know that the psychological damage of such an event would be so traumatic and the panic in the market so destabilising, that they are postponing this day for as long as they can.

Another possible reason for the unwillingness of the banks’ management to put up the land for sale is that they do not want to face the consequences of their own recklessness. They are in denial about the true valuations of their portfolio.

The developers know this and have recently begun referring to the banks as their ‘partners’ in mega-deals. The larger developers are assuming that the ‘too-big-to-fail’ moniker will save them. They are mistaken.

As a result, the Irish financial system is living in daily fear of the domino effect, where one large developer failing might bring them all down.

How long can – or should – the banks carry these bad loans? Are we talking weeks, months or years? Clearly, bank shareholders, who have been dumping bank shares for months now, believe that enough is enough.

Ultimately, the banks are caught in a brace. If they protect their developer mates, in a futile effort to protect themselves, their share prices will continue to fall. So will their bond prices.

More importantly, they could run out of cash because no one will lend to them as long as their balance sheets are hiding such colossal non-performing loans. Two events last week shed light on the banks’ position.

Banks are offering 6 per cent for ‘touch’ deposits. These are deposits you can withdraw at any time. For the banks, this is the worst, least secure deposit it can have. Yet they are prepared to pay close to 2 per cent above the market rate of 4.09 per cent.

The other story is just one of hundreds doing the rounds these days. A busy liquidator friend told me of a call he made last week to a builder who owed a client €600,000.He called the builder and the conversation went like this:

Builder: ‘‘Do you know where I am?”

Liquidator: ‘‘No.”

Builder: ‘‘Dublin Airport on my way to Dubai to build.”

Liquidator: ‘‘What about the €600,000?”

Builder: ‘‘You and your €600,000 can go fuck off . . . now fuck off.”

This type of thing is happening every day; the lads simply don’t have the cash.

The money is gone and they are not hanging around for the bailiffs. Is it any wonder that one of our reputable banks is offering us 6 per cent for our measly deposits? Cash is king and everyone wants it, no matter what price.

If you look a bit deeper, you see that now we have a chicken-and-egg scenario, where the bad debts on the banks’ balance sheets are causing the banks to go into retrenchment mode. So they are lending less. But the less they lend, the more their builder-developer mates get into trouble because, the tighter the banks’ lending regime, the lower the residential/ commercial demand.

If you look at the financial system as one large game, where the banks borrow from one source and lend to another, the dilemma becomes clear. If the banks can’t borrow, they can’t lend.

One way of looking at the 70 per cent fall in the share prices of Bank of Ireland and Anglo Irish or the 60 per cent fall in AIB is to regard these price falls as the markets’ unwillingness to lend to the banks. They are simply too risky at these prices.

The system needs a net injection of cash, but there is no likely source for this, particularly as the banks’ balance sheets are still jammed with useless rubbish, the bad loans of the boom. Unless the banks face the music and accept that they are not going to get paid back on many of these non-performing loans, no one will be prepared to lend to them. If no one lends to them, they make no loans and therefore, no profits. In the worst case scenario, they run out of cash.

This is a critical juncture for the Irish banking system. The top brass have to wake up to the reality that protecting developers is damaging the banks’ credibility. Ultimately, the banks will have to cut the umbilical cord.

Every property boom/bust and recession is characterised by Icarus moments where the great and the good fly too close to the sun, their wings melt and they fall to earth. Just think of Alan Bond in Australia, Donald Trump in the US, Paul Reichman in London or Patrick Gallagher here in the 1980s. Inmost cases, the individuals recovered their fortunes in the next upswing.

This Greek drama is not unusual. What is odd is the number of Irish financial professionals who seem to be in denial about this or, worse still, the number who don’t seem to understand what is happening or why. Many seem genuinely shocked and, if they are shocked, they are in no position to manage the situation. It is now dawning on the young stars of Dublin’s banking community that there is more to finance than Ron Black’s, a Prada suit, extra firm hair gel and an Audi TT.

However, the banks’ choice is simple: it’s either you or them. They have to realise that it’s not going to get any better. The longer they protect their developers, the lower their share prices and the property market will go.

Why would anyone buy now in serious quantities when they realise that there is huge supply overhanging the market that has to be liquidated to pay bad debts? The longer the banks prevaricate, the further off any recovery.

If one bank were to bite the bullet now and put the assets of one of its bankrupt property oligarchs on the market, the cleansing period would begin. Yes, there would be huge falls in the price of sites, but that’s the only way the market will clear – a child could understand this.

Some of our senior bankers fail to grasp this idea, but maybe that’s one of the problems with ten years of cowboy capitalism: with all these nudges and winks, you forget how a real market works.


  1. Oh dear. It’s going to get very very painful.

    Or very painful for the 25-35 age group, with most of the older group (house owners before the boom) having mild discomfort.

    Some anecdotal evidence:
    http://www.firstpartners.net/blog/location/dundalk/2008/06/26/you-know-the-irish-economy-is-hurting-when/

  2. Garry

    So our banks were forced into stopping as they could no longer get the money to fund developers and others further down the chain (or pyramid). Because the market saw it as a bubble on the point of bursting and stopped. Which forced our banks to stop handing out cash. And as the market is herd based, it swung very quickly, Irish banks are now perceived as dodgy investments internationally, which will take a while to recover even after the core problem gets fixed.

    So the bottom line is runaway house building/house price inflation was stopped by the stock market i.e.; by people in London, New York, Frankfurt etc. Not by our elected government or the hundreds of Irish people/organizations whose job it was to manage the economy and create sustainable growth. OK there were other factors like the ECB rates and the global credit crunch, My point if it was left to the people we pay, we would have gobshites in the banks and media telling us 5million was great value for a bedsit, with even more pain down the road.

    Why do we have a financial regulator? Or ministers? Or the ESRI? Or independent boards of directors? Or the corporate regulator/corporate governance?
    Any chance of someone admitting they screwed up?

  3. Look what the cat dragged in

    No Garry. Let the blame game commence whereby everyone will be blamed but no one will accept responsibility.

  4. James

    Honest to God folks, get someone in from anywhere else in the world and show him our shoeboxes. Then tell him how much they cost. Then after a while, when he’s stopped laughing, try to sell him one.

    The whole thing is a feckin joke and everyone knows it.

  5. Aidan

    It shows just how immature the irish financial sector is, these are supposed to be smart people, well it looks like they are not that smart afterall, i think the the financial sector did not attrcat the most competent people but the ones most interested in the money and perks, whats needed nowis a cleanout and the recruitment of competent and proven talent from abroad if necessary. This might be forced on the financial sector anyway if the banks have to be taken over by foreigners in order to get the cash they crave

  6. JN

    SIX PERCENT? Could someone provide me with a link to the bank that is paying 6% for deposits please, I would like to place a sum on deposit with that bank immediately. I can’t get much more than 4.25 for a term deposit – I think I’m with the wrong bank!

  7. walnut

    This country is a mess in every way possible. Easy money has covered up the cracks in the system for too long. We’re heading for a long hard recession because we have elected politicians with little intelligence and foresight. We deserve everything we get! Here’s hoping we vote Yes to Lisbon next time out; for the more power taken out of incompetent politicians hands the better we will be. Bertie Ahern should be on trial for treason along with his builder buddies.

  8. Look what the cat dragged in

    Ah but all the’ll happen Bertie is that the Mahon Tribunal will drag on for years and there’ll be no price to pay for Bertie once the court has ruled. If that was you or I , we’d be done at this stage for obstructing justice and perjury with all the lies being told. Charlie lead the way and Bertie is following!

  9. Fergus

    This is our own fault. We bury our head in the sand when it comes to choosing our political leaders. The banks and the developers should be hung out to dry for getting us into this painful mess, but it is Fianna Fail that carries ultimate responsibility for this. And, of course, We the people.

    Fianna Fail is the most successful and shrewd political party in the western world, which is why Ireland remains one of the West’s most backward and politically immature states. It stands for nothing other than the maintenance of office (not power) on a permanent basis, and it does this by refusing to make any hard decisions, by bribing the electorate at crucial times in the electoral cycle, and by brilliantly shifting the blame onto others, more often than not the EU.

    We could learn from this and throw the bums out, but I suspect FF will have learned from the recent Lisbon treaty rejection that there is a lot of political capital to be gained in blaming immigrants, and I expect this to be a theme in the run up to the next election. The “loss” of monetary policy to Frankfurt (did we ever really have control over monetary policy David?) will also be blamed for the boom/bust, and not of course the recklessness of Bertie, Charlie MacCreevey and their mates at the FF tent in Galway. The sad thing is, a plurality of the electorate will fall for this claptrap yet again, and the FF vote will hold.

  10. Malcolm McClure

    David: In this excellent article you are getting close to the nub of the problem. Maybe soon you’ll use the dreaded word ‘cartel’ and will describe practices that lay at the heart of the cost spiral and in opposition to smaller, efficient competitors.
    The cure for land hoarders is a National Land Bank with compulsory purchase powers and valuations set at say agricultural value plus (say) 50%. Land needed for public purposes would be acquired by this Bank. Also land zoned for development by the Planning Authority. The latter would be released to the developer that tendered the lowest bid to complete each parcel to an agreed specification.

  11. Tom Kirwan

    A little perspective is needed. The Irish financial system/economy are not the only entities in trouble. What about all the smart guys at BearStearns? Did anyone mention that some of their schemes were just a tad risky? And Citi , how did they manage to get it so wrong? There can be no greater indictment of what a mess the largest bank in the world is in than when Goldman Sachs tells their clients to “short” the bank and put it on the “conviction sell list”.

    Yes, the blame can be thrown at the banks, the developers, the government and the honest to goodness ordinary people of Ireland who bought in the mirage of ever bigger houses/kitchens/decks but Ireland over the last few years was just reflecting human nature. Ireland was not unique in believing that house prices could keep going up. Maybe they pushed it a little more than others but unique, no. The history of bubbles is a history in human nature and greed.

    The challenge now will be to provide true leadership. There is a crisis and there are fundamental fault-lines in the economy beyond the demise of construction. More ominous for the country’s future growth is the outsourcing news from Hibernian and Avocent sending jobs back to the US.

    The hysterical blaming smacks of too much navel gazing and insularity. Ireland was clapping itself on its collective back on the way up about how “smart we all are”. Now on the way down there is the over-reaction of how “wrong” everyone was from the politicians to the guy on the corner. We are not that special. The country got a lot of things right, somethings wrong and there was overindulgence but lets put it in perspective to what is happening in Florida, San Diego, Madrid and what happened to Japan the 80′s. Ireland is not the first and won’t be the last bubble.

    There are a huge amount of smarts and potential capital in Ireland to invest in the future. It will take leadership and some perspective of the world. It is a hyper-comptitive world and Ireland will only compete if it is continuously looking out for the threats and the opportunities.

  12. B

    If we are looking at Biffo to suddenly pull a rabbit out of his jocks we are truly fucked.

  13. blow in

    Apologies in advance, my comments are a little out of context and a little negative just could not help myself
    I think its a case of no no no no no and me me me me
    no….. to the Lisbon treaty
    no……to a wage freeze to an over paid public sector ( Maybe the German Ambassador was correct in his 2007 controversial speech, our junior ministers here earn more than German Chancellor )
    no….. to pylons
    no….. to incinerators
    no….. to Corrib gas pipe lines
    how the hell is the country ever going to get ahead?

    me me me….90% of the land in Ireland is private land and the 10% that is left, some is forestry and a little public space to. In the UK Joe public has access to farmers land by using what they call bridle paths. Imagine what a tourism opportunity there would be if more of this beautiful country could be opened up a little. The Irish farmers want the government to pay them to provide access for tourist as heavily subsidized as they are i rest my case.
    me me me…..the guy David was referring to in the article with the 600 000 owing just shows what the actual mentality is out there.
    I will have to keep a close eye on my savings with the bank remembering Northern Rock was not so long ago hopefully i will be first in line to draw my money out the writing may already be on the wall.
    Cheer up at least Monday is over.

  14. B

    Irish land is not actually private land at all. The land was signed over from the Crown to the Irish State. No Irish land is truly private. It is all State land in law if not in practice.

  15. “force the developers to sell sites and property”
    No way man, not even the banks want to take collateral that’s worth nothing. The crown princes of the boom will sit on that (in the hope) till the next scam comes along; why wouldn’t they sure … as you said yourself, ”they are postponing the day for as long as they can.” If you’ve no money as least your credit is good till it’s found out. The ”same old story.” (you can’t believe. I hear Rory Gallagher singing in the background)

    The banks are going to carry on as long as they think the Irish government will do as the USA, (back the banks through the pretense of the Federal Reserve, and the English Government did with Northern Rock, use tax payers money to cover up the greatest pyramid scam in baking history.

    Builder: ‘‘You and your €600,000 can go fuck off . . . now fuck off.”
    He wouldn’t dare say that if the bank was coming to take the real collateral he should have in place to get the money in the first place.

    That’s what I mean when I (commented on recent posts) talk about proper regulation. Money on paper is not worth a farthing. Thousands of little businesses beaver-ing away to expand with glamorous office blocks to lure clients to borrow, and buy is not a sign of boom, and prosperity. What they have in the bank in reserve is what makes a sound business.

  16. Garry

    Hi Tom,

    I don’t agree that there is too much hysterical blaming going on…. at least not yet. I think its fair enough for there to be some anger, particularly as it’ll be the prudent who will subsidize the losses. The Japan example you give should get you thinking how serious it is.

    1) Some people did their job too well, the shysters and property pornograhpers in the media, marketing, banking, legal and construction industries. Cant blame them for that.
    2) Some companies and people knowingly missold stuff to some greedy/stupid/unlucky/naive people who are now going to learn some very painful lessons.
    3) Some screwed up and didn’t do their job properly, the people and organizations whose job it is to macro manage the economy and regulate the other industries.

    Because of all this credit and venture capital for higher risk non property investment wasn’t available in the past 10 years and probably wont be available while losses are being eaten by the banks.

    OK some other countries screwed up also. But WE screwed up and on a bigger scale than almost everyone else! Why?

    I would submit that we need to first look at our (rapidly expanding) “industry” of regulatory and certification authorities and conduct a value for money audit on them. Audit the auditors!

    Some examples
    1) The financial regulator hasn’t done its job, given that it took the stock market to regulate the banks here in the crudest way possible.
    2) The communications regulator isn’t doing its job, where the situation on broadband etc is changing, its due to new technology (mobile) rather than anything they are doing. Eircom have successfully ramped up their line rental charges to stop serious competition on landlines under the nose of the regulator.
    There are literally hundreds more of these organizations, all defining frameworks and standards for Ireland. (Which really should be just rubber stamping EU standards and setting basic general principles). An example there, it took the EU to force the airlines to put proper fares on their websites.

    Clearly, we either need to strengthen these organizations, change them, or scrap them. Their budgets and staff numbers are significant and add a considerable cost to doing business here. We are paying their salaries either as taxpayers or through increased prices.

    My gut feeling is they could be replaced with a few guys rubberstamping EU standards combined with US style treatment of white collar crime at a fraction of the cost.

  17. vic

    The lack of any political alternative to FF is our biggest problem.I reckon unemployment will hit 300,000 within 18 months and emigration will start again.FF are so hopeless and rarely lose power.The tyranny of the status quo helps smooth over the failings mentally retarded business people and their political lackies.

  18. MK

    Hi David,

    The banks may have to “bite the bullet” at some stage but they will do all that they can to keep the payments coming in on the loans they have given out, even if the terms have to be changed with extended term lengths, etc. Its a waiting game for the banks and many of the big developers and will depend on how much they have over-extended themselves and how much cash they have in hand. Many developers were turning huge profits though so its not a case that all will go bust even if the market stagnates. Lets not forget that houses were bought and sold in the ‘all-so-terrible’ 80′s (which are getting a bad press these days) and houses and commercial property are being built and sold as we speak. The market has not come to a complete halt – yet! Now that would be painful. It will take years of a slowdown before we will get back to 80′s level. But for now, the banks will want to trade out of this position.

    > If you look at the financial system as one large game, where the banks borrow from one source and lend to another, the dilemma becomes clear. If the banks can’t borrow, they can’t lend.

    Its true, but the fact that the banks can no longer borrow money to loan out is perhaps a good thing. It was at frenzy levels anyway. They can still make money on the loans they have already arranged, and they are substantial. The banks share prices are being hit very hard, perhaps too hard, and I think they will recover, as it should be a case of when rather than if, but when that ‘when’ will be is anyone’s guess for the moment. 2009? 2010? This will be a stamina thing. The main thing concerning banks is not new lending, but making sure their current loans are serviceable.

    I agree with Tom Kirwan above, that the bubble causes are not unique to us. However, the extent of our bubble may be down to us and the systems we had in place and what we allowed to happen. Bubbles have patterns but these can be accentuated or dampened depending on our local unique factors. Ireland’s prices were not dampened and our bubble looks to be a big one with a corresponding deep ‘burst’.

    As for land prices, we could adopt a model that combines a quasi-Soviet with an Istanbul system. This is where all land is building land, there is no zoning in effect (although buildings have to comply with the area, etc) and that land values are set by the state – ie: price intervention and increased in line with inflation That would reduce the values that some wealthy-types are hoarding and would in an instant remove our “love affair” with land and all the speculation involved with it.

    MK

  19. marie

    I do not think there are going to be many Irish emigrating. I have tried to leave Ireland myself recently. Every job I went for there were Eastern Europeans there going for the same job. I am a highly qualified health sector worker. Its not like the 1980s when there were no Eastern Europeans going for the same jobs. If its this difficult for me, what is it like for someone without skills. That is Britain at the moment. It is also difficult to go to other EU nations as we do not speak European languages. America is in a recessionary state. Would Australia allow a million Irish or so in? Would we get well paid jobs there?

    Currently, 1.1 million non-Irish people have been allocated PPS numbers. There are way more people moving here than moving out. How can the ESRI suggest Irish people leave Ireland when there are hundreds of thousands of non-Irish being allocated PPS numbers. So, I do not think that unless things slide further there are going to be many Irish emigrating.

  20. B

    I think we will have emigration but of college age people so we will then be stuck with homeowners stuck in the glue of an overpriced mortgage making the working population immobile.

    Well done lads. So house prices will never come down? Better get in before its too late?

    It was all BS and once one wheel came off the whole stack of cards came down.

    Lets see after the builders holidays how many jobs have gone.

    The government are promising all sorts but in reality any economic levers they had are mushed into the Euro.

    We are going downhill without any brakes. Lovely. Now what?

  21. Eugene

    Good point on the emigration. People cant, with negative equity, leave so easily. ( although some may off sticks to America). All immigration has been of the rootless, not the housed. And our college graduates are not used to it, and dont have older brothers in the UK/US etc. So while there will be an upturn it will not be significant.

  22. John

    Folks,
    whatever happened to the so called “soft landing” that we were being spun by the banks and estate agents this time last year?

    John

  23. Malcolm McClure

    Perhaps not entirely by coincidence, RTE’s show ‘Ireland’s top Earners’ was repeated last night. Perhaps to remind us that there’s still plenty of money in Ireland if you knock at the right door. I suspect that some of the comments on this blog are too pessimistic about the economy. Certainly, we are going through a bad spell, but there are some indications that recovery in US economy might begin later this year and ripples of optimism will spread to Ireland shortly afterwards. The bottom of the market might still be a few months ahead but if you don’t have to sell, better to sit it out than pay agents fees and a few months rental plus stamp duty when you decide to buy again.

  24. daltonm

    I can understand why the banks can’t loan but really don’t think it’s such a god thing. My own position is that after selling my house last year the buyers got cold feet and tried to pull out, this caused delays and the builder for my new house started putting the pressure on so I backed out and ended up renting, where I am now. The problem is that I reapplied for mortgage and get offered less at a higher rate, putting buying a house at arms length again. I am saving like crazy to get the required bigger deposit but fear that as soon as I have it than the market will rise again out of my reach. I know there has been talk about reductions but where I am trying to buy there is still a state of denial and no reduction and very little flexibility. One of the biggest problems is the refusal of auctioneers to list the actual sale price – if this were done then it would put a different spin on things and banks and sellers would then have to face their demons. David Mc says that you would be mad to buy in 2008 – am not convinced and still have a fear that I ill loose out because the banks are tightening their belts, I also don’t want to profit out of other peoples misery – all I want is a house.

  25. “B said,

    on June 30th, 2008 at 10:58 pm

    Irish land is not actually private land at all. The land was signed over from the Crown to the Irish State. No Irish land is truly private. It is all State land in law if not in practice.”

    Oh Please. . . B, you can believe that if you want, and even the ‘State’ can too; but the Crown never owned the Irish land in the 1st place. They were squatters. We’re both off topic but I am sure most readers here will not be tipping their cap to the forced historical treaties of which you speak. Natural law and justice say the land is ours; always. After that, it gets a bit trickier. We can work out ecotrails and landbanks I am sure; among ourselves. But please, don’t reference the bloody Crown in a discussion among equals. Next, you’ll be asking us to respect the overarching legitimacy of the European rule of law. They got their answer so recently too, my friend. Some things are sovereign and cannot be signed away in treaties. Eire go brath. Take it as you please. Preferably in good taste and with shoulders back. God forbid the days of cap-tipping are coming back because of the word recession? Breathe in white light B and breathe out ‘recession’ and cap-tipping’. WE own the land. Not the state.

  26. Malcolm McClure

    Ruairi O’Brien asserted “WE own the land. Not the state”. This possessiveness about real estate, particularly land, unfortunately lies at the very heart of the Irish psyche and is responsible for much of the recent economic trouble we have gotten into. Of course this statement by O’Brien is a complete fallacy, as was demonstrated by the 1923 Irish Land Act. Under this, successive governments appropriated land and the Land Commission redistributed it to needy people, mostly from the Congested Districts. In all 14% of all agricultural land was redistributed in a bloodless revolution that only ended in 1987. There is no reason why the Government could not again assume these powers and redistribute hoarded development land through a Landbank.

  27. Garry

    daltonm, to me it looks like you’ve managed to do what very few experts could …… sold out at the top of the market …… And then even better………. the banks have done you a favour by not giving you a much bigger mortgage …. so you can buy later closer to the bottom….

  28. mdalton

    True Garry but people are still in a state of denial. There was one house on the market for a while and when it eventually sold, I was spoke to the auctioneer who sold it and when I asked him did it achieve the asking price, he paused, and then stuttered that it did – I told him he was a liar and still wonder how in this day and age he can tell this outright lie and no-one does anything about it, I know it didn’t because I know the owners. They took a 30k hit. Even in the context of a hit I mean that their profit took a hit they bought it some years ago and had a very low mortgage. I feel that auctioneers also have to take blame as well as the banks – I mean if you look at it they send their valuers to properties to put a value on homes and instead of valuing homes properly ( In the German renting system for example there is a point system where size, location etc are subject to various points which dictates the rent), houses in Ireland are valued on inflated prices and on existing mortgages. This is the basic flaw with property here. It is not valued at it’s true worth but rather on what an individual borrowed for it. The other main problem was stamp duty, when buyers were selling their homes on they added the stamp duty to the new price – ching ching for the government, which is why they were happy to go along with it, but bad news for the next buyer and ultimately disastrous news for the economy…

  29. Philip

    Great article David. I am still laughing at “Algarve and blacked-out Jeep brigade” comment.

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  31. I think I have read your best David-but every week gets better.!
    Malcolm McClure said,

    “ON JUNE 30TH, 2008 AT 2:55 PM
    David: In this excellent article you are getting close to the nub of the problem. Maybe soon you’ll use the dreaded word ‘cartel’ and will describe practices that lay at the heart of the cost spiral and in opposition to smaller, efficient competitors.
    The cure for land hoarders is a National Land Bank with compulsory purchase powers and valuations set at say agricultural value plus (say) 50%. Land needed for public purposes would be acquired by this Bank. Also land zoned for development by the Planning Authority. The latter would be released to the developer that tendered the lowest bid to complete each parcel to an agreed specification”
    This was done in Norway 40 years ago. Imagine the tractor brigade riots at the hint of such a move-not to mention the big builders with their huge land banks circumscribing our capital city.
    the army will have to be called out to declare martial law and restore order if Fianna Fail/Fine Gael are ever replaced, and a progressive political entity ever gets into power in the distant future in this country.
    The banks dilemma is interesting though. they haven’t a red cent to lend at any rate it seems, and as their shares plummet nobody will give it to them to lend (a government/taxpayer bailout once more maybe?)
    Their valuation is so low that even if they clean up their books they may be snapped up by some big continental banking fish such as BBVA (Spain) for example.
    A distressing situation for the irish financial institutions it seems,-even when the tide goes out, and their nakedness is covered over with a fig leaf they may still be in trouble.!

  32. Malcolm McClure

    John McDermott said ” The banks dilemma is interesting though. they haven’t a red cent to lend at any rate it seems, and as their shares plummet nobody will give it to them to lend (a government/taxpayer bailout once more maybe?)
    Their valuation is so low that even if they clean up their books they may be snapped up by some big continental banking fish such as BBVA (Spain) for example.”
    Maybe things aren’t quite as bad as that. Over the past 3 months AIB shares have lost 35% of their value, whereas Royal Bank of Scotland has lost 47% of its value and Halifax Bank of Scotland has lost nearly 55% of its value. Seems that continental banks looking for a bargain would go for RBS or HBOS rather than AIB?

  33. Stiofain

    David ,

    would you be of the opinion that depositors should not hold more than €20,000 ( yes i know they are lucky if they have that much ) in an account at a single Irish bank based on the limits of the depositors insurance scheme ?

    as far as I know depositors are insured by the state for 90% of the first €20,000.

    thanks and regards,

    Stiofain

  34. Jack

    Do not blame Fianna Fail for the economic mess we are in. Do not blame the people who voted for or against them. As the great philosopher, Cantona, said: “You do an injustice to the pig if you expect it to walk with the grace of the giraffe.”

  35. M Kershaw

    David;
    With unemployment now running so high,
    lets say e.g. 70,000 out of the new unemployed
    default @300,000 after 12 months.
    This is the equivelant of 25% off the now depleeting ISEQ ie a 21billion loss to lenders.
    whom in gods name would put money into an irish bank at the moment when the shit has only begun to hit the fan.
    u cant get blood from a stone.
    Lots of people are going to cut and run leaving irish lenders holding the baby.
    serves them rite for lending far above peoples earnings.
    This is not taking into account the developers whom are over extended or the fallout for any business relating to construction e.g Wavin,ect.
    I once worked for a very sucessful developer,
    he said when i owed the bank 50k i was scared,
    now i owe them 50 million they ar scared.
    Heads down fingers crossed?.

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