# Why do we begrudge giving debt forgiveness to borrowers?



## Firefly

We have had massive write-offs/bailouts/whatever you want to call them, for developers. Our senior bankers are being investigated as what appears to be a snail's pace. We have a solicitor being investigated for north of 80m living somewhere foreign. We have already pumped 62.9 billion (http://www.askaboutmoney.com/showthread.php?t=151115) into the banks to help pay off faceless bondholders, with surely more to come. 
We have put up with increased taxes, pay cuts and job losses. Social Welfare looks set to be cut. All of these have been done without a whimper compared to what happended in Greece for example. 

It has been estimated that resolving negative equity would cost 14bn and this would directly benefit more "real" people amongst us than the 62.9bn already put into the banks has.

The thread relating to the Frontline program, since Monday, already has the highest number of views & posts in this forum.

So why so much debate? Are we really a nation of begrudgers?


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## Nationaldude

+1

Also, the 62.9bn was pumped into the banks for the very purpose of absorbing defaults on mortgages.


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## Shawady

Firefly said:


> It has been estimated that resolving negative equity would cost 14bn and this would directly benefit more "real" people amongst us than the 62.9bn already put into the banks has.


 
Is the 14 billion figure the value of wiping all negative equity or just those that are in trouble?


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## Firefly

Shawady said:


> Is the 14 billion figure the value of wiping all negative equity or just those that are in trouble?



All negative equity apparently (http://www.independent.ie/business/...ge-debt-plan-would-cost-euro14bn-2903148.html) which means for those only in trouble it would presumably cost less


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## Booter

With the arguments against debt forgiveness mainly focusing on the "why should I pay my neighbour's mortgage" point, its made me think about the whole concept of the welfare state, and whether something so ambitious, and costly, could ever get off the ground now, if it wasn't in place already?


Internet forums, TV & radio would be overflowing with outrage at the very thought that society would voluntarily transfer over €20bn per year to people....just because they have no money for food, heat, or accommodation! Imagine!

But as the welfare state is in place already, and society already does this for its less well off, is it really such a stretch of this concept that we would transfer - on a once off basis - a lesser amount (€14bn) to that section of society which is struggling the most in this regard. Given the likely knock-on benefits to the rest of society through economic impact, maybe we need to re-consider.


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## DerKaiser

Booter said:


> But as the welfare state is in place already, and society already does this for its less well off, is it really such a stretch of this concept that we would transfer - on a once off basis - a lesser amount (€14bn) to that section of society which is struggling the most in this regard. Given the likely knock-on benefits to the rest of society through economic impact, maybe we need to re-consider.


 
1) The existing welfare state is unaffordable, so we need to pull back rather add more cost.

2) The fact that there are people who advocate cancelling negative equity even where people are doing reasonably well for themselves out of taxation paid by people who may not be in negative equity but are hard pressed unfortunately undermines any argument for genuine debt forgiveness.

3) As for the begrudgery argument, would I begrudge paying for a debt forgiveness scheme where it's not clear that the reallocation of wealth is from those on higher living standards to those on lower living standards? Yes!


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## DerKaiser

Firefly said:


> It has been estimated that resolving negative equity would cost 14bn and this would directly benefit more "real" people amongst us than the 62.9bn already put into the banks has.


 
But it needs to also come out of the pockets of other "real" people.


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## Shawady

Firefly said:


> All negative equity apparently (http://www.independent.ie/business/...ge-debt-plan-would-cost-euro14bn-2903148.html) which means for those only in trouble it would presumably cost less


 
I think this is the crux of the problem. There are probably many people that are in negative equity but are well able to make their repayments.(I think the figure is 300,000 in NE but only 35,000 in arrears).

I know plenty of people like that are in negative equity but are happy where they live and can easily make their repayments. In some situations, people on trackers actually have lower payments than they did 3 years ago. I don't see why they should have half their debt paid by taxpayers money.

The real problem is with those that cannot make their repayments. Negative equity is only an added problem here is that they cannot sell their house and move on.


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## dereko1969

This should be in letting off steam


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## Complainer

Booter said:


> With the arguments against debt forgiveness mainly focusing on the "why should I pay my neighbour's mortgage" point, its made me think about the whole concept of the welfare state, and whether something so ambitious, and costly, could ever get off the ground now, if it wasn't in place already?
> 
> 
> Internet forums, TV & radio would be overflowing with outrage at the very thought that society would voluntarily transfer over €20bn per year to people....just because they have no money for food, heat, or accommodation! Imagine!
> 
> But as the welfare state is in place already, and society already does this for its less well off, is it really such a stretch of this concept that we would transfer - on a once off basis - a lesser amount (€14bn) to that section of society which is struggling the most in this regard. Given the likely knock-on benefits to the rest of society through economic impact, maybe we need to re-consider.


It's not an 'either/or' choice. The welfare state is already in place for everybody. If those in mortgage difficulties find themselves in dire straits, the State welfare supports will kick in. If those supports aren't kicking in, then maybe the straits aren't so dire after all.


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## Firefly

Shawady said:


> I know plenty of people like that are in negative equity but are happy where they live and can easily make their repayments. In some situations, people on trackers actually have lower payments than they did 3 years ago. I don't see why they should have half their debt paid by taxpayers money.



I think most people agree with this



Shawady said:


> The real problem is with those that cannot make their repayments. Negative equity is only an added problem here is that they cannot sell their house and move on.



This is the group I am referring to. If the cost of bailing out these people was 6bn, 14bn or 20bn, would the reaction be any different? I'm not so sure. It seems that even if bailing out these people had an overall positive net effect on the country, the thought of seeing your neighbour getting a "handy one" from the bank would upset most people....even though we are already paying more tax from less wages to pay for faceless bondholders...


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## truthseeker

I find it very depressing the lack of sympathy, empathy or compassion with regards to mortgage holders in trouble. The assumption that the people in the situation were just reckless is just plain wrong.

I am in negative equity. I didnt buy because I was 'speculating on the market' and expected to 'flip' for a profit in a few years time. I bought it because I wanted a home of my own. Sorry if thats not what the acceptable description of events is anymore - but thats it.

There seems to be an assumption nowadays that anyone in trouble overextended themselves - I certainly didnt, I was single when I bought and the repayments were easily managed on my own salary only. I had a good deposit, I had no other debt - I still have no other debt.

I didnt buy a mansion I couldnt afford - its a small apartment - very modest by anyones standards.

I have been made redundant, my husband was made redundant. Neither of us could have foreseen that. 

I would imagine the situation is similar for many people. I dont know what the answer is, but being branded speculators, overextenders, foolish, selfish etc... really doesnt help.


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## Nationaldude

I'm also in negative equity. To what extent? Who knows, but i like many many more simply bought a home for my family, first time buyer late 2007, I clearly remember asking anybody I came accross during the purchase what way they thought the market was going to go and they all sang from the same hymn sheet "soft landing" was the buzz word. Everyone from broker, estate agent, surveyor, insurance & solicitor all said the same thing so we felt secure enough to go through with the purchase. Luckily enough we are both still in employment and can afford our mortgage but I still can't help to feel duped by all the aforementioned "professionals" who assured us we were doing the right thing.


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## DerKaiser

truthseeker said:


> I have been made redundant, my husband was made redundant. Neither of us could have foreseen that.


 
You are in a clear cut case. You can't afford to pay a mortgage whether you overextended or got the bargain of the century. 

I'd like to think that most people agree debt forgiveness applies if people have no income. In fact, I wouldn't even call it debt forgiveness in such a situation. Forgiveness implies a choice on the part of the lender, in such situations there is no choice. You simply can't service the debt.

On the other hand there are less clear cut cases where people still have an income. Some people have a romantic notion of "debt forgiveness" being writing down debt that they can service. Isn't that wrong?


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## DerKaiser

Complainer said:


> It's not an 'either/or' choice. The welfare state is already in place for everybody. If those in mortgage difficulties find themselves in dire straits, the State welfare supports will kick in. If those supports aren't kicking in, then maybe the straits aren't so dire after all.


 
Best post of these whole discussions. The state will ensure everyone ultimately has the safety net of social welfare. That ensures a minimum standard of living.

Those who are worse off than people on social welfare need not be.  There are existing mechanisms to ensure this.

Those better off than people on social welfare should count themselves as fortunate and not expect handouts to sustain a standard of living in excess of everybody else who relies on the state.


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## Purple

The welfare system provides an income for people who don’t have one. It’s function is to provide a societal safety net, a minimum standard of living for individuals and families. There is already a mechanism in place to pay the interest on the mortgages of people who are unemployed.
There is a world of a difference between that and paying off the a loan on an asset for an individual so that they can retain that asset.
I agree that something should be done but it’s such a complex area that a blanket scheme will inevitably be open to abuse or will at least help some people and not others who need that help more. I would like to see a reform in the personal bankruptcy laws, much like the American model. 
I’m in negative equity. I think it would be outrageous if the state spent my neighbours money paying off a portion of my mortgage.
In the case of people who simply cannot pay there should be a mechanism for debt write-off with their bank. I don’t see why they should use other people’s money to retain ownership of their home. This was never suggested before even though many thousands of people have had to sell their home due to changed financial circumstances over the last 40 etc years. The only justification being offered for it now is that there are more people in that position.


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## Purple

DerKaiser said:


> Best post of these whole discussions. The state will ensure everyone ultimately has the safety net of social welfare. That ensures a minimum standard of living.
> 
> Those who are worse off than people on social welfare need not be.  There are existing mechanisms to ensure this.
> 
> Those better off than people on social welfare should count themselves as fortunate and not expect handouts to sustain a standard of living in excess of everybody else who relies on the state.



+1 excellent point from Complainer.


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## DerKaiser

Purple said:


> There is already a mechanism in place to pay the interest on the mortgages of people who are unemployed.
> 
> There is a world of a difference between that are paying off the a loan on an asset for an individual so that they can retain that asset.
> 
> I would like to see a reform in the personal bankruptcy laws, much like the American model.
> 
> In the case of people who simply cannot pay there should be a mechanism for debt write-off with their bank. I don’t see why they should use other people’s money to retain ownership of their home.


 
Also a great summary.

1) You can fall back on the state to guarantee a minimum standar of living

2) But don't expect for someone to also give you an asset you haven't paid for

3) If you fall back on the state, lose ownership of your home and can't fully pay down your debt you should not be subject to the full rigours of existing bankruptcy laws


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## Jim2007

truthseeker said:


> I find it very depressing the lack of sympathy, empathy or compassion with regards to mortgage holders in trouble.



The problem is that distressed mortgage holders are making unacceptable demands of their fellow citizens - you pay my loan and I get to keep the house!  The average joe might be willing to accept the idea of a reset button, but not the idea of him footing your bill.

By reset button I mean you hand back the keys the outstanding debt is written off and you start again from zero.

Jim2007


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## Chris

I'm not sure it is begrudgery. I think it more a case of people realizing how big a mistake it was to blanket bail out bank creditors, and they simply do not want to see another blanket bail out for others. Two wrongs don't make a right.



truthseeker said:


> I have been made redundant, my husband was made redundant. Neither of us could have foreseen that.


But it can be said that you were "foolish" to not plan for a worst case scenario by having a big enough rainy day fund to see you through troubled times.



Purple said:


> I agree that something should be done but it’s such a complex area that a blanket scheme will inevitably be open to abuse or will at least help some people and not others who need that help more. I would like to see a reform in the personal bankruptcy laws, much like the American model.


Absolutely agree, if the bankruptcy process was less complicated and faster to organize,  problems could be solved on an individual basis.



Complainer said:


> It's not an 'either/or' choice. The welfare state is already in place for everybody. If those in mortgage difficulties find themselves in dire straits, the State welfare supports will kick in. If those supports aren't kicking in, then maybe the straits aren't so dire after all.


Well said, doesn't happen often that we agree ;-)


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## onq

As many posters have said, it is a complex situation and the governments position that each case should be judged on its merits is one I fully support.
Several of the posters here have clear cut cases where modest home ownership was their very reasonable aim and they are seeking assistance.

As against this there are people whose aim may or may not have been home ownership.
They may be typified by houses costs well above the national average and with foreseeable reductions in their future income that may have meant they might not have been able to finance their mortgage anyway.
They seem to be in a gray area as regards whether they deserve state assistance or not.

Finally there are the people who took out interest-only loans on properties they couldn't afford to buy by via an ordinary mortgage,  as opposed to renting to live in such a property.
It is difficult to know how to address these people's plights, but the case for "losing their home" cannot be easily made - they were going to lose it at some point because their finance mechanism was unsustainable.
I fins it difficult to agree with the state supporting people who took a punt on the property bubble - I am sure there are arguments in support, but I go against this in my gut.


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## truthseeker

Chris said:


> But it can be said that you were "foolish" to not plan for a worst case scenario by having a big enough rainy day fund to see you through troubled times.



How much of a rainy day fund would you see as not foolish? Seriously? Do you realise the number of people on dole queues desperately looking for work?


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## STEINER

I bought my home in 2006 and estimate a 50% drop in the value of my home.  After the initial 2 year fixed rate ended I choose the ECB tracker option and monthly repayments are about 200 euro less than the initial repayments.  We got the maximum mortgage we could from the bank to purchase and ensured that we wouldn't be financially overextended with the repayments.  Although I and my wife didn't buy as an investment per se, at some stage in the next 5 to 7 years we may relocate.  The negative equity thing doesn't bother me, if we move in a few years we are just going to have to put 100-150k to the sales proceeds to pay off the existing mortgage and I just see this as a cost of buying another home.  I am not not seeking any debt forgiveness, I was happy to get the mortgage and I am keeping to my agreement to pay it off every month.  I sympathise with any homeowner who is in negative equity and also with people who are struggling with repayments.  I don't have any sympathy for anyone who bought property as an investment, particularly those who bought with interest only mortgages.  I don't support the introduction of some debt forgiveness scheme.


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## Chris

truthseeker said:


> How much of a rainy day fund would you see as not foolish? Seriously? Do you realise the number of people on dole queues desperately looking for work?


At the very least 6 months minimum living expenses would be my opinion.
Before I took out my mortgage I made sure I had enough savings and insurance for a minimum living standard, including the mortgage, for at least 12 months, should both my wife and I lose our jobs. But we didn't stop there and rather increased our rainy day fund year by year. 
The vast majority of people I know in this country did not have more than a months worth of savings even during the boom years! I don't know whether you fall into this category, but not having a large rainy day fund *before* you take out a mortgage is foolish in my books.


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## Jim2007

truthseeker said:


> How much of a rainy day fund would you see as not foolish? Seriously? Do you realise the number of people on dole queues desperately looking for work?



Here in Switzerland, we advise people to have at least 12 months living expenses in cash or near cash before they go investing in anything!  This normally amounts to 3 months cash on deposit and the remainder on rolling time deposits of three, six and nine months.

Up until recently, I worked as a freelance consultant and so I had up to two years living expenses in cash and near cash, because the self-employed are not allowed to claim unemployment benefit here until 12 months after their last consulting assignment.

In Switzerland it takes at least 3 months before you'd start to receive any social benefits and longer if there was any unusual issues, hence the 12 months recommendation.  In Ireland it seems faster, so I'd suggest that say six months average living expenses would be a good idea.


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## truthseeker

Jim2007 said:


> In Ireland it seems faster, so I'd suggest that say six months average living expenses would be a good idea.



We had 2 years living expenses saved as rainy day fund. My husband has been unable to find work for over a year now - he was the larger salary. Im reaching 4 months. Rainy day funds dont last forever, if it keeps on raining. Many people are in a similar situation to us.


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## Jim2007

Firefly said:


> All of these have been done without a whimper compared to what happended in Greece for example.



I'd say we're behaving as expected!

The average Swiss investor does not compare Ireland with Greece, because it is clear to him that Ireland is a northern country and Greece is a southern country, so he knows what to expect!

People in the north of Europe are expected to be honest, reliable and hard working.  From time to time they do get into financial difficulties, but when it does happen they can be relied upon to get it sorted out and move on.  On the other hand southern countries are seen as being unreliable, dishonest and lazy!  And consequently when things go wrong all you can expect is a headache!

And funnily enough that is what we see in the Swiss papers - Ireland is seen as being serious and taking the necessary steps to sort itself out where as Greece is seen as always complaining and doing nothing to help itself.

I know of a couple of Swiss funds that have been adding to their Irish bonds position over the summer on the basis that Ireland is a northern country that got into a bit of difficulty, but is expected to sort itself out.

Jim2007 (Switzerland)


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## riverbed

*Forgiveness*

Like a lot of people , I bought at the height of the Market, I felt if I didnt go now, it would be beyond me in another six months, the way prices were edging up.Can I ask this question, would we be on here complaining if it went the other way, I couldnt see myself if I profited from my property appreciation, calling into the Bank and dropping a few euro into their Christmas party fund, the fact is we signed Mortage aggrements, accecpted loans and agreed to repay them, and signing up to them is our own fault.
Now I agree we are in an incredibly difficult economic climate, prices have collapsed in the property market, we have about 10 years stock built IMHO.
Why should AIB let me off my debt, all they did was help me buy my house, I didnt have a problem when they were giving me money, so its not really feasable to ask for Debt Forgiveness.Restructuring, or rearranging etc, I could agree to that.By the way Im not a speculator, and I kept a level head tro all the madness, I lived an ordinary life, who did we think we were? Restaurants all the time, new cars, big weekends away, and bigger holidays.
There are bigger farms in Texas than the size of Ireland, were we really all the Millionares we thought we were, I think not.
The Ireland we find ourselves in now is a hard place, we are suffering , pain is everywhere, we are all guilty of the big life, the fact is we thought we were on a roll, but we clearly werent.
Defaulting on mortages is not the answer, the ripple effect of bad debt just puts pressure further on the system, now I dont have all the answers, but we must take responsibility for the decisions we took, and agreed to.I took out a mortage for better or for worse, its my signature on the agreement, its my problem!


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## Ryandd

Its very noble for the people with no jobs facing re eviction to take it on the chin and say that its there problem.  But either way the state will still support you if you don't manage to get back on your feet, and I think thats the problem people didn't bring unemployement upon themselves, if we were still in our jobs we wouldn't be having this sort of discussion.  Nobody wants to be bailed out in they way critics interput it.  But lets face it the country have not enough jobs to allow those who bought a house when they had secure jobs to be able to pay their mortgage and this is another casualty of the banking crisis.  No one is looking for handouts its solutions to grow the country and allow people manage their bills like Im sure they would rather be doing.


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## Swyper

DerKaiser said:


> You are in a clear cut case.



I beg to differ. Unemployment is not a terminal disease. It's a temporary financial state for most people. If the poster is genuine that they did not over-extend themselves, then this should be no more than a problem to be ridden out. It does not call for a debt forgiveness which would financially benefit the poster for 20+ years - far longer than anyone could reasonably expect to be unemployed.

And before you say "where's your empathy", I have more than enough experience with negative equity and unemployment. But I'm of the seemingly minority position that I shouldn't be expecting everyone else to solve problems that are in my own power to solve. This country still has a peasant mentality when it comes to it - that the man in the big house can be pleaded with to bestow his favour.


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## Kerrigan

The fast majority of people do not want debt forgiveness.  The ones I have spoken to anyway.  They want affordable restructuring of the debt they already have until this economic turmoil has blown over.  

As I've mentioned a million times before, rent allowance in this country will do more damage to the tax payers pocket than any form of restructuring debt.


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## Ryandd

I think some people are forgetting that ordinary families in trouble with their mortgage repayments have lost their jobs and unable to get back to employment in order to meet their repayments, they are frightened of losing their home, this is the problem at the core of the mortgage crises.  And most reports have pointed the finger at the banking crisis and the lack of credit to businesses etc and as a result there were massive job losses around the country and most of the people seeking help are casualties of this scale of unemployment.  The people who are opposing help for these mortgage holders are already in employment and are very lucky to be so.  All the distressed mortgage holders were tax payers they this is not an negative equity situation, unless people can get back to work and earn a wage to manage their loan they have no chance of ever repaying their mortgage and its as clear as that.  I know I was made redundant and unless I can earn a similar salary to what I was on I won't be in a position to repay my mortgage and I have to face that reality and deal with the fact that i will lose my home and all that goes with it.


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## Ireland.1

What baffles me is people hitting out at distressed mortgage holders with the same line - why didn't you put a rainy day fund aside?  

Some people did.  The rainy day fund did not exceed 3 years!


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## Purple

Ryandd said:


> I know I was made redundant and unless I can earn a similar salary to what I was on I won't be in a position to repay my mortgage and I have to face that reality and deal with the fact that i will lose my home and all that goes with it.


That is the very harsh reality for many people. I am in favour of the reform of the personal bankruptcy laws which seems to be on the card now; people need to have the opportunity to start again. I am totally against the state taking money from other citizens in order to allow people to keep/pay off capital assets.


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## Jim2007

Purple said:


> That is the very harsh reality for many people. I am in favour of the reform of the personal bankruptcy laws which seems to be on the card now; people need to have the opportunity to start again. I am totally against the state taking money from other citizens in order to allow people to keep/pay off capital assets.



That's the thing, people who talk about debt forgiveness want it both ways - free me from the debt burden but let me keep the assets and that idea is just not going to fly!

Now I heard it said that if they are not allowed to kept the house, it will still cost the tax payer in rent allowances, I don't see why this is a given!  The reality is that in most other EU countries there is a cap on how long people can continue to receive benefits and this is usually around two years.  After that you only receive support if you are truly destitute and that does not mean that you get to keep your flat bed TV screen, house or whatever.  At that point you are given social housing, very basic allowance and are required to do whatever work the community requires of you be that sweeping the streets or whatever.

As we move closer to economic union, I can't see how the Irish social net, can be sustained in the long term and I expect some people are going to be in for a very hard time.

Jim2007


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## Kerrigan

I agree about the social net.  It's just not economically possible to keep going the way we are going.

When I read about 'social housing' it frightens me!  If we go back, lets say to the 40's or 50's, we had apartment projects in Dublin, that were used to house people that were not paying their rent.  These apartment blocks in time became the scurge of the city.  

I personally believe if you remove people from their homes and place them in social housing with other people with similar problems and so on it is a receipe for disaster.


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