Freefall – Part Two
If you want to watch Freefall on the RTÉ Player, here’s part one and two.)
“You shouldn’t be worrying yourself Taoiseach,” is the point where Bertie Aherne pleads ignorance and effectively washes his hands of responsiblity. The rotting core of the Irish financial industry was truly revealed when Lehman Brothers collapsed but one wonders how long would the Irish finiancial institutions stayed afloat if Lehman Brother had survived.
When new kid on the block Bank of Scotland came to Ireland for business, it gave cut-throat mortgages, under-cutting its Irish competitors. To compete, the Irish banking institutions brought their interest rates down and loaned more capital. This is where 40 year mortgages and dangerous 100% finance and 120% mortgages was offered to furnish homes along with purchasing the property. People who could who never usually be afford to purchase property became property moguls through pressure and easy money from banks. It seems to be an inherent part of the Irish psyche to purchase property, rather than renting as “it’s money down the drain”; a throwback time to John B. Keane’s The Field.
The banks propagated this notion of property sustaining the Irish economy and through Ireland’s ties to the European Union, easy money was available. The governement allowed themselves to be dictated to by property moguls by assisting in them in developments. The property industry became a crutch to the economy, responsible for it’s boom but also it’s destruction. “I don’t want to see any intereference in the propery markets, I don’t want to hear anything about them,” according to Brian Cowen as Minister for Finance.
As far back as 2003, the impending Irish property bubble was foreseen, flashing alarm bells across the board. 42% of Irish homes were overvalued. There was such a descrepancy between the average salary and house prices which could be almost 11 times more.
Irish money was borrowed and recklessless on the part of the banks and property developers. The government twisted themselves to cultivate the most profitable aspect of the growing economy, instead of trying to spread the wealth to other sectors and industries.
Banks rolled over loans, which became bank losses. The developers avoided paying a great deal of tax buying having their loans rolled over to buy something else. Ballsbridge became the most expensive land in the world with prices increasing over 150% by developers seeking to buy up the area.
The loans now transferred into NAMA are responsible for the loans of 20 developers. Only 20 people. To think that such a small number combined with bad decisions by bankers and an unregulated system led to Ireland’s eventual decline and near-collapse. People who didn’t know their ass from their elbow with the foresight of basic physics, “What goes up, must come back down.” Whether it’s a gentle decline or jump from the edge, prudence was not exercised.
Excessive greed.
