The current tracker mortgage scandal has its roots deep in the Celtic Tiger boom when the banks went hell-for-leather to lend to anyone in order to make more and more profits.
We are talking about huge amounts of money here.
Consider the fact that it took Bank of Ireland 125 years to lend out a total of €60 billion and in only three years, from 2004 to 2007, the bank doubled that figure!
One of the products that all the banks pushed was of course the tracker mortgage, an ultra-low interest mortgage linked to the ECB rate. The banks calculated that, although they might lose money on these products, they could then “hook-in” the people who owned trackers and up-sell them more loans for cars, home improvements, and holidays, all of which would carry higher rates. The higher rates for other loans would off-set the losses on trackers and the banks would be in clover.
In short, this was all part of a plan to create a nation of “debt junkies”, tethered to the banks, in hock, and, ultimately, in the banks’ pockets.
Then came the crash, people defaulted, others ran a mile from new loans, most tried to pay back their old debts, and the great Irish banking “up-sell” floundered overnight.
Then of course, once the entire logic of the “tracker-as-gateway-drug” strategy unravelled, the banks got sneaky and reacted in the way they always do which is to screw the customer for the bankers’ own mistakes and miscalculations. As such, they tried to move as many people as possible off their trackers to mortgages on higher interest rates so that the bank could recoup more money each month.
So, they advertised one thing and sold another!
However, they got rumbled by a few tenacious customers who took them to court for “miss-selling” and now we have a deluge of complaints from thousands of customers who have been shafted.
Now the banks are facing a massive bill and, as usual, the Irish authorities – the central bank and the financial ombudsman – are squirming as evidence of their inactivity mounts. Yet again, people are asking whether anybody is regulating, protecting the customer, and overseeing the system.
However, the angle I would like to take is not regarding the inactivity of the authorities. This is a bit like blaming the cops from the mind of the criminal. Sure, we’d like them to be better at the job and be more “on the beat”, but the problem is deep in the pathology of bankers. The angle I want to take is why the people who run banks are unethical and in many cases amoral, much more amoral than people who run other businesses. This is a serious problem. What is wrong with them?
The first thing we have to accept is that the mortgage scandal is theft. When you overcharge knowingly, you are stealing. This is the crime. It is not incompetence or oversight; it’s robbery.
The best expression I’ve heard about banks is from the Californian bank regulator of the late 1980s who, when investigating yet another banking scandal, observed that “the easiest way to rob a bank is to run one”. This is definitely the case in the tracker scandal.
The second thing we need to appreciate is that banks go bad from the inside out. The rot always starts deep within the bank. Typically, banks start to take large risks, because it is in the chief’s interest as his bonus is based on lending profitably. In a reasonably competitive market, you can do this by either lending lots at low margins or lending small amounts at high margins. The tracker scandal is the latter, which is about recouping as much money as possible at high interest rates.
The issue is therefore ethics.
Now I realize this is an old-fashioned concept. When we think about ethics and morality, we move into the principles territory. Ultimately, however, people do have principles.
Organizations should equally have principles, these being the core values of the business.
Core values are, of course, a choice. You can choose to behave well or not.
The problem is that if bad ethics, such as over-charging and stealing from customers, are rewarded they will become infectious. Soon the moral boss sees the immoral ones becoming enriched and he says to himself, “Why not, if everyone else is doing it and getting rich?”.
Over time, bad ethics drive out good ethics.
This is what happened in Irish banking during the boom and it looks like it is happening again but this time in a sneakier, sleeveen way.
How do you fix it?
It seems that the entire problem is wrapped up in the endemic short-term, quarterly-results driven world with which our global financial system has become obsessed.
This would be a great explanation if it weren’t for the fact that the Irish banks are largely nationalised!
The problem is ethics which is cultural. Is it too much to demand a certain morality in the boardroom? Is it too much to ask for a few good men and women who apply morality to their business life? If not, we are in a disturbing place.
Very uplifting and super heavyweight commentary.
If you could apply this same analysis to the out of control hyperinflation taking place in the equities markets where wealth is acquired by stealth it would put whats going on in Ireland in the hal’penny place.
This is what I think;
Whittaker called out De Valera.
You or Kelly or O’Brien or Conor McCarthy will have to call out the politicans and bankers.
Michael.
Subscribe.
Very succinct summary David. Im curious, is anyone in the usual Labour/SF/FF/FG parties proposing legislation akin to the Consumer Rights Act/Unfair contractual terms legislation in the UK so consumers have statutory contractual redress?
Culturally is there an appetite (reflected in voting patterns) to reward politicians less focused on supporting vested interests to the benefit of the electorate?
Surely there’s a Realisation that the consumer economy is just as structural as that of Business?
I am disappointed with this article . Madoff would return to Ireland with his derivatives and suck us more . The national moral compass is a void with too many excuses to make and still seem respectable to carry on robbing all in the name of ‘providence’ as used by the Central BONK.
There are no operative criminal laws for Banks and their officers in Ireland. So Ethics and Morality have no basis to secure normal living in Ireland. Because are guaranteed to Fcuk the Electorate especially the young.
There is no such thing as morals and ethics in Capitalist business society. Money is God. Rich must get richer and poor must get poorer.
To expect the bankers to conduct their business ethically is childish. That is why we have an elected Government and Regulators to slap them on the wrist (not always effective) or put them behind the bars (best option).
The run a bank comment is actually from Bertold Brecht. I took out a small French mortgage in 2006. Without asking, I automatically got something which is effectively a capped tracker i.e. margin over ECB but cannot go above 4%. I presume the bank buys some kind of derivative to insure the book against this notwithstanding the fact that nobody thought interest rates would stay so low for so long. So interested to know (a) was the concept loss making everywhere ? (b) has there been a tracker scandal in France ? Also interesting that all of these banks are… Read more »
At least we knew where we stood when we had the Punt.
The word ‘Banker’ rhymed with it.
Come now David, Banks practicing unscrupulous usury, whatever next – Regulators actually doing some regulating. The problem lies at the heart of Irish society, a wholly immoral middle class who just can’t keep their fingers out of the cookie jar. Degenerate scumbags dominate all of the professions, the civil service and every level of so called government.
The only way to enforce morals or ethics in the case of robbery is to enforce a punishment. I hear the argument that in criminal cases there is a high bar for proof, but the government is the major shareholder in the larger banks and so can enforce corporate punishments. They could sack the heads of the banks under whose watch these fraudulent activities took place, recoup the bonuses paid to these people while they were practicing this fraud, cancel their pensions and take away there homes and allow them to rent them back if they have any money to… Read more »
“What the hell is wrong with bankers?” The answer to this question is very straight forward. The reason the CB can’t put manners on the banks is because the whole European banking system is more bankrupt than it was in 2007 when Lehmans failed. Consequently the CB must look the other way when the customers are getting shafted because the trackers are such loss making products. The customers must be shafted to save the knock on effect that would happen to the european banks if these loss making products were to be maintained or the customers compensated. Not very hard… Read more »
A more appropriate heading would be :” What the hell is wrong with the State” Isn’t possible that the state turned a blind eye to this gouging in order to allow the Banks to become stable again. After all, the state owned most of them, so surprise, surprise the three wise monkey approach was called upon to help see this through – screw some vulnerable citizens for the greater good. Now that the Banks are back in profit it’s time to pull back and point the finger at the bankers. Come on, this is very small country, the politicians must… Read more »
When I lived in the UK (late 1980s-early 2000s) bankers were considered dodgy characters, not to be trusted, similar to used car salemen. Then I returned to Ireland, to find that banking was considered a respectable, pillar-of-the-community profession. I thought how nice it was that Irish banking had stayed conservative and decent. I was proved very,very wrong a few short years later. Now I realise that banking is inherently a dodgy business for dodgy chancers, because it is inherently a con job: They pretend to be stable and risk-averse, but borrowing sort and lending long is inherently a very risky… Read more »
Central Bank have to sign off the “Fitness & Probity” of Banks’ Senior Management and Directors and “The core function of the Fitness and Probity Regime is to ensure that persons in senior positions within RFSPs (regulated financial service providers) are competent and capable, honest, ethical and of integrity and also financially sound”. If, as it appears, Bank Senior Management and their Directors have failed this annual F&P then the Central Bank are left with no option but to withdraw their right to operate in Bank Senior Management or Director roles – this law must be enforced and seen to… Read more »
Actually Dan O’Brien wrote a much better article in yesterdays Indo and highlighted the lack of competition and the blatant government support and protectionism going on here. He goes as far as to call it an ‘anti-competitive oligopoly’. While I personally believe the tracker scandal is a problem the real theft is going on by the main banks charging its customers over twice the EU Average. The current EU average for a mortgage is 1.9% and it’s 3.2% here that has actually come down in the last year from 3.9%. The average SME is charged 5.1% when their EU counterparts… Read more »
Hi David, This topic relates right back to the crisis of 2007/2008, as in Banks misbehaving and the system ‘failing’. But banks misbehaving was not new then leading up to 2008, and for sure it is not new now. The article title is wrong – it should read: “what the hell is wrong with our banking system?”. And that includes the regulation and controls, as well as the bankers, the banks, and the culture that is allowed to breed and manifest within. Culture is important in many businesses. It is that ‘je ne sais quois’ that can mean the difference… Read more »
[ Is it too much to demand a certain morality in the boardroom? ] With a former BoI supremo being caught looking on porn on the BoI network…and… then there was the 8 Billion loan from PErmo to Anglo to make the Anglo accounts look good…and…. then there was Fingers, a man of charity and all of that spending much of the time in Leinser House….and… then there was AIB….and all the scandals of AIB….and former AIB supremo Suds having a track record of leaving a wreck behind him……. and finally Seanie Fitz, and the boys in Anglo. Morality ?… Read more »
As a resident of a country that includes DD, I’m less convinced DD works in and of itself. However folks voting in their own interests in a PR-STV State should permit change, which has not yet fully transpired. There’s likely another agenda at play here given recent developments in what is a 10 years old story, perhaps European oversight/market failure avoidance. I must look up the statute of limitations in Ireland for simple theft given the quote above. RTE reports suggest the CB only has 26 staff looking at this for all financial institutions involved. That’s approx 500-1000 payments to… Read more »
What the hell is wrong with bankers? A very good question with all the wrong answers. In the essay and the responses there is One reference to central bankers as if the banking system operates without such a backstop and controlling influence. The central banking system was set up with a singular goal. That is to benefit the those who designed it and encouraged, fostered, cajoled and threatened for the establishment of the central banking system. The benefit is to lend to the rulers, government elites and to hand the repayment schedule to the TAXPAYER OF THE RESPECTIVE COUNTRY. Thus… Read more »
Nothing will change when there is no political will to change the status quo. The political will won’t change either whilst we the people have no power in the time between elections…..this is where a system of direct democracy could help. A more modern constitutional article similar to article 48 of our 1922 constitution could allow the people to force the government to change it’s views, this article allowed for ctiizen initiated referenda it was omitted from the 1937 constitution.,,,,,we can debate about this idea or that idea to put controls on the banks for years, but it takes politicans… Read more »
” Then came the crash, people defaulted, others ran a mile from new loans, most tried to pay back their old debts, and the great Irish banking “up-sell” floundered overnight.” The failed Irish banKERS crash was a crash of high debt ratio mortgages. The people with trackers had high debt ratio mortgages. Taking trackers of cUstomers was the failed Irish bankers version of restructuring a mortgage completely bias in the favour of the stronger party to the mortgage contracts. HOW MANY TRACKERS WERE TAKEN OF CUSTOMERS IN MORTGAGE ARREARS OR CUSTOMERS TRYING TO RESTRUCTURE THEIR HIGH DEBT RATIO TIGER MORTGAGES?… Read more »
What the hell was wrong with our APPEALS COURT. Irelands banks supernormal level of profitability and excessively high interest rates are no mystery. From the MILLAR case – The relevant general terms and conditions provided at clause 3 that: “Rates of interest are altered in response to market conditions and may change at any time without prior notice and with immediate effect.” In December 2013, the FSO determined on the evidence before him that the Millars’ complaint was not substantiated. In making this determination, the FSO found that clause 3 is clear in its wording and permits the bank to… Read more »
Perhaps the Banks assigned the assets on their books in 2008 to the ECB in exchange for liquidity. Perhaps the banks split the legal and economic interest of our loans. Perhaps the legal assets they gave to the ECB took the form of the Legal Mortgage Charge relating to our loans. Perhaps the banks sold the economic interest ie. the facility we signed, onto the stock market, in the form of securitisation. Perhaps the vulture funds were only assigned/traded the economic interest ie securitised instruments, ie. they should be nothing more than rent collector or collectors of interest payments due… Read more »
‘One of the products that all the banks pushed was of course the tracker mortgage, an ultra-low interest mortgage linked to the ECB rate. The banks calculated that, although they might lose money on these products, they could then “hook-in” the people who owned trackers and up-sell them more loans for cars, home improvements, and holidays, all of which would carry higher rates. ‘ I am not sure how a bank loses money on any mortgage or loan. Generally most deposits and other money is held as a “reserve” by a bank and not loaned to anyone. The amounts loaned… Read more »
In banking bad behaviour is rewarded not punished. How to fix?
Prosecutions.
“Now the banks are facing a massive bill and, as usual, the Irish authorities – the central bank and the financial ombudsman – are squirming as evidence of their inactivity mounts. Yet again, people are asking whether anybody is regulating, protecting the customer, and overseeing the system.” Yes of course, the regulators are doing their job, they are looking after the bankers. The system is nicely overseen and in the next crash looks after the banks to ensure their survival. We are all familiar with banks being bailed out by the taxpayer. That can still happen but is not as… Read more »
“”Sure, we’d like them to be better at the job and be more “on the beat”, but the problem is deep in the pathology of bankers. The angle I want to take is why the people who run banks are unethical and in many cases amoral, much more amoral than people who run other businesses. This is a serious problem. What is wrong with them?”” Well how about a little deeper down the rabbit hole. You never ever mention the Central Bankers. The way the central banks are set up is to run a legal Ponzi Scheme. It is a… Read more »
“the easiest way to rob a bank is to run one”. Not quite as you will be hunted down and fired. ownership is the quote. https://www.barrypopik.com/index.php/new_york_city/entry/the_best_way_to_rob_a_bank_is_to_own_one “Entry from February 04, 2009 “The best way to rob a bank is to own one” On June 13, 1987, William Crawford, the California savings and loan commissioner, testified before Congress on the growing Savings & Loan crisis of the 1980s: “We build thick walls, we have cameras, we have time clocks on the vaults; we have dual control—all these controls were to protect against somebody stealing the cash. Well, you can steal far… Read more »
A touch Iconoclasm against Iconoclasm ? . ………………………………………… . . http://aanirfan.blogspot.com/2017/10/rothschilds.html . . Excerpt ; . ~~ Anonymous comments: The BIS is the coordination centre of global private and public central banking. It is owned by central banks around the world, which in turn are in certain important instances privately owned. This ownership is obscured with extreme care. (Private shareholders like George Soros were bought out under the management of Andrew Crockett. At a considerable premium, I might add.) For example, ownership of the Bank of England is hidden under the provisions of the Companies Act 1976, Section 27(9). http://the-tap.blogspot.com/2010/02/who-owns-bank-of-england.html… Read more »
.
Total Iconoclasm against Iconoclasm ;
.
.
http://webskeptic.wikidot.com/federal-reserve-ownership
.
.
Hmm…m !
The latest report by the Society of Chartered Surveyors in Ireland says that the Construction costs make up 43% of the total price of an apartment in Dublin (which is between €470K to €578K), while VAT, levies and fees make up 41% (site cost are 16% of the total but in some places as little as €33K). This reminds me when President Ronald Reagan said that the government won’t solve any problems because the government is the problem. Mr Paul Mitchell of the Society said a couple would need a combined income of €87K to €129K in order to afford… Read more »
BANK as far as I’m concerned is a four letter word. My brother died in the summer and I’m one of his executors. Our solicitor wrote to one bank looking for statements and certificates of interests for a couple of years prior to my brother’s death. Received a letter back saying that they would only give information out since the date of his death. In order to access info before that we would need a letter from deot social welfore, revenue or a court order ffs. We’ve had trouble with other bank – tardiness mainly. One insurance company lied and… Read more »
It is getting insane, when there is pressure to do something stupid, and all that you have stopping you is regulation.
http://www.zerohedge.com/news/2017-10-23/uk-banks-too-scared-regulator-open-accounts-crypto-companies
Is this a rare bout of sense, from the banking sector ?
I know that there are crypto-currency junkies on this site, but cryptocurrency is a ponzi racket. Pure and simple. It is nothing else.
It is an even bigger joke than AIB shares – which are ongoing lottery tickets, like the Prize bonds.
What is wrong with bankers ? They have too much easy access to power, that is what is wrong. And they are using it to enrich themselves. The problem is the political power of bankers. If the corner shop gets into financial trouble, the manager is releived of his duties, and it is sold to a new firm. No questions asked. That did not happen with AIB, BoI, etc. the PAYE taxpayer was roped in by Lenny, Eamon Bailout Ryan and chums. In fact the bank directors got their pensions provided to them, by the people that they had previously… Read more »
So what is next?
Sean Quinn might likely be successful suing the The State for €3bn and the electorate must pay up.
Why? Has Anglo Bank and their elected officers have reason to cause this ?
Where are the bankers held to account ?
Bankers are WANKERS, plain and simple. I would shoot every last one of them if I was guaranteed to get away with it, and sleep like a baby that good night. I would volunteer to be the national executioner if the job came up and bankers were on the menu. Going back to cryptos for a minute, not that I bother boring people with it all the time (someone else brought it up in this thread), but if you want to see how a true SCUMBAG BANKER behaves then look no further than the odious Jamie Dimon: “JPMorgan involved in… Read more »
I see that from 1 January 2019, the largest UK banks must separate core retail banking from investment banking. This is known as ring-fencing. Ring-fencing was the central recommendation of the Independent Commission on Banking chaired by Sir John Vickers and was introduced through the Financial Services (Banking Reform) Act 2013. Details of the regime are set in further legislation passed in 2014, 2015 and 2016, and through rules set by the Prudential Regulation Authority and Financial Conduct Authority. I suppose now that the Irish banks have been given another horse for their stables, maybe measures like these could help… Read more »
.
Will DMW at last venture to talk about Cyber-Currencies now that one of the main symbolic subjects — The Wolf of Wall Street — of many of his articles has said this over the weekend ? ;
.
.
EXTRACT ;
According to the FT, he said that ;
ICOs were going to “blow up in many people’s faces.”
.
“It’s far worse than anything I was ever doing,” he added.
.
…………………………………..
.
ICO = Initial Coin Offering
.
e.g.
.
Bitcoin
.
.
.
http://www.independent.co.uk/news/business/news/jordan-belfort-icos-scam-wolf-wall-street-initial-coin-offering-a8014881.html
There’s a new witch hunt on in full flow now coldblow. I’m sure you’re loving it.
It seems like you can’t even ask a bird out on a date now – if she says NO then that’s sexual harassment.
The game’s gone mad!
Mary O Rourke is on TV3 at the moment. She has declared how Failed banking directors told lies to her brother Brian.
It was on TV3 that Cormac Butler explained to Vincent Browne on the TONIGHT show how Irelands failed bankers told lies to Brian Lenihan.
Cormac explained how Bankers concealed their lossed plus failure to operate TRUE AND FAIR OVERRIDE.
Perhaps only in lawless Ireland does the law look the other way.
Directors were promoted for their EXPERTISE and controlled the next wave of agressive profit growth .
The Statue of Limitations for ALL Irish Banking complaints must now go back to 2003 when the Bankers abuses started.
Failed Bankers redress costs should be the the return of ALL money, lost property, health care costs plus one years salary.
When TWICE BITTEN we should finally learn that failed banKERS should jog on. They are SERIAL FAILURES.
We now need a low normal profit sustainable banking system for the next generation.
http://investmentresearchdynamics.com/category/housing-market/
Denver housing market looking dicy. Just as I had a chat with a Bay Area Realtor who says there the sale prices are 110% of the list price with multiple offers. I guess being a Mile High City is not high enough while in the Bay Area the house prices are pumped by High Tech.
“”Beijing is ready to step up the game. Soon China will launch a crude oil futures contract priced in yuan. This means that Russia – as well as Iran, the other key node of Eurasia integration – may bypass US sanctions by trading energy in their own currencies, or in yuan. Inbuilt in the move is a true Chinese win-win; the yuan – according to some – will be fully convertible into gold on both the Shanghai and Hong Kong exchanges. The new triad of oil, yuan and gold is actually a win-win-win. No problem at all if energy providers… Read more »
http://www.cnn.com/2017/10/24/politics/fusion-gps-clinton-campaign/index.html
http://www.cnn.com/2017/10/24/politics/obama-era-uranium-deal/index.html
http://www.foxnews.com/politics/2017/10/25/justice-department-provides-fbi-uranium-one-informant-to-congress.html
There is a 180 degree twist on the Russia Trump dossier as it pivots to Clinton criminal actions.
This is “the hell wrong with” … : . . BEFORE THE FORMATION OF IRISH STATE . AFTER THE FORMATION OF IRISH STATE . NOW ! . . Bankers [ Males ] . Senior Civil Servants . Professional Class . Government Cabinet . MEPs . Dail TDs . Senators . Local Councilors . Corporate Management . Media Journalists / Opinionators . Clergy of : Catholic Church Protestant Religions Judaism . inter alia . ……………………………………………… . . IRELAND IS RIDDLED WITH IT ; North East of Ireland Rest of Ireland . NOTE ; FEMINISTS WILL NOT CHALLENGE FREEMASONRY . AIN’T THAT… Read more »
http://insider.foxnews.com/2017/10/25/tucker-carlson-las-vegas-massacre-questions-jesus-campos-security-guard-and-police-hung
More unanswered questions re the guard in Vegas
Change of pace commentary for those interested…Had to paste the whole thing as I could not get a link. There are a few important rules you have to follow if you want to join the consortium of mainstream economic con-men/analysts. Take special note if you plan on becoming one of these very “special” people: Never discuss the reality that government fiscal statistics are not the true picture of the health of the economy. Just present the stats at face value to the public and quickly move on. Almost always focus on false positives. Give the masses a delusional sense of… Read more »
Failed banKERS were up early this morning listening to John Mc Guinness on morning Ireland. They were ringing in trying to dictate the data.
The DATA is the data. You cannot whitewash yesterdays data.
The banKERS abuse is a consumer issue.
The consumer rights of Irish citizens need to be refered to the European Court Of Justice.
The contract rights of Irish citizens need to be refered to the European Court Of Justice.
Irish courts have failed the consumer.
This is based on data.
By the way, if you want a definition of economic absurdity, despite all the currencies backed by (absolutely) nothing (as against the promise to thieve off their own citizenry), it really is hard to surpass the latest ‘projections’ of the world’s most extravagant (and clueless) petromonarchy. http://www.telegraph.co.uk/business/2017/10/25/saudi-arabias-post-oil-revolution-hodge-podge-absurdities/ Even those who are not on the Torygraph, will get the message. Central planning is about to be given another try. Again. Even though it failed in so many countries, it seems that in Arabia, they are guided by a wisdom that never existed in Soviet Communism, Mitterand interventionism, or even the LBJ’s… Read more »
Oh vey, U understand the Principal that must be paid back. But, u get all confused, & rat-f..ked, with the Interest that must be paid back … ultimately to The Dreadful Few. But, what if there was a Lender that does not charge Interest ? . Well, the good news is that there is such, . . ………………………………………. . EXCERPT ; . What does “free” mean? Interest-free. If you receive a loan from JFLA, you pay back exactly the amount you received. There are no fees or extra charges. . …………………………………………………… . Please see link below. . . https://www.jfla.org/ .… Read more »