Archive for June 30th, 2012

Quote of the Week

“Producing a solution is incredibly hard, however, because the euro area faces a serious of interlocking problems.” Karl Whelan, Economist and UCD professor – and tireless and unthanked good egg who been prodigious with giving his time, trying to help the country overcome the financial crisis. Karl is now writing for Forbes.com and this is from his first contribution. Some of you might think that Karl means “series” rather than “serious” but that ignores the possibility of the American trend for converting adjectives to nouns eg “yesterday I had a sad” instead of “yesterday I was sad” and what better noun to describe the EuroZone crisis as in “it has a serious”!

“It was a bit of a let-down when he didn’t turn up. We were expecting a very heated discussion, seeing as he is such a public protagonist of Nama” unidentified Fianna Fail TD. NAMA held a meeting at Leinster House with Fianna Fail TDs and senators during the week. Missing from the meeting was the Fianna Fail senator from Kerry, Mark Daly who was otherwise engaged in a cross-party field trip to the US. Senator Daly has been accusing NAMA of all sorts of shenanigans for over a year now, yet refuses to provide details when challenged even under the privilege afforded to him in the Seanad. To date, the best he has come up with is a sale of a property on Baker Street in London involving NAMA developer, McAleer and Rushe, yet the senator accepts that this was a Bank of Ireland transaction, and nothing to do with NAMA. You’d hardly describe the Senator as a NAMA protagonist. Antagonist, maybe.

“I would be relatively cautious, in the sense that we really need to have a time-series of data. So if it levels out, or starts to slowly go up over 6 to 9 months then I think we can start to suggest that we might be or we’re at the bottom and we are bumping along the bottom and hopefully things will begin to rise again very slowly. But on the way down we’ve had periods where its kind of slowed down and its almost looked as if its levelling off then its fallen again, and then it slowed down and fallen again. So it might be a tiny little blip, or it might be the start of something else” Professor Rob Kitchin from NUI Maynooth whose IrelandAfterNAMA blog has kept us informed about housing, vacant housing and more general economic and social developments in the aftermath of the banking and property sector collapses in 2008. Professor Kitchin was speaking on RTE Radio’s Drivetime on Monday. The Independent’s Charlie Weston leapt on the contribution and extracted the “We are at the bottom and we are bumping along the bottom and hopefully things will begin to rise again very slowly” to support the Independent claim “Rob Kitchin, said there was tentative evidence the property market was bottoming out” For God’s sake, will someone place a property advertisement in the Independent to stop this rubbish.

Graph of the Week

The IMF has been keeping track of the cost of the global financial crisis that kicked off in 2007, and at the start of June 2012 published an update to its “databank”. Its analysis shows that the Irish banking crisis has been nearly the worst ever, anywhere in the world. Here is one of its graphs which shows apart from Iceland, Ireland is top of the world league on one measure. Apart from Iceland which has seen its currency devalued, debt written off and is now back in the bond markets, has unemployment at half Ireland’s level and indeed, is repaying the IMF sooner than scheduled.

Table of the Week

From the same IMF report, we get this table showing world banking crises from 1970 onwards and in terms of what the IMF calls “Output Loss”, Ireland is number three after Burundi andKuwait. What this country is shouldering to bail out the banks is truly horrific for a modern developed economy.

Image of the Week

Dimissed by some as “a cheap little power game”, the handshake between Irish republican Martin McGuiness and Queen Elizabeth II was indeed “historic” and as all handshakes are, “symbolic” – the original intention of the handshake being to demonstrate that you are not carrying a weapon. And the photograph showing a queen smiling from the eyes, dressed in green, engaging in the simplest of gestures with the embodiment of Irish republicanism with unionist partner in government, Peter Robinson looking on approvingly, and just off-camera, Irish president Michael Higgins – it was indeed “historic”. How was it to meet the Queen, someone asked Martin afterwards.  “Very nice” came the reply.

This coming week will see the Orange Order visiting Seanad Eireann where there will be speeches from the loyal orders and from senators including Sinn Fein. Which seems like a small departure from the Order’s “no speaking with republicans” position. Historic.

Last (last) chance of the Week


On Wednesday, we had the damning judgment in Dublin’s High Court where three of the Quinn family were held to be in contempt of orders given by the Court last summer. At stake is €500m of property, some or all of which the Quinns were held to have attempted to place beyond the reach of Anglo, or IBRC as it is now known. Yesterday, the Quinns were to hear their fate for their contempt, and imprisonment was a strong possibility. Instead the Quinns have been given three weeks to undo their fairly blockheaded attempts to bilk Anglo. Given the progress in the case so far, you might be sceptical of any success for Anglo from all this, but you never know. Presumably one of the transactions the Quinns will need undo is get the USD 500,000 back from their Ukrainian employee Larissa Puga (pictured above, left from the BBC Northern Ireland Spotlight programme). In this week’s judgment, the Judge held that Larissa’s contract had been improperly modified so as to provide for the USD 500,000 termination payment, and there appears to be an implication that the payment was made so that Larissa would accept a claim by a hitherto-unknown Belize company on a Kiev shopping centre. What chance does Anglo have of getting that USD 500,000 back? It remains to be seen of course, but the view on here is, to re-use that mildly vulgar expression we have down our neck of the woods again, “they have their shite”

Word of the Week


Last weekend, there was a tragic incident in Dublin city centre in which journalist Eugene Moloney was killed. Two people have since been arrested, one was released without charge and the other has been charged with manslaughter. Both RTE and the Independent covered the story describing the incident as “murder”, the Irish Times referred to “killing” and “death”. Murder has all sorts of legal and criminal meanings. Manslaughter is legally quite different. But national broadcaster and Ireland’s best selling daily newspaper (currently) know better, it seems. Next week’s phrase of the week is at this stage looking like “EU debt deal”, about which there is threadbare detail and in terms of Ireland, other than a mention in the EU summit statement which generally looks encouraging, there is nothing tangible to suggest that anyone other than the people of Ireland are expected to bear the burden for losses already incurred by our banks.

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It has been a very long time coming but yesterday, the Minister for Justice, Equality and Defence Alan Shatter introduced a new bankruptcy Bill for individuals in Ireland. In a country where one in seven mortgage accounts is either in arrears for more than 90 days or has been restructured with less than the contracted monthly mortgage payment being made, there is obviously a debt problem. In fact when former US president Bill Clinton addressed a business forum in Ireland last October 2011, he said that the biggest challenge facing this State was the mortgage crisis. Under the existing draconian bankruptcy rules which involve a bankruptcy period of five to 12 years, there are about 30 bankrupts per annum in a country of 4.6m, by comparison the UK has over 60,000 per annum in a country of 62m, a rate that is more than 500 times that of Ireland. The new Bill is aimed at modernising our bankruptcy laws and providing an efficient and humane system which balances the needs of debtors and creditors.

The verdict? Certainly the scheme for those with unsecured debts is comparable to the rules in the UK and should provide for a quick and easy means for those who can’t pay to have a quick resolution. However, all eyes have been on those with secured debts, particularly mortgages, and the provisions here are quite restricted.

There are two aspects of the bankruptcy legislation as it relates to secured debt which differ from other jurisdictions with which I am familiar, and which have the potential to undermine the promised potential of this legislation

Firstly, the person seeking bankruptcy must be able to demonstrate that they will not be able to pay their debts over a five-year period.  According to the Bill “it is his or her opinion there is no likelihood of the debtor becoming solvent within the period of 5 years commencing on the date of the making of the declaration” So if you are a mortgage-borrower with six months of arrears today and a property which has declined 50% from peak, on what basis can you demonstrate that you will not be able to become solvent in five years. Obviously, it will depend on the future direction of house prices and there is no guidance given in the legislation as to how future asset prices might be determined.

Secondly, the person seeking bankruptcy must be able to demonstrate that they have co-operated with their mortgage lender for a period of at least six months and that they have not agreed to any alternative arrangement. The Bill says “the debtor has made a statutory declaration declaring that he or she has co-operated for a period of at least 6 months with his or her creditors who are secured creditors as respects the debtor’s principal private residence in accordance with any process relating to mortgage arrears operated by the secured creditors concerned which has been approved or required by the Central Bank of Ireland and which process relates to the secured debt concerned and that notwithstanding such co-operation the debtor has not been able to agree an alternative repayment arrangement with the secured creditor concerned, or that the secured creditor has confirmed to the  debtor in writing its unwillingness to enter into an alternative repayment arrangement”

In other words, notwithstanding the fact that you are hopelessly insolvent with massive negative equity, your bank can seemingly stop your bankruptcy bid by providing you with temporary relief on your monthly mortgage commitments.

Interestingly if you are already a bankrupt like Sean Quinn or Anglo’s Sean Fitzpatrick, then you can’t seek bankruptcy under this legislation.  And if you have debts in excess of €3m, again there is no change to your prospects as you will not be covered by this new Bill. The two exemptions are curious.

The Bill will now be subjected to debates in the Dail and Seanad, and the expectation is that it will be operational by the end of this year. It would seem from an initial review however that amendments will be needed if Ireland is serious about adopting a modern personal bankruptcy regime.

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