The Big Bailout of the Eurozone (Another crisis coming? - Seriously)

[pintsofguinness]

That's great news Donagh, you're in a relatively secure job. I didn't borrow what I couldn't pay back, I was sensible, I work 9 or 10 hours a day to pay my way, I might be out of a job by Christmas yet I'm expected to pay for the people who were irresponsible and greedy.  I'll be ripped off on heating, electric petrol etc but all is well because if I buy a flat screen TV I'll save a couple of pound and when I lose my job I can look forward to picking up £40.00 a week. 
So while it might make you feel warm inside to be helping out the young and old (which is nice in theory) it really doesn't help my worry, or the people like me. 

I'm not sure why the well off in society should be called upon to pay for the greedy and lazy either.  Pensioners deserve all they can get though, they've paid their taxes all their lives probably.  Unfortunately there will be no one to pay my pension or yours.

I'm not sure where you've picked up that family and children are getting more money?

[Main Street]

I'm sorry if this comes across as harsh or unfeeling, but anyone who did even a modicum of research on the way up should have known that some fall in house prices was possible. Those who could afford it anyway don't need help, and those who couldn't be bothered finding out that basic fact don't deserve it.  

How can you be so sure.
People wanted a place to live. The longer they waited the more expensive houses got. And then the so called soft landing
No harm to set up a scheme to look at the situation of first time buyers.

Governments around Europe are recapatilising motgage lenders by extra State borrowing or using taxpayers money, to litterly absorb the bad debts of the banks.   
The severe losses endured by mortgage lenders like Irish Life Permanent,  Royal bank of Scotland, Bradford & Bingley,  Hypo Real estate Germany were in the derivitives market.
The State has to get some assets for its capatalising, why should those assets be  a share in absorbing the bad debts which have a dubious value.
Why can't the government instead take over directly the mortgages of first time buyers and still recapatalise the banks at the same time.
Doesn't mean the morgage is written off. Actually taking direct control over a segment of the house owner mortgages.  State provision of mortgages is practiced in Scandanavian countries with modest profitibility.

While Banks and investors get all the benefit of socialization around the rest of Europe, at best the first time buyer possibly can apply for a temporary deferment with their payments if they fall behind in certain situations in certain countries.

[Bogball XV]

I'm not sure why the well off in society should be called upon to pay for the greedy and lazy either.  Pensioners deserve all they can get though, they've paid their taxes all their lives probably.  Unfortunately there will be no one to pay my pension or yours.

How do you know the pensioners weren't lazy and greedy too?  Maybe that's why they can't provide for themselves now

[Lone Shark]

I'm sorry if this comes across as harsh or unfeeling, but anyone who did even a modicum of research on the way up should have known that some fall in house prices was possible. Those who could afford it anyway don't need help, and those who couldn't be bothered finding out that basic fact don't deserve it.  

How can you be so sure.
People wanted a place to live. The longer they waited the more expensive houses got. And then the so called soft landing
No harm to set up a scheme to look at the situation of first time buyers.

People wanted a place to live - no, not correct. People need a place to live. However people WANTED somewhere with all the trimmings, and to be able to brag to the others down the pub about how their house had gained €50k since buying it off the plans, they WANTED to use the shagging thing as an ATM to buy a load of stuff that they couldn't afford. They WANTED the warm fuzzy feeling of owning their own gaff, even if they hadn't done the appropriate groundwork to deserve it. (After all, very few of these people in bother are the ones who had saved up 20% of the cost themselves) I wanted somewhere to live, and I had access to no more information than anyone else in this country. I saved like a dog to get together a deposit of around 20% of the price, and then I crunched the numbers (back in 2003 mind, before things even got really crazy) and I realised that this country was bananas. All across the globe, for the past 400 years or so, an average house has cost 3.5 times an average wage. The graph has gone up and down at various times, but there is data for the UK, Holland and Germany going back hundreds of years and it's incredible how prices always revert to that mean. Now I will accept that the two income family is a relatively new phenomenon, but when one factors in childcare and/or career break at key mortgage paying times, that's maybe a case for 4.5 - at most. Loopers in this country thought nothing of paying ten times the average industrial wage for a three bed semi-d in honest to Christ RATOATH!!!!!!   An average house in Ireland will revert to somewhere in the vicinity of €170k and anyone who paid twice and three times that does not deserve to have access to credit because they simply can't handle it.

I don't mean to be so harsh because it's pretty clear that you're on a big mortgage now and no doubt well into negative equity, but the fact stands - I have plenty of scope on my credit card to buy something I can't afford, but I don't do it because I think through the consequences of my actions and anybody who didn't do that basic check with a housing purchase does not deserve to keep the dwelling. Of course nobody should be made homeless, but the most unfair, regressive and in my mind immoral subsidy of them all right now would be to try and keep eejit first time buyers in houses that they can't afford. There are four siblings in the shark's family and not one of us are on big money - one is a student, three have middling to low salaries and all four of us rent. The idea that three of the four of us should pay taxes and the student should have to work weekends and/or holidays to pay his registration fee is one thing - however the idea that that money would be used to subsidise some couple who got greedy and bought a €400k house just because their mammy kept telling them that "rent is dead money" is nothing short of kleptocracy and I'm not lying - I will leave the country rather than pay it.

I've tolerated waste, I've tolerated all sorts of nonsense - and despite all this I have declared every freelance article and every bit of cash income I've ever got to the taxman. Friends and family alike have looked at me all kinds of skew ways when I've gone out of my way to point out to the tax man that I got €40 last week for writing a piece for a local paper, but I couldn't have it any other way. I hate the idea of robbing the state, even if those charged with spending the money don't think anything of it. However I will draw the line at this. Nobody should go homeless, but those who bought what they can't afford should have the honesty and the morality to either work harder and pay their way, or else rent like the rest of us mere mortals.

I'm almost thankful that the exchequer is too broke to go ahead and bail out a single homeowner, never mind thousands of them.

[Main Street]

I don't mean to be so harsh because it's pretty clear that you're on a big mortgage now and no doubt well into negative equity,

My personal circumstances are the opposite actually, mortgage paid off and a natural tendency to save before spending.
When we bought our house, its value was about 4 years of a basic take home teachers salary.

Negative equity is not the problem if people have the income, or the possibility to increase income, or possibilities to reduce expenditure.
The problem for people is paying back the mortgage after losing their job or a proportion of their income.
Thousands will be falling into that hole over the next 12 months.
It is besides the point that I happen to believe that young people starting out in life together shouldn't be the subject of false speculative property and land values which has forced them to undertake larger and larger mortgages.
There are enough problems in life. Housing is a basic right which should be affordable, not a slavery.

I'm almost thankful that the exchequer is too broke to go ahead and bail out a single homeowner, never mind thousands of them.

But bailing out those who never lose, wouldn't cause a moments grief?
Even though the exchequer is broke, the Government will still borrow billions to absorb bad debts of the banks.
Will devalue the whole wealth of the country and increase the national debt (taxpayers burden) with no tangible growth in assets or productive base.
And now flying around are insane  ideas to throw the pensions money into that mix.
In the UK, billions worth of pension funds have already been gambled away.

[stephenite]

Great posts Lone Shark and Main Street - not sure who I agree with, the notion of throwing money at those who took out big mortgages is something I find particularly distasteful, and I agree to a certain extent that those people did nothing to research properly their financial situation before signing.

However the reality is that a lot of people saw what the others were doing and the banks were throwing money at them - now rightly or wrongly the banks have to take a large portion of the blame - they were giving money out left, right and centre to those they knew couldn't afford it if the economy went south, of course this isn't an Irish phenomenon and probably one of the main reasons the world is in the state it's in.

[Lone Shark]

The problem for people is paying back the mortgage after losing their job or a proportion of their income.
Thousands will be falling into that hole over the next 12 months.
It is besides the point that I happen to believe that young people starting out in life together shouldn't be the subject of false speculative property and land values which has forced them to undertake larger and larger mortgages.
There are enough problems in life. Housing is a basic right which should be affordable, not a slavery.

I've lost a huge chunk of my income over the last few months - I too was made redundant and am now picking up what bits I can get. However - and here's the crux of it - I'm still paying my way and putting an extra little bit aside every month because I've got plenty of little part time bits going across several fields. However that only works because I'm working well in excess of 55 or 60 hours per week. Now how fair is it that the extra money I earn, instead of going towards the house I want to buy some day, gets spent on taxes to pay for people who bought houses they couldn't afford?

As for housing being affordable, it is. We all have a basic human right to shelter - but not home ownership. I strongly suspect that you're not distinguishing between those two. Renting is extremely affordable these days - however some people find renting distasteful, and we are apparently supposed to subsidise that. I vehemently disagree. Foreclose on those who cannot afford the properties they bought, change the bankruptcy laws so that they get a fresh start, and ensure that they get rent allowance if necessary. Job done, no moral hazard, no-one going homeless.

As for being forced to buy, well to be honest I'm disappointed that you resorted to that - no-one was forced to buy. I'll agree that some people were pressured into it by bullying and brash friends and relatives, but no more than I was I'm guessing.

But bailing out those who never lose, wouldn't cause a moments grief?
Even though the exchequer is broke, the Government will still borrow billions to absorb bad debts of the banks.
Will devalue the whole wealth of the country and increase the national debt (taxpayers burden) with no tangible growth in assets or productive base.
And now flying around are insane  ideas to throw the pensions money into that mix.
In the UK, billions worth of pension funds have already been gambled away.

With all due respect, you're presuming my opinion on this matter. I personally would have let the banks fall some months ago and been preparing the groundwork to let the post offices do the day to day banking in the short term while banks like Rabo and Santander come in and pick up the retail networks, after guaranteeing the savings of individual investors. However by essentially throwing the full weight of the state behind the banks, we have backed ourselves into a corner. As such something has to be done here. I hate the idea of a bailout, I think it's appalling that public sector pensions may be used and I would love nothing more than to see the likes of Eugene Sheehy and Sean Fitzpatrick up on criminal charges for fraud (we predict a soft landing - yeah right, sure you do!!), however we are now in the situation we are in. Once we guaranteed the banks' debt, we essentially went all in. It was immoral and, I suspect, unconstitutional, but it has been done. What we need to do now is get the best value we can, get an honest look at where the banks books sit, bring the full rigours of the law to bear on those who are indebted to an extent that they will never recover, and let the property crash really happen and get to the bottom so we can start our economy again with the lessons in our mind and a much lower cost base. This drip drip effect kills us - we know where properties are going, so let's get there.

The banks will make it back - the government just needs to be sure that the taxpayer does, and not continue with this nonsense of socialising the losses before privatising just as the profitable days lurk around the corner. Current shareholders should get f*** all since they are equally culpable in this mess, and get a central banker and regulator in place with actual balls this time.

However one last round of protecting those who have at the expense of the prudent who haven't would be a clear indication that the priority of this government and this state is the usual looking after themselves. If that's our priorities, we are FUBAR'erd and there is no point in staying here because we'll be a backwater corrupt cesspit like Romania or Bulgaria in no time.

[behind the wire]

what he said. very honest and well thought out post lone shark. totally agree.

[Lecale2]

How are Iceland getting on? They have been out of the news here for a month or more now. How is the financial crisis affectting the man on the Reykjavík omnibus?

[Main Street]

As for housing being affordable, it is. We all have a basic human right to shelter - but not home ownership. I strongly suspect that you're not distinguishing between those two. Renting is extremely affordable these days - however some people find renting distasteful, and we are apparently supposed to subsidise that. I vehemently disagree. Foreclose on those who cannot afford the properties they bought, change the bankruptcy laws so that they get a fresh start, and ensure that they get rent allowance if necessary. Job done, no moral hazard, no-one going homeless.

Just in case, I didn't indicate anywhere that a mortgage be written off.
At most, I indicated that a slice be taken off, to take away the sting.
The State buys out the mortgage, values the property, adjusts the mortgage and manage the "clients".
As I said, similar schemes have been in operation in other countries and have proved modestly profitable.
A proven modestly profitable State scheme looks an attractive option to me.

Alternatively the State can also move in and scoop up defaulted/risky housing at bottom prices, capatalising the lenders according to realistic values. The State can re-mortgage the property to its  "clients" according to the realistic value.
Let the lenders write off the inflated value. That would certainly shift the balance of power but we all know the reality is that the State is the cart.
As it stands now, the State is getting in position to absorb the write offs to keep the lenders flush.
The State, (as States do since bubbles started bursting) bail them out, still leaving the lender with all the assets.

I heard a report on the news that what businesses need are bank loans to buy stock.
Frankly I am dumbfounded that after 10 years of increased consumer debt fueled spending that so many businesses are in such a weak position.
I would have assumed that the good business years are used to eliminate debt/overdraft, pay cash on delivery for discounts, increase stock and financial/overall stability.

[Maiden1]

What are the government meant to do? let the banks etc fail.  A lot of people seem to think f&*k it they deserve all they get.  They don't think it affects them.  Firstly if a bank fails then this directly puts thousands of people in the bank out of a job.  It stops people being able to borrow any money to buy e.g. a new car except those coming in with 15k in cash.  This puts the car dealership and all the employees out of work and potentially defaulting on there mortgages.  They all need to get the dole so that they can eat and they will also require social housing instead of at the minute paying tax.  The government is trying to stop this from happening, by guaranteeing the money in the bank, it is not giving the banks any money.  If they did not do this then they would be paying a lot more in social housing, dole and getting a lot less in revenue.

Secondly if a newly married decided to buy a house instead of renting (and renting is just paying a landlords mortgage) then you would be pretty heartless not to have any sympathy for them.  Perhaps they where naive like a lot of us but no matter how much they paid for a house they would always struggle without a job.  

Mortgage lending does need to be reformed after this, some steps I think would help would be a minimum 10% deposit on a house as 100% mortgages pose to much risk to a bank (and everyone else) in a recession.  Better rates for people taking out income protection insurance with a new mortgages.  Also at present people generally get a 2 year reduced rate then they need to re mortgage every couple of years, this should be done away with as what is happening now is that the people in negative equity can't re mortgage and end up paying much higher premiums which they then cannot afford.  When you get a mortgage it should be at whatever rate from day 1 that doesn't jump in 2 years.

[whiskeysteve]

Breaking news on the BBC that Woolworths have gone into administration along with MFI.

Thats 26,000 jobs under threat.

Black times ahead.

[Rois]

I'm working on an administration at the minute.  The administrators were appointed on Friday.

A number of employees have been made redundant but none at the site I was responsible for thankfully.  The hardest night I've ever had in my working career was Monday when I thought I was going to have to make people redundant on Tuesday and tell them they weren't getting paid for the first three weeks of November.  

It's worse for the employee when the company goes into administration - they get statutory redundancy, yes, but only to a maximum weekly limit, and potentially not in line with what their contract of employment stipulated.  

[Smokin Joe]

I too was made redundant

Didn't know that.  That's tough squire - hope all works out for you.

[Donagh]

Breaking news on the BBC that Woolworths have gone into administration along with MFI.

Maybe they had their strategies all wrong:

http://www.irishnews.com/appnews/540/5860/2008/11/1/601716_362062143657NoIrishp.html