Stephen Donnelly: We need a strategic review of mortgage crisis
AIB's move to write down a debt by €150k highlights the need for a systematic approach
On Wednesday we got some good news. On the front page of the Irish Independent, Charlie Weston told us about a Dublin family with two kids whose AIB mortgage had been written down by €150k. Sorting out unsustainable household debt may be the single most important ingredient of Ireland's social and economic recovery. Which is why we gave the banks billions of euro of public money specifically for this purpose. That was three years ago. But rather than grasping the nettle in 2011, the banks have been sitting atop these hordes of cash, like punch-drunk dragons.
Finally, in 2014, things are starting to move – three to five years late, but better late than never. It can also reveal the ongoing problems with, and potential solutions to, the mortgage crisis.
The AIB deal has been broadly welcomed. The family can stay in their home, and have a chance of financial recovery, and contribute to Ireland's economic recovery. Had their home been seized by AIB and sold, the bank would still have taken the financial hit, the State might have had to step in to house the family, and the economic productivity of the couple would likely have diminished. So – family saved, potential public spending averted, future tax take increased. Good news so far, so what's to improve?