Bank bashing has gone too far in Ireland
Rage feeds populism but is not a policy and is incapable of providing a solution
Goldman Sachs’s three main Irish “vulture funds” collected more than €465 million from local borrowers in 2017 on distressed property loans the Wall Street giant purchased from Irish banks during the recession. Photograph: Brendan McDermid/Reuters
Populism has three ingredients.
The first is an identified social or economic ill, exaggerated out of all proportion. The second is a vaguely identifiable group to blame. The third involves advocating cliches as solutions.
A tell-tale sign of populism is that language becomes aggressive, sometimes accusing opposing groups of having animal, subhuman or other very unattractive qualities.
US president Donald Trump identifies immigration as the problem, associating it with rape and pillage. He blames Mexicans or Muslims and proposes building walls. His slogan “Drain the swamp” cleverly and intentionally depicts human beings as animals.
The picture being painted is one of banks selling unfortunate borrowers to vulture funds who callously inflict human misery on them
Brexit identifies loss of sovereignty as the problem and links it to every ill in Britain. It blames “the elites” and proposes “taking back control”. The language of betrayal, treachery and vassalage is normal Brexit speak.
In Ireland we have not succumbed to populism in any meaningful way, but this is no reason to be complacent. Constant vigilance is the price of liberty and wherever we see the seeds of populism starting to geminate it behoves us to shine a light on them – for populism grows in the dark.
Whiff of populism
Bank and fund bashing are a national pastime in Ireland (and to some extent deservedly so) but this has now developed a whiff of populism especially as it becomes associated with the challenge of homelessness.
The three ingredients are present.
The identified problem is forced repossessions. But while there have been some repossessions, there is nothing like the tsunami predicted. By international comparison there are very few repossessions here and Irish borrowers are the most protected in the world. This is not going to change.
Banks, so-called vulture funds and those identified as “vulture lovers” are blamed.
There is no analysis here. When we blame banks, who are we talking about? We don’t mean the teller or the director of human resources or the shareholder or the depositor. In this context “banks” and “bankers” are almost meaningless terms.
“Vulture fund” has come to mean any overseas institution that has chosen to invest in Ireland, many of whom are building the homes that we need.
And “vulture lover” is a meaningless, though effective insult.
Solutions advocated involve jailing bankers, writing off debts and running investors out of town.
Recently, both Fianna Fáil and Sinn Féin have had quite remarkable Bills pass through stages in the legislative process. Among other things they will restrict the sale of residential mortgages to “vulture funds”. If any of these many Bills became law, there could be profoundly negative consequences for the system in general.
Rage is the human emotion associated with populism. But rage is not intelligent and only intelligence solves real problems
At a very minimum the ordinary economy would be more severely restricted from accessing credit. Any competition in the market would run a mile and existing banks would be damaged in important ways.
Given that Irish borrowers are already so well protected, the actual intent of these proposed laws seems to have little to do with protecting those in financial distress and everything to do with being seen to have grabbed a pitchfork.
Leading figures in academia, social policy and media have all jumped on this bandwagon with gusto.
Recently a personal insolvency case came before the High Court. The proposal made on the borrower’s behalf required writing down the mortgage by 45 per cent. The fund objected based on its claim that the borrower had more income than was being recognised and the question before the court was whether children’s allowance ought to be considered household income for the purposes of the calculation.
In the end the fund withdrew its objection and the write-down was directed by the High Court but commentary around the case was telling.
One leading academic in the area tweeted: “How do vulture fund lovers defend this? . . . This is only tip of the iceberg of human misery being inflicted on those in arrears.”
People who have no direct experience of mortgage arrears can rightly feel concerned. The picture being painted is one of banks selling unfortunate borrowers to vulture funds who callously inflict human misery on them.
But the truth is different as the case cited highlights.
A live issue for government is around pay caps for bankers which, according to some, see Irish banks lose out in recruitment and retention of senior staff.
The outgoing governor of the Central Bank recently opined that “taking account of the more stringent European remuneration guidelines now in place . . . there may be merit in allowing more enhanced flexibility with respect to remuneration for such staff.”
This recommendation, while reasonable and provided by somebody without skin in the game, will be denounced as an attack by insiders on the ordinary citizen.
Rage is the human emotion associated with populism. But rage is not intelligent and only intelligence solves real problems.
To those angry politicians, academics, journalists and other influencers, it is high time to engage in some honest introspection.
What do you really want?
Ross Maguire SC is founder of New Beginning, which provides debt-management services