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The following is the truth as it appears in the Sports section of the Irish Times.

“The work was simple. I used to go around the small towns and villages and these estates going up left, right and centre. Cootehall! Tulsk! Frenchpark! Where were all the people going to come from? I remember saying to someone around 2004: ‘this thing is going to fu**ing blow up sometime. But hopefully not in the next 12 years and we will get a good touch out of it’. – Shane Curran, Veteran GAA goalkeeper quoted in The Irish Times Oct. 4th 2014 http://www.irishtimes.com/sport/gaelic-games/gaelic-football/colourful-nonconformist-shane-curran-always-ready-to-think-outside-the-box-1.1951420

This man like thousands of others is not stupid. He could see the evidence of the property scam all around him and he knew damn well that it would end badly. He discussed it with lots of other people who like him were perfectly capable of interpreting the evidence that was all around them. However, most commentators these days would have us believe that Shane Curran was remarkably perceptive and almost alone in reading the signs.

Why is this lie so frequently promulgated? Well, it’s like this. Unless the majority is prepared to believe the lie, a large number of people face a fall. The truth is that a person would have to be monumentally stupid or to have been willfully blind to have failed to see what Shane saw. The next question may be shocking but it needs to be faced. What jobs in Ireland are suited to the monumentally stupid or the willfully blind?

The answer of course is few, if any. Certainly stupidity on this scale should rule out journalism, broadcast presenter, teaching and certainly employment in any part of banking or financial services. Our problem is that those proven to be too stupid are still in place.

See also:
https://colummccaffery.wordpress.com/2013/05/12/they-are-known-to-be-useless-and-they-are-all-still-there-a-reminder-from-eddie-hobbs/
https://colummccaffery.wordpress.com/2010/11/24/time-for-a-clear-out-who-misled-and-who-remained-silent-as-a-completely-irish-made-fiasco-developed/

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Decades ago Lucan was in at the start of the land rezoning scams. It was so bad that Charles Haughey was sufficiently embarrassed that he asked Liam Lawlor to stop. Now a “for sale” sign has appeared at St. Edmundsbury, Lucan which has prompted thoughts of “Here we go again!” Offered for sale is a “STRATEGIC LAND BANK”. A what? Yes, that’s what I’m thinking too.

Developers have been eyeing St. Eds for a long, long time. Their problem is this: The lands present a unique opportunity to create something very special and the local citizens know it. Have a look at a map or at Google earth and see that the lands between the Lucan/Chapelizod Road and the Liffey are reasonably undeveloped. The sensible course is to create a Liffey Valley park all the way from Lucan to Chapelizod. This is why rezoning within the Liffey valley itself has been resisted successfully on a number of occasions.

Read the ad on myhome.ie. It reads as an open invitation to a chancer; it holds out the hope of rezoning at some stage. It says,
“This is a strategic block of land located on the edge of Lucan, Co. Dublin. It represents a unique opportunity to acquire a large land holding close to the City with superb profile and potential. …
The setting is unique affording privacy and quality yet with the possibility of future alternative uses. …
The sale represents an ideal opportunity for those speculators, investors, land bankers, institutional, educational, sporting organisations and farmers looking to acquire assets with long term growth potential combining location, profile and quality.”*

I’m pleased that my branch of the Labour Party is back on the case with this one.** I remember the evening many years ago when Eamon Tuffy – now Deputy Mayor of South Dublin – showed me the Lucan maps with the land purchases highlighted and talked about land rezoning and corruption. It was all about to start on a scale way beyond Lucan.

The present “for sale” sign is a reminder of chancers now gone and an invitation to chancers new. It should be taken down.

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* http://www.myhome.ie/residential/brochure/st-edmundsbury-lucan-dublin-county/2613980
** http://www.labour.ie/caitrionajones/news/13782147583466708.html

Let’s be clear. This was an Irish scam. Lending companies had access to lots of relatively cheap “international” money. This was “imported” and lent to the relatively poor so that extraordinary property prices could be paid to the rich.

In terms of page-one economics the price of a house was determined by whatever people were prepared to pay. The graph shows that income and costs increased steadily but house prices took off on a bewildering upward trajectory.
6a00d8342f650553ef01901d4b2988970b
From Michael Taft’s Notes from the Front. http://notesonthefront.typepad.com/politicaleconomy/2013/06/the-hulk-says-crush-household-debt.html

Traditional lending conventions linking income with loan size were dropped in order to maximise borrowing and this made large payments to the rich chancers possible ( https://colummccaffery.wordpress.com/2012/05/27/if-the-banks-and-building-societies-were-giving-crazy-loans-which-could-not-be-repayed-by-how-much-should-we-penalise-both-their-and-their-customers-foolishness/” ). The scam was greased by making some people desperate (“You need to get on the property ladder.”) and by convincing others that they too could be successful speculators (“It’s a no brainer; property prices don’t fall in Ireland.”).

The interesting question is this: How did so many people fall for the scam? Firstly, it needs to be emphasised that not everyone fell for it. Secondly, while citizens correctly expect those of their fellow citizens who are paid to think, manage and comment to warn them of scams, they were sorely let down. I’ve argued elsewhere that these well-paid failures who did not speak out time and again either because they were too stupid to see the scam or so lacking in integrity that they abandoned their jobs to hide within the scam, should now be moved to jobs more suited to their shortcomings. In short a significant portion (perhaps a majority) of Ireland’s professional elite has been exposed as thick or turpid or both. ( https://colummccaffery.wordpress.com/2013/05/12/they-are-known-to-be-useless-and-they-are-all-still-there-a-reminder-from-eddie-hobbs/” )

It is, however, a mistake to view all of the victims of the scam as blameless. No matter how many times managers and media encourage a person to be foolish there remains a personal obligation to be prudent. Of course there are times when a scam is so well done that little or no blame can attach to the victim but that is not the case in relation to the Irish lending scam. Despite the elite chatter and media torrent in support of foolishness, ordinary conversations about the dangers were commonplace and there were many warning voices which could have been heeded. Moreover, as the scam developed there was increasing concrete evidence in plain sight sufficient to warn all but the wilfully blind or the addicted risk-taker.

Young people are particularly vulnerable to scams and are often preyed upon. The property scam was no exception. The pressure to “get on the property ladder” was relentless and in a just world a nasty fate would await anyone who dispensed this advice – especially when it was dispensed as it became more and more clear that the end was approaching.

Mature victims drawn into a reckless gamble were less vulnerable and their fellow citizens should be less forgiving of their stupidity and/or avarice.

The argument that the victims should be bailed out for reasons different to those offered for baling out the banks is untenable. There was no moral or legal reason for baling out banks. Leaving aside young people and cases where no blame could attach, there is no moral or legal reason to bail out victims of the scam either. However, a functioning liberal economy or the view that these people in aggregate qualify as “too big to fail” may be very good reasons why careful, thinking citizens will have to bail out these people as well as the banks.

John Fallon reported in the Irish Times today that David Duffy, the CEO of Allied Irish Banks, intends a clean-up within the bank.* However, what is reported is that David Duffy has joined Fianna Fáil and Sinn Fein in asking citizens yet again to go WAWA (“We are where we are”). Yes, here we go again. What he proposes is that past wrongdoing be attributed to “culture” and that the bank makes a fresh start without getting rid of wrongdoers.

The wrongdoing in question is managers borrowing from their own bank to become developers or investors. David Duffy is clearly of the view that this is not just a bad practice but unethical and lacking in integrity. He is resolute that it will never happen again and that if it does, the manager will be dismissed.

The problem of course is that it can’t be wrong today but not wrong yesterday. That’s where the old reliable WAWA escape clause comes in and it’s all too familiar: “No one is guilty; it was the culture”. It’s a constant refrain in Ireland today. It is offered as an excuse for all sorts of failure and for crimes: failure to speak up while the economy was ruined, child abuse, political murders, laundry slavery and now dodgy borrowing by bank managers has been added to the list.

It is simply not credible that the chancers who were involved in these loans will now suddenly become people of integrity fit to be managers in an important institution. It is not acceptable that the CEO of this institution is prepared to go WAWA and to leave those not fit for office in place.
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* http://m.irishtimes.com/newspaper/finance/2013/0223/1224330416276.html?via=bnews

I find it unacceptable that work-related pensions are paid to public servants who have failed to do their jobs or who have broken the law or rules specific to their jobs.

This week in the Irish Times Cllr. Dermot Lacey talks about appeals he has made and won to overturn planning decisions made by professionals “in defiance of good planning and in some cases at least the democratically adopted development plans”. [i] Reports of flooding, bizarre building in remote areas and small towns, and structural and safety defects in buildings all point to many public service professionals failing to do their jobs. [ii]

In the Irish Times of Oct. 13th Conor Brady takes former deputy commissioner of An Garda, TJ Ainsworth, to task for failing to do his job adequately. However, he also talks in the plural of Gardaí who in doing the bidding of Charles Haughey and his henchmen, failed in their duty. [iii]

I’ve been arguing that teachers who systematically broke the rules laid out by the Dept. of Education should be denied a pension. [iv]

I’m sure the list of wrongdoers and chancers who enjoy pensions is a long one. That makes it all the more important that something be done about this scandal.

I am informed by the Dept. of Education that the courts have ruled that pensions are private property and cannot be touched. If this is the case, it is worth asking the Criminal Assets Bureau to take a look. CAB have recently expanded their operations to look at tax and welfare cheats. However, it cannot be the case that civil service pensions are untouchable private property, given that they are not paid out of a fund but are paid out of current spending and very significantly they have been touched: they have been reduced in the current fiscal crisis. [v]

Many citizens are deeply offended by the handful of very rich chancers who have retired from public service, walked away from the damage they have done and who now enjoy extraordinary pension payments. The scandal, however, extends far beyond a handful of rich people and into a considerable number of wrongdoers who should not be rewarded for their failure to perform or their active breaking of the rules.


 [v] I’ve reopened correspondence with the Dept. of Education. Having been given the run-around, I’ve now asked formally as a citizen if they will refer this matter for legal advice.

http://www.irishtimes.com/newspaper/ireland/2012/0628/1224318887148.html

A complex computer system has spectacularly crashed with spectacular consequences. I’m sure that there are IT failures of this type very regularly. This one has received public attention for obvious reasons.

Reaction to it, however, has at times seemed crazy, especially the demands and deadlines for it to be fixed. There seems little appreciation of engineering reality. There is moreover the likelihood that senior managers share this blinkered perspective and have taken decisions based on “best practice” in financial and administrative terms.

It is completely daft to demand that it be fixed, to try to impose deadlines for its being fixed or to enquire into in isolation. This is a breakdown, a failure, no one knows exactly what caused it and no one knows exactly when it will be fixed.

Here’s a reasonable news article setting out the difficulties: http://www.guardian.co.uk/technology/2012/jun/25/how-natwest-it-meltdown?fb=optOut

In detail it is complex. And, we find ourselves a long way down the road in terms of dependence on these systems. The fundamental issues are however simple. Over the years basic mistakes have been made by senior managers who did not realise what they were doing and were under pressure from competitors. The public was uninvolved because the issue was thought to be too complex for public discussion. That’s how elites take control and that’s often ok when those taking control really do know what they are doing.

Take this from the Guardian article linked above:  “This was not inevitable – you can always avoid problems like this if you test sufficiently,” said David Silverstone, delivery and solutions manager for NMQA, which provides automated testing software to a number of banks, though not RBS/NatWest. “But unless you keep an army of people who know exactly how the system works, there may be problems maintaining it.”

Here’s something worth bearing in mind. Despite stunning improvements in testing, anything beyond the most basic software CANNOT be fully tested before it is put into service because the number of variables is too great.  That’s why David Silverstone said “sufficiently” and not “fully”. The user runs with it and hopes for the best. “Software maintenance” has always been a risible concept. What it means is that the customer runs the tests as day to day usage and pays the developer to patch whatever is discovered. It’s not a scam; there’s no other way.

The problem now is compounded in that complex programmes are being run in parallel with and on top of older applications. The last couple of decades saw a problematic coincidence.  At a time when the overall systems became more complex and more ambitious there was a management fashion to offload not IT operators but real software developers and to buy in “turn-key” applications which may have been modified to give the appearance of bespoke systems. It’s a recipe for profound crashes, and everyone in engineering generally and anyone who has given serious thought to complex systems has been watching it develop over the years.

In most large organisations there are problems such as this waiting to happen. There’s no easy fix at this stage; we are too far gone. Fundamentally wrong management decisions have been made and cannot be undone quickly or perhaps at all.

Before Ireland began the property scam the lending policy of building societies protected both the borrower and the building society from folly.

Some time ago I wrote here (https://colummccaffery.wordpress.com/2010/06/11/house-prices-available-mortgages/) about the “traditional” mathematical formula used by building societies to link the size of a loan to the borrower’s ability to pay. This formula [(Annual salary A X2.5) + Annual salary B = 75% of the value of the house.] was used in my piece to calculate the sensible price of housing as opposed to the market value of  housing. The latter is determined by whatever the purchaser is prepared to pay and was grossly inflated when banks and building societies abandoned the socially responsible and commercially viable formula and made crazy loans available.

This brings me to the point of this piece. The conventional formula could now be used to differentiate between sensible businesslike lending and foolish behaviour.

When a foolish loan was agreed, there were of course two parties to the foolishness: the lender and the borrower.  It is certainly true that borrowers behaved foolishly. They too could see that repayments – even if everything remained fine for them on the income front – were incompatible with comfortable living. They were, however, driven to excess by fear of rising prices and constant media and family advice to “get on the property ladder” at all costs. In short, they are responsible for their actions and they will pay for their foolishness for a very long time.

The lender is responsible too. The lender is responsible for knowingly and foolishly lending more than could be repaid while living reasonably well. The lender tempted and lured the foolish borrower.

Look at it this way. Reasonable living dictates that mortgage repayments do not constitute a crippling outflow of money each week or month. If a building society or bank lured a borrower to the extent that he/she abandoned common sense and borrowed far too much, the lender should be penalised by the amount of the excess. The excess can be calculated by reference to the pre-madness policy, i.e. by using the “traditional” formula.

Let’s turn to the question of money.  Let’s consider a well off couple both with good jobs seeking a mortgage at the height of the scam:  One has an income of, say, €40k p.a. and the other has an income of, say, €30k p.a. Let’s refer to the first as A and the second as B. Now remember that traditional formula: (Annual salary A X2.5) + Annual salary B = 75% of the value of the house.

Right let’s apply figures: (40k X 2.5) + 30 = 130k

What this indicates is that at the time the loan was agreed, any bank or building society which lent in excess of €130k to a couple with a combined income of €70k p.a. was behaving foolishly and could not possibly have expected the loan to be repaid. That they were aware of what they were doing is evidenced by the existence of the earlier prudent lending policy expressed in the “traditional” formula.

If we are talking about debt forgiveness or write-downs of mortgages, a sensible approach would be to go back to the loan application, look at the stated income/s and calculate the maximum loan that a sane, commercially minded lender would have advanced. It is now a matter of striking the value of the mortgage debt down to this figure. It could then be increased by, say, 10% in order to penalise the stupidity of the borrower.

None of this takes account of how the lenders will cope with the reduced value of the loans on their books. This, however, is true of any measure of debt reduction. What the proposal here does do is root a system of debt forgiveness/reduction in a clear and previously existing policy which worked for years and whose purpose was to protect the lender and the borrower from greedy madness.

Here’s the story: http://www.independent.ie/national-news/revealed-the-whistleblower-behind-crash-warnings-3088276.html

This story is ridiculous. What it states explicitly is that after the start of the debate about soft vs. hard landings at the end of Ireland’s property-bubble scam, a civil servant wanted to have Ministers warn of a possible collapse. However, the use of the word “whistleblower” misleads and it perpetuates one of the great fairy stories of recent Irish history.

A whistleblower reveals information which is vital to the public good. Without wishing to underestimate the courage of the civil servant at the centre of the story, there are two problems with this story and its framing. Firstly, the incidents related are far too late to have had an enormous bearing on avoiding the damage done to Ireland; once the “landing” appeared on the agenda, all that was in doubt was the scale of the damage.

Secondly and more importantly, what is needed is evidence of earlier civil service opposition to the virtually insane policies that created the bubble. Such evidence would tend to exonerate civil servants generally from the suspicion of utter stupidity or shameful lack of integrity. It is at this point that use of “whistleblower” perpetuates the lie.

You see, what happened in Ireland did not involve a secret and seeing it coming did not require expertise in economics. It happened in plain sight and only a complete fool could have failed to notice and failed to realise that it would end very badly. Very few of those in Ireland who are paid to think and speak (The group includes journalists, managers, teachers, politicians etc.) showed themselves competent. It is not credible that so many professionals are so wilfully ignorant or stupid that they were unaware of the approaching mess. It is more likely that they lacked the integrity to speak out again and again in opposition.

Should journalism want to redeem itself, some of its better practitioners would do well to focus on who stayed silent as the bubble was intentionally inflated before everyone’s eyes.

See here:  https://colummccaffery.wordpress.com/2010/11/24/time-for-a-clear-out-who-misled-and-who-remained-silent-as-a-completely-irish-made-fiasco-developed/

Sometimes I can’t resist a smile when I hear wistful talk about the nuclear family and its importance to a good society. You see, when I first became aware of the term, it was applied not to a desirable way to rear children but to the polar opposite.

When I married and bought a house in the early seventies, I moved from an urban village to a suburban town. I was part of a movement which was discussed as a cause for concern. Growing up, my extended family lived within one postal district; everyone was a bus trip or even a walk away. Many other families were closer still, with grandparents, aunts and uncles in their immediate vicinity. By the 70s young people were moving to suburban housing estates built on expensive, rezoned lands, where everyone was of an age and income, and lived very similar lives, disconnected from routine daily family contacts. Public transport and other infrastructure had not been a condition when approving housing estates. Visiting became a chore and the better off kept up wider family contact by buying a car. Concerned debate focussed on the role of planning in pulling communities and the extended family apart, and reducing society to, yes, nuclear families. Perhaps if “atomic family” had become the term, subsequent debate would have been clearer.

I stumbled upon an interesting piece a couple of days ago:

 IRISH HOUSING AND WAGES, 1977 to 2006: PORTRAIT OF A SCAM

Jun 8th, 2010 by Conor McCabe

http://dublinopinion.com/2010/06/08/irish-housing-and-wages-portrait-of-a-scam/

I knew that Irish house prices had become ludicrous in relation to salaries but I’d not seen data before. It seems a perfect illustration for page 1 of a basic economics text: that price is dictated by willingness/ability to pay.

A young person ambitious to launch out into life can be vulnerable to overcharging on housing. (I remember!) There was a time when such a person’s ambition/desperation was limited. In the early 70s the building society formula was that loans were for 75% of the house price and the loan amount was calculated thus: 2.5(Annual salary 1) + Annual salary 2.

Take two people on good incomes setting up home in the early 70s. Say, Salary 1 = 1.5K and Salary 2 = 1K. This gives: 2.5(1.5) + 1 = 4.75. That is to say, these two young people could borrow up to 4.75K as 75% of the house price. The house price then comes out at 6.3K. Guess what? In 1970-71 Gallagher’s were selling 3 bed semis in Lucan, Tallaght and Raheny for a tenner less than 5K.

Let’s try this calculation with Euro and today’s incomes. What would be good incomes for two young people today? Well, let’s assume that equality has made strides and that it is two young people on the same income. How about 35K each or a “household income” of 70k?

Here goes: 2.5(35) + 35 = 122.5. That would be a 122.5K mortgage as 75% of the house price. This would give a present day price of 163K for a 3 bed semi in the Dublin “commuter belt”.

I accept that these calculations ignore many variables. They’re rough! However, they indicate that an affordable 3 bed semi with gardens to which two Dublin residents on good incomes might aspire should be about 160K. The price today – AFTER all the reductions of the past year or so – is still in the 220 to 300k range.

The scam was worked by abandoning the 2.5(X) + Y formula and giving 100% + mortgages to people made desperate by incessant talk about the “property ladder”.

There are three components to the Irish financial mess. 1. The decline of the export economy. 2. The international banking nonsense. 3. The Irish government policy that created and sustained a property bubble.

In last Saturday’s Irish Times Garrett Fitzgerald argued for a public enquiry into number 1, the true death of the “Celtic Tiger”. He’s right: In the long run this is the most important issue. Employers organisations and both Garret and John Fitzgerald argue that wages at the lower end will have to compete with low wage economies. Essentially what they are saying is that Ireland must WIN a race to the bottom.

Socialists should join Garrett’s call for an enquiry as it would open a debate on different conceptions of or routes to economic development.

It was obvious from RTE’s Frontline programme last night that many have swallowed the popular storyline that Ireland’s boom was destroyed by developers and bankers. Ireland is indeed cursed with chancers and an incompetent ruling class but that’s one just part of the story. Ireland’s FF/PD/Green governments maintained the appearance of a thriving economy by stoking a building boom; it was criminal folly. However, the fact is that the flourishing export-led economy ended years ago as industry relocated to cheaper countries. Any fool driving around the country could see this as the factories closed and the furniture warehouses multiplied. On TV last night over and over again the simplistic view was aired: builders and bankers killed our lovely Celtic tiger!

It was sad to see on this programme too an ambulance driver making a case for maintaining his small income and in so doing protecting a group of people who were conspicuously absent: rich public servants. None of the private sector workers whose function in the programme was to attack fellow workers was prepared to have a go at poor public servants. Unfortunately, the word “rich” was never used; it seems to have been banished from our vocabulary. Instead both sides seemed to want to attack “administrators” so that “frontline” staff can be protected. It was a depressing sight: two sets of workers baying for the dismissal of poor office workers while the rich sat at home watching the spectacle.

The Chief Economist with Ulster Bank has retired. He was interviewed this morning on Newstalk and spoke of the role of the economist in public life, emphasising the difficulty of making predictions. He pointed out that most Irish economists predicted a “soft landing” as the property boom ended. The interviewer didn’t refer to the more serious issue. The record of public figures – not just economists – should be judged not on whether they predicted a “soft landing” or a “crash” but on whether they spent years screaming warnings about the flight itself and its daft altitude.

Any sensible, prudent person could see that quite ordinary people as well as property developers and builders were being lured into reckless investment, usually financed by borrowing, by relentless public argument and propaganda carried by uncritical media. We had years of favourable comment: it was a “no-brainer”; everyone should have a “property portfolio”. Of course all those who fell for this were foolish but that doesn’t exonerate those who encouraged, capitalised on or facilitated their foolishness.

Any contributor to public debate who did not over the years see the folly or who did see it and failed to speak out time and again, and those in the media who failed to find and give a platform to sensible contributors should never again be taken seriously.