# Who will pay for the Tracker Mortgage scandal?



## Purple (19 Jan 2018)

Figures up to €1 billion are being mentioned as the total cost "to the Banks" of the Tracker mortgage scandal but who will actually pay for it?
In the medium term it will be the general public though higher bank charges, higher interest rates on loans, and lower rates on savings, or through their taxes if the banks slither out of their liabilities. 
The bottom line is that the money will be recouped from the public on way or the other and the individuals within the banks who engaged in what some might think was a criminal conspiracy will walk away unpunished, unnamed and untarnished. 

As it always was and as it always will be.

What a great little country we live in!


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## newirishman (19 Jan 2018)

According to latest statistics, house prices have risen another 12% over the last year. 2nd place in Europe when it comes to house price rises! Yeah!

Nothing, absolutely nothing, the banks have done, do, or will do, will come even close to how society here rips each other off by pushing into yet another housing bubble.
As long as everybody - including politics - think that high house prices = good all the other stuff pales almost into insignificance.

That's the great little country we live in.


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## Jazz01 (19 Jan 2018)

newirishman said:


> how society here rips each other off by pushing into yet another housing bubble.


Can you explain what you mean by this? Are you saying it's "Joe Public" that is the cause of high house prices?


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## Purple (19 Jan 2018)

newirishman said:


> According to latest statistics, house prices have risen another 12% over the last year. 2nd place in Europe when it comes to house price rises! Yeah!
> 
> Nothing, absolutely nothing, the banks have done, do, or will do, will come even close to how society here rips each other off by pushing into yet another housing bubble.
> As long as everybody - including politics - think that high house prices = good all the other stuff pales almost into insignificance.
> ...


I don't know of anyone, outside the construction sector, who thinks high house prices are a good idea. 
If we had a functioning banking/credit sector we'd have more home building and therefore lower home prices.


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## dub_nerd (19 Jan 2018)

Prices up around 30% just since this article was written in late 2014. That's about €100 bn added to the price of Irish property. A mere billion of fiddling by the banks is literally in the ha'penny place. Also, if we had decent competition, banks who have been penalised for their fiddling would not be able to push the costs on the consumer. One of the reasons for lack of competition is lack of enforcability of mortgage contracts because Irish buyers consider it a god-given right to borrow stupid amounts of money and then squat in the property when, surprise surprise, they can't pay it back. Neither the banks, the politicians, nor the public are blameless. (That said, there is no such thing as collective guilt -- individuals are responsible).


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## Purple (19 Jan 2018)

dub_nerd said:


> Prices up around 30% just since this article was written in late 2014. That's about €100 bn added to the price of Irish property. A mere billion of fiddling by the banks is literally in the ha'penny place. Also, if we had decent competition, banks who have been penalised for their fiddling would not be able to push the costs on the consumer. One of the reasons for lack of competition is lack of enforcability of mortgage contracts because Irish buyers consider it a god-given right to borrow stupid amounts of money and then squat in the property when, surprise surprise, they can't pay it back. Neither the banks, the politicians, nor the public are blameless. (That said, there is no such thing as collective guilt -- individuals are responsible).


Okay, but give that you say that _"there is no such thing as collective guilt -- individuals are responsible"_ what's your opinion on the specific issue at hand?


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## Jim2007 (19 Jan 2018)

Purple said:


> If we had a functioning banking/credit sector we'd have more home building and therefore lower home prices.



On the contrary, if you had the typical mainland European style bank management they would not be remotely will to load the banks up with such large mortgage books.  The mortgage book should be part of the business, not the business as it is with Irish banks.  And until people accept that just as in the rest of Europe, not everyone can or should own a house that will continue.  A housing policy that requires people to either rely on social services or take on large volumes of debt just does not work.

There was a European study released a while back that showed that Irish people lost the largest amount of their wealth during the last recession.  Which is not surprising considering they were holding the most risky asset class available to the average Joe and on top of it he had borrowed to do so.  And we are heading in the exact same direction once again.  In stead of ask who can we keep playing the game, we need to start asking why we are playing the game.


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## Purple (19 Jan 2018)

We need the banks to fund developers. We have enough mortgage facilities as they are, thankfully, capped by the Central Bank (doing its job for the first time in 20 years).


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## dub_nerd (21 Jan 2018)

Jim2007 said:


> The mortgage book should be part of the business, not the business as it is with Irish banks.  And until people accept that just as in the rest of Europe, not everyone can or should own a house that will continue.  A housing policy that requires people to either rely on social services or take on large volumes of debt just does not work.



I've heard this said many times, but do the numbers bear it out? As far as I can see, home ownership rates in Ireland are high but not extreme. We are well down this list on Wikipedia, and this other one on tradingeconomics (see near end of page). What's more, we have a considerable urban-rural divide according to stats from the CSO -- around 70% home ownership overall, but over 80% rurally and under 60% for urban dwellers. The latter represents more than half the value of all Irish property. It looks to me like Germany and Switzerland are the extreme outliers on this metric, while Ireland is fairly run of the mill in general but at the lower end when it comes to urban property.


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## dub_nerd (21 Jan 2018)

Purple said:


> Okay, but give that you say that _"there is no such thing as collective guilt -- individuals are responsible"_ what's your opinion on the specific issue at hand?



I think that's pretty clear. The chances that all the banks "accidentally" engaged in overcharging large swaths of their customers is precisely zero. Individuals at the banks consciously decided to act criminally to the detriment of thousands of people, causing extreme hardship in some cases and almost certainly some deaths by suicide. Every bank has a compliance officer. I'd start by jailing every one of them, and/or using them as canaries to get to the actual people responsible. Obviously, this being Ireland, that's never going to happen.


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## Purple (23 Jan 2018)

dub_nerd said:


> I think that's pretty clear. The chances that all the banks "accidentally" engaged in overcharging large swaths of their customers is precisely zero. Individuals at the banks consciously decided to act criminally to the detriment of thousands of people, causing extreme hardship in some cases and almost certainly some deaths by suicide. Every bank has a compliance officer. I'd start by jailing every one of them, and/or using them as canaries to get to the actual people responsible. Obviously, this being Ireland, that's never going to happen.


I agree but it shouldn't stop with the compliance officer. There were meetings and decisions were made. The people who were at those meetings and were part of, or privy to, the decision making process should also face prison time. 
Until people face the realistic prospect of 10-15 years in prison these things are bound to repeat themselves.


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## Dan Murray (23 Jan 2018)

Purple said:


> I agree but it shouldn't stop with the compliance officer. There were meetings and decisions were made. The people who were at those meetings and were part of, or privy to, the decision making process should also face prison time.
> Until people face the realistic prospect of 10-15 years in prison these things are bound to repeat themselves.



Agreed - but when the Governor of the Central Bank clearly did not know (at last week's Finance Committee meeting) the level of financial sanctions available then I reckon custodial sentences are a long, long way away.


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## Purple (23 Jan 2018)

Dan Murray said:


> Agreed - but when the Governor of the Central Bank clearly did not know (at last week's Finance Committee meeting) the level of financial sanctions available then I reckon custodial sentences are a long, long way away.


Ah yea, there's no chance that anyone will face real sanctions for this. Since the banks will recover any fines through higher bank charges the reality is that the very people who were overcharged will actually end up paying for this, along with every other bank customer.


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## peemac (28 Jan 2018)

The total cost to the banks is about €300m not excess €1b.

about €700m is refunds of customer's money that the banks incorrectly took - so it inflated their profits over the past 8 years.

The 300m is fairly small in the overall scheme of things. Some will be recouped by higher charges, but primarily it will be a one off hit to profits and that affects shareholders - theoretically affecting many as pension funds and the government are the main shareholders in all banks


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## Purple (29 Jan 2018)

peemac said:


> The total cost to the banks is about €300m not excess €1b.
> 
> about €700m is refunds of customer's money that the banks incorrectly took - so it inflated their profits over the past 8 years.
> 
> The 300m is fairly small in the overall scheme of things. Some will be recouped by higher charges, but primarily it will be a one off hit to profits and that affects shareholders - theoretically affecting many as pension funds and the government are the main shareholders in all banks


So they have the €700 million in a drawer somewhere?


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## peemac (29 Jan 2018)

Purple said:


> So they have the €700 million in a drawer somewhere?


No, but it will be a one off charge to the bottom line and affect their profits - just the opposite of when it increased their profits when the took it off.

Shareholders gained from the error and now those shareholders must repay via a smaller dividend or less value of the shares.

I can't see how they can increase charges to the constomer as there are so many options open to the customer and that is making banks more competitive - I can get an unsecured (except for personal guarantee) business loan for 5.5% at present, my credit card charges are at an all time low of 0.6%, my personal monthly bank fees are under a tenner. Savings rates - again, plenty of competition for banks not affected by the tracker and with ecb rate at 0.05%, any interest is a bonus.

I think it will simply be a one off hit to the substantial profits of the banks.


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