Tuesday 10 December 2019

One thing is certain - we always get screwed

The Central Bank Governor says we can't interfere with the banks. At least not in any way to help the little guy, says Brendan O'Connor

POWERLESS: Philip Lane says that the Central Bank doesn’t have the power to interfere in the arrangements between banks and their customers on variable-rate mortgages. Collins
POWERLESS: Philip Lane says that the Central Bank doesn’t have the power to interfere in the arrangements between banks and their customers on variable-rate mortgages. Collins
Brendan O'Connor

Brendan O'Connor

If we learnt anything last week, it's that there is one certainty in life. And that is that you and me and everyone we know will always get screwed.

The Governor of the Central Bank was out during the week to tell us that there is nothing he could do to change the very high variable mortgage rates charged by Irish banks, against an international background of cheap, zero and even negative wholesale interest rates. Philip Lane explained that it wouldn't be within the Central Bank's power to interfere in the arrangements between banks and their customers.

It was a sensitive week to bring up the powers of the Central Bank, when the Banking Inquiry found that the bank had adequate powers to intervene in the reckless lending that led to ruination of the country but did not. It was a sensitive week to claim the State had to keep a hands-off relationship with the banks when we were all reminded so forcibly that while we can't interfere to stop mortgage holders being scalped we could intervene to the tune of €64bn when the banks needed it; €64bn of our money, which the current head of the Central Bank says we should be paying back instead of using our money to cut taxes and/or to increase spending on things like health.

It was a sensitive week all round to talk about the sanctity of capitalism and how we mustn't interfere in it, and how the contract between a bank and its customer is a sacred thing. Because we learnt last week that we could have saved €9bn if we had let capitalism take its natural course back in 2010 by burning senior bondholders. The IMF was encouraging us to do so. And the bondholders certainly expected to take some class of a hit, as this was priced into the cost of the bonds. This is how capitalism works. But, under pressure from the ECB, we intervened in the normal workings of capitalism and paid back every red cent to these guys. Bear in mind that many of these bondholders were guys who had bought these bonds on the cheap, as a punt. They couldn't believe their luck when they got back 100c in the euro. Ask anyone you know who works in the markets in London or the States or anywhere. They will tell you we were a laughing stock.

But interference was apparently OK in this case. It's capitalism, red in tooth and claw for the poor average mortgage holder. But it's socialism for the money men.

It's OK too to interfere in the mortgage market by forcing young people who want to buy a house to cobble together 20pc of the price of that house while they are paying overheated rents. It could seem, to the regular schmuck out there, that interference in the dynamic of capitalism is always OK, as long as it's not the little guy benefiting.

Those same people, who work hard to try and save to buy a house and be self-sufficient, have to listen to everyone else banging on about their right to have a home. It seems that the less you have in this country the more right you have to have a home. There is huge impetus right now to provide free social housing to those who can't afford to buy a house, because they have a right to one. But we are simultaneously making it harder and harder for working people to own a house. Their right, it seems, is not such a priority.

Although, it has to be said, the Central Bank is looking at the 80/20 rule and will be coming back to us in November, at which time, they say, they may relax the rules, they may make them more stringent, or they may keep them the same. Which is helpful, isn't it?

And meanwhile Michael Noonan, who assures us he did the right thing by giving into the ECB threats over the bondholders, is contemplating what to do with the €10bn or €12bn "fiscal space" over the next few years. He's talking about rainy day funds. As if this is magic money But it's not. The so-called fiscal space is another word for our money. That €10bn or €12bn is money that's going to be extracted from us in taxes, from the young people who are trying to cobble together 20pc deposits, from the people who are paying over the odds on variable mortgages.

The fiscal space will be extracted from people who work hard and pay their taxes. They are the ones who have had their pensions raided, who now pay water charges, higher public transport charges, levies on their insurance, who pay enormous taxes on fuel, drink, everything. The same people who are increasingly feeling they get nothing back. The same people who were blackmailed into paying ever-increasing health insurance by community rating rules and because everyone is afraid of the public health system.

These young working people are paying for everything. And with these mortgage rules they feel they are paying for the former recklessness of the banks, the developers and the Central Bank. It wasn't reckless mortgage lending that caused Anglo. And mortgage holders, unlike everyone else, were and are required to pay back every penny. Mortgage holders listen to businessmen griping about personal guarantees, and they don't understand it, because every penny a mortgage holder borrows has a personal guarantee attached to it.

And last week again, they were reminded in all kinds of ways, that they don't matter, that shit flows downhill, that they will always take the fall and live with the consequences, while the bondholders and Jean-Claude Trichet and the rest of them march on.

There's a great movie called Margin Call, about a private bank that realises one night early in the '07/'08 crisis that they need to dump all the crappy assets they hold, because it will all soon be worthless. After they've managed to pass everything along, albeit at enormous losses, the boss John Tuld, played by Jeremy Irons, is sitting eating a nice meal with a nice bottle of wine and he explains to his colleague Sam Rogers (Kevin Spacey), who has misgivings about selling all their clients so much rubbish, that he's actually "starting to feel a little bit better about the whole thing".

"It's just money. It's made up. Just pieces of paper with pictures on it so we don't have to kill each other to get something to eat. It's not wrong, and it's certainly no different today than it's ever been: 1637, 1797, 1819, '37, '57, '84, 1901, '07, '29, 1937, 1974, 1987 - Jesus, didn't that fuck me up good - '92, '97, 2000 and whatever we want to call this. It's all just the same thing over and over again. We can't help ourselves, and you and I can't control it or stop it, or even slow it, or ever so slightly alter it.

"We just react and we make a lot of money if we get it right and we get left by the side of the road if we get it wrong, and there always have been and there always will be the same percentage of winners and losers. . . fat cats and starving dogs in this world. Yeah there may be more of us today than there's ever been, but the percentages, they stay exactly the same." And he convinces Sam to stay on another two years because there'll be a lot of money to be made after the crash.

And the John Tulds of the world will always be the fat cats and will live to fight another day, where the little people will always be the starving dogs who are left on the side of the road, picking up the pieces.

Sunday Independent

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