Donal Lynch: Striking a blow for 'the debt set'
Patrick Honohan urges a tough line on investment property debt while brother Ed urges leniency on home owners, writes
Published 01/09/2013 | 05:00
IT'S been two years now since Senator Shane Ross described the powerful Honohan brothers as "heroes". This week Patrick, the governor of the Central Bank, spoke with a historian's calm remove of the anger and dismay in this country at the Anglo Tapes. He assured the German broadsheet, Frankfurter Allgemeine Zeitung, that "the hubris of the past has definitely gone" in Ireland's banking sector.
In one way you knew what he meant. Six years and untold billions down the line it's hard to imagine that even privately our bankers are using tones as "buccaneering" (to use his word) as those audible on the Anglo Tapes.
Why did we presume him to be a hero? (Shane Ross wasn't the only one who sang his praises – Philip Lane, an economics professor at Trinity College Dublin, said that Honohan had 'cleans hands' since he hadn't been in charge during the boom).
After all it was Honohan who, as economic adviser to the then-government, had overseen the 'stress tests' of the Irish banks and had assured anyone who cared to listen that he would have "the two big banks fixed by the end of the year".
That alone might have damned him in history's eyes. But when he went on Morning Ireland on November 18, three years ago, to announce that contrary to all previous government statements Ireland would need "tens of billions" to stay afloat he had the righteous air of a whistleblower.
Arguably, what he did was impertinently interrupt a high stakes game of poker. At the time we grimly cheered this move because Lenihan had been attacked for weeks in the media for his seemingly dithery approach to the problems the country was facing. Lenihan was trying to bide our time so that we could reach a more favourable bailout agreement than the one that was being offered.
By blowing his (and our) cover Honohan had arguably deftly cut Lenihan's negotiating position off at the ankles. In either event, the result was the country being condemned to a generation of intolerable austerity.
Patrick's younger brother Ed seemed to have inherited his sibling's capacity for gamely handling politicians.
Neither picked it up from the ground, as they say. Their father, William, had served for two decades as Secretary to the Department of Social Welfare and was one of the founders of the ESRI.
Ed would go on to forge his own role in national politics having once worked as adviser to former Taoiseach Jack Lynch and he too had history with Lenihan having once lobbied him for a key judicial role in Europe.
As the Master of the High Court, Ed has a bird's eye view of Ireland's burgeoning personal debt disaster.
While his brother was playing both for Ireland and the opposing team – the governing council of the European Central Bank, on which he sits – Ed was striking a practical blow for some of those hardest hit by the crash.
Two years ago he criticised banks and other creditors for pursuing borrowers "to the bitter end". He added that meaningless "accountancy exercises" – whereby the banks pursue borrowers simply so that they obtain a judgement and write off the sale for tax purposes – were driving some people to suicide.
The younger Honohan said he decided to speak out because he had dealt with several debt cases where the borrowers had subsequently taken their own lives: "There are people who were considering suicide yesterday who today are feeling quite cheery after someone has spoken about it," he said.
"I have the occasional visit to court of a widow and that's how I learn about these things . . . Obviously for the person who has this debt it was insurmountable."
Honohan also described some banks as "cheerleaders for the Celtic Tiger" and said some were "then reverting to type and come to court assuming the banker always wins. That is not how the law sees it."
The comments drew a furious response from the Banking Federation, which called Honohan's language "inflammatory" but even at a procedural level the younger Honohan has proved himself a friend of borrowers with their backs to the wall.
As the Master of the High Court he is petitioning lenders' first port of call. He regularly requires the lenders to amend any defects in their court submissions and sometimes decides on adjournments of several weeks.
According to one report on his modus operandi, "little or no sympathy is given to lenders with defective court paperwork". Writing in this newspaper last March Ed Honohan again underlined the rights of the borrower: "The law has always been on the side of the borrower in peril of repossession. The so-called equity of redemption always prevented the lender from seizing the property when the borrower could pay off the loan in full, even if the payment is late."
Patrick Honohan too has urged caution in the repossession of homes by lenders; however last year he sounded an ominous note, urging banks to move even more quickly to repossess investment properties whose owners are struggling to repay debt.
Ireland stands on the precipice of yet another demoralising round of repossessions. Credit ratings agency Fitch forecast in August that instances of house repossessions are likely to skyrocket here as lenders increasingly look to solve the mortgage crisis.
Debt-ravaged homeowners will no longer have one year's protection from having their houses repossessed after the Central Bank recently changed its rules. The most recent figures show that close to 100,000 mortgage holders are three months or more behind on their payments and David Hall of the Irish Mortgage Brokers Association referred to the "banking dogs" that are about to be set loose amongst the masses.
"The debt set" (as Ed Honohan calls us) have never been under more pressure. The letters pile up on the mat and every month brings a new dread. We could use a pair of avenging heroes, but it looks like one will have to do.