Diarmaid Ferriter: Vultures will come back to bite Government
There is growing resistance to the notion that the sale of people’s debts was necessary
Fine Gael’s Michael Noonan dismissed criticism over the State’s approach to vulture funds at an Oireachtas Committee on Housing and Homelessness hearing in May 2016.
When giving interviews during his term as chairman of the Fiscal Advisory Council from 2011-16, economist John McHale often suggested the council existed to “institutionalise the memory of the financial crisis”.
This idea that governments need to heed reminders of the mistakes that contributed to the economic crash is entirely sensible, but that they will is a forlorn hope.
I thought of McHale’s description when watching The Great Irish Sell-Off on RTÉ on Monday which revealed the scale of the offloading by Irish banks of properties and loans, including mortgages, to vulture funds, the degree to which their operators were lured by government and could avoid tax on their profits, and the horrendous consequences for homeowners left at the mercy of the vultures.
It seems that at the very height of the crash, the State was already prepared to ignore one of the lessons of the crisis by aggressively encouraging and facilitating the unregulated vulture funds to offload the toxic assets from the banks, whose very lack of regulation created such a mess in the first place.
As journalist Ian Kehoe has summarised, the scale of the offload was monumental: “Funds have bought up close to 90,000 mortgages and tens of billions of euro in distressed property debt and business loans. They have even bought overdrafts, personal guarantees and even credit card debt”, and all at knock-down prices.
A chorus of establishment voices are loud in their insistence that this foreign capital entering Ireland was essential to aid recovery as it offloaded debt and gave a cash injection at a time when it was vital; the same chorus now assures that the tax loopholes have been closed, but that is only because adverse publicity and investigation by journalists forced them to be closed.
The way the vulture funds and the State have colluded is, of course, capitalism at its most ugly and cruellest and underpinning it is a widely held belief that it was a necessary and deserved medicine.
While, as an interviewee on the programme – Ashoka Mody, the former IMF head of mission to Ireland – criticised the tax loopholes, he also asserted: “There is a necessary process of catharsis that has to occur. Clearly Ireland lived beyond its means. For 10 years it was a raging boom. Everyone participated in it; in some ways everyone was complicit in it and now the time has come to pay for the gamble and the bets that were lost.”
This is a grossly inaccurate generalisation that seeks to depict Corporate Ireland, Irish governments and the Irish people as one when it came to greed and lack of regulation.
The late Brian Lenihan, when minister for finance, was also fond of this kind of pronouncement, as when he asserted “we decided as a people collectively to have this property boom. That was a collective decision we took as a people.”
The notion of collective responsibility has been conveniently used to distract from failures of leadership, and the prioritisation of private capital over public purpose.
Irish citizens did not collectively decide to “have” a property boom; a relatively small number were able to skew the market through speculation, reckless lending and a refusal to reduce the inflation of the property market, and many were encouraged to borrow beyond their means or panicked into buying through warnings that if they did not move with speed they would fail to get a foot on a much-vaunted property ladder.
The myth was also peddled during the programme that those operating the vulture funds were “risk-takers” who needed to be rewarded by not having to pay tax on their profits as if they were courageous and driven by a social purpose.
Michael Noonan gave the lie to this, however, in a grossly insensitive way, when, at an Oireachtas Committee on Housing and Homelessness hearing in May 2016, he dismissed criticism “for not intervening with vulture funds.
It was a compliment when they were so dubbed in America because vultures carry out a very good service in the ecology; they clean up dead animals that are littered across the landscape”.
Noonan was essentially defending a weak regulatory apparatus and a slavish following of American practices.
There are signs, however, of Irish resistance to this, as is happening in Spain, where people are taking a stand against the vulture funds and the state that supports them.
Last year, Fine Gael decided the general election was “going to be all about the economy”. This misguided compartmentalisation meant the government parties took a hammering.
But that might only have been the beginning of something more long-term and powerful: a determination that while the State might only pay lip service in relation to “institutionalising the memory of the crisis”, grassroots movements will not, and will build much out of an insistence that it is not “all about the economy”, it is about people and their right to a home.