Thursday 22 August 2019

Gene Kerrigan: 'You have great leadership,' said the vulture'

The housing crisis is treated as though it came out of nowhere. There is a context, it didn't just happen, writes Gene Kerrigan

Cartoonist: Tom Halliday
Cartoonist: Tom Halliday
Gene Kerrigan

Gene Kerrigan

In December 2010, Stephen Schwarzman looked upon Ireland, and he was pleased. We were in a pitiful state.

The credit bubble had burst, the banks imploded, the economy crashed, morale withered.

Less than three weeks earlier, the IMF had taken over the running of the economy and the political classes were in shock.

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A year before that, the Government had set up Nama, to untangle the massive debts run up by bankers and developers.

Mr Schwarzman liked Nama. At a Goldman Sachs seminar in the USA, he remarked that Nama would soon be selling property cheap. "They barely know what they have," he said.

Mr Schwarzman is CEO of Blackstone, a vulture corporation that specialises in profiting from "distressed assets". It exists to make rich people richer.

In the years that followed, Blackstone was one of the vultures that did to us whatever suited them. We might not applaud what they did, but you have to acknowledge the sheer professionalism at work.

And the servile amateurism of those who were supposed to protect us.

Mr Schwarzman was in no hurry. "As we look at the current situation in Europe," he told the Goldman Sachs seminar, "we're basically waiting to see how beaten up people's psyches get".

Ireland was promising, in that respect.

The vultures wanted us broken, our politicians desperate and pliable. "You want to wait until there's really blood in the streets," Mr Schwarzman said.

He was speaking metaphorically, of course. I think.

As Blackstone waited, Irish unemployment soared, emigration returned. As always in recessions, the health service took a beating. Blood in the streets, indeed.

We began paying billions we didn't owe to the gamblers who had wrecked the economy, because our leaders wanted to "maintain confidence" in the banks.

Fine Gael and Labour denounced all this. In 2011 we kicked out Fianna Fail and the Greens. Fine Gael and Labour took over. They implemented precisely the same policies.

Meanwhile, in the USA, Obama was dealing with his own economic problems. One of his minor measures was to close a tax loophole for billionaires. For this, Mr Schwarzman, a close friend and supporter of Donald Trump, compared Obama to Hitler invading Poland.

In 2011, according to the Irish Independent, the diary of the new Taoiseach, Enda Kenny, showed he had a meeting with Mr Schwarzman.

By 2014, Mr S had put together a €4bn fund to buy up property here.

Blackstone, of course, were not alone in seeing the Irish opportunity. In September 2012, about a hundred vulture funds and "hedge" players came to Ireland to survey and discuss the opportunities.

They called the gathering "HedgeCraic", because, sure, we're great "craic" altogether. They spoke of "binge thinking" because, well, they knew the Irish are drunks.

These people were in deadly competition with one another. But they had common cause in shaking us down for every possible cent.

They had meetings in the Shelbourne Hotel and in the Ritz-Carlton, with appropriate advisors helping them understand the opportunities. Michael Noonan, Fine Gael Minister for Finance, addressed them at the latter.

The Dail was told that in 2013/14, vultures had 65 meetings with Department of Finance officials.

And so it began.

The vultures had uncounted billions to spend. They were encouraged to buy distressed mortgages at massive discounts.

Individuals, desperate for a roof over their heads, were not allowed to buy their own mortgages at these distressed prices. That privilege was reserved for the immensely wealthy, who could buy the mortgages in bunches.

Our politicians accommodated this - laws were adjusted to favour "reits", which are investment outfits which buy large bundles of properties.

The vultures had sweetheart tax arrangements - one notorious outfit reported €1,000 in taxable income from a €4.5m deal.

Steadily, large outfits awash with investment capital took control of huge tranches of Irish housing stock.

There was easy bankruptcy, debt forgiveness and discounts all over the place, but not for those who took mortgages. They were forced to pay up every cent, or had the property taken off them.

We became used to vultures buying properties, allegedly "refurbishing", getting rid of the old tenants, and jacking up prices. There were hundreds of deals, involving thousands of properties, some - the Irish Independent reported - sold for as little as €6,000 each.

Meanwhile, construction was dead.

The price of houses rose steadily, way beyond what was affordable for average workers in austerity Ireland. At the same time, the State wasn't building social housing. Homelessness steadily grew.

The numbers in emergency accommodation grew; rents were used to astronomical levels for even the most comical "flats", which sometimes consist of a corner of a shack-like "room".

Housing is now not about shelter, with abundant profit for a few. Housing is now about extracting immense profit for even fewer.

People who would like to strike out on their own now depend on a spare room in their parent's place, or a sofa in a friend's flat.

People die in doorways. Blood in the streets.

Masses of children still live in "homes" consisting of a single room in a B&B, where all family activities take place, with no privacy, no place of quiet, no square yard to call your own.

They suffer this for months, for years.

Experts warn this will have lasting consequences.

While the rich employ tough cookies like Mr Schwarzman, we depend on people schooled by FG and FF to fight our corner.

Currently, Fine Gael is still arguing about how to recover from the Maria Bailey nonsense. And about two young right-wing members with a crush on Mike Pence. This they regard as politics.

FG and FF thrust and parry over minor points in budgets, because they are as one in defence of the people who have benefited hugely from the housing crisis that afflicts the rest of us.

FF skulks, wondering if we've yet forgotten how they screwed us before. Dare they make their move, have we forgotten yet, have we forgotten?

One hapless "Minister for Housing" after another tweak in the market - as though the depredation of the past decade hadn't happened. And without acknowledging that the politicians dare not do anything that will interfere with the plans of the rich.

The problem grows.

Some wonder if the Government can't take on the vultures?

Oh, come on. Get real.

To the political classes, vultures, "reits" and hedge fiends are not a problem, they are the solution.

They push up house prices. People who own houses get that feel-good glow. They solidify behind the parties in power.

In September 2014, Bolivia proposed a resolution at the United Nations, seeking international cooperation against vultures. The resolution passed by 124 votes to 11.

Ireland, of course, voted to protect the vultures.

Mr Schwarzman?

Oh, don't worry, he's doing okay. In 2018 he personally made $567m.

Mr Schwarzman attended a meeting at TCD in 2015, along with Enda Kenny. There, Stephen said of us, "You have great leadership".

I'm not sure it's what I want to hear from the guy who came to exploit us when our psyche was beaten up.

Sunday Independent

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