We Yanks could teach the Irish a few things about bank bailouts and mortgage pathology. Well, actually, it looks like we have.
I can't say I've been following the Irish economic debacle very closely — it's hard work just keeping up with our own — but an article in the Irish Times summarizes it. Apparently, the taxpayers of the Irish Republic are generously going to be picking up the tab, some 70 billion euros, for three big rupt-banks.
The writer, Morgan Kelly, has the traditional Irish gift for words. Some of his juicy observations:
SAD NEWS just in from Our Lady of the Eurozone Hospital: After a sudden worsening in her condition, the Irish Patient, formerly known as the Irish Republic, has been moved into intensive care and put on artificial ventilation.
… The true scandal in Irish banking is not what happened at Anglo and Nationwide (which, as specialised development lenders, would have suffered horrific losses even had they not been run by crooks or morons) but the breakdown of governance at AIB that allowed it to pursue the same suicidal path.
Once again we are having to sit through the same dreary and mendacious charade with AIB that we endured with Anglo: “AIB only needs €3.5 billion, sorry we meant to say €6.5 billion, sorry…” and so on until it is fully nationalised next year, and the true extent of its folly revealed.
Where the first round of the banking crisis centred on a few dozen large developers, the next round will involve hundreds of thousands of families with mortgages. Between negotiated repayment reductions and defaults, at least 100,000 mortgages (one in eight) are already under water, and things have barely started.
If one family defaults on its mortgage, they are pariahs: if 200,000 default they are a powerful political constituency. There is no shame in admitting that you too were mauled by the Celtic Tiger after being conned into taking out an unaffordable mortgage, when everyone around you is admitting the same.
The gathering mortgage crisis puts Ireland on the cusp of a social conflict on the scale of the Land War, but with one crucial difference. Whereas the Land War faced tenant farmers against a relative handful of mostly foreign landlords, the looming Mortgage War will pit recent house buyers against the majority of families who feel they worked hard and made sacrifices to pay off their mortgages, or else decided not to buy during the bubble, and who think those with mortgages should be made to pay them off. Any relief to struggling mortgage-holders will come not out of bank profits – there is no longer any such thing – but from the pockets of other taxpayers.
Can it be but five years since the Irish were swanking it up with real estate windfalls and foreign investment, buying each other rounds of drinks without counting the cost? Has the whole Western world's government and business Establishment forgotten whatever common sense it ever had?
Best of Irish luck to you, friends, and we'll accept the same from you. Heaven help us all.