Tom O'Connor: The comments last week by the Financial Regulator Matthew Elderfield display a callous indifference to the plight of 77,000 people currently in arrears with their mortgages. Mr Elderfield rejects government help for these people, as it would cost the taxpayer money. This is astonishing when we consider that he is supportive of the €33 billion in recapitalisation of the banks and the overall cost (including NAMA) of €73 billion according to the ESRI. This includes €10.44 billion to Anglo Irish Bank, which has very few ordinary people as customers and is well known as the bank of the property developers.
We are not being told of the extent of arrears. However, there are 77,000 householders in arrears. Even if every single one of these housholders had arrears totalling €20,000, this would still only add up to 1.54 billion. This is just 2% of the €73 billion being given to the banks. Now, even though it is the taxpayer who will be liable for the €73 billion, they are being denied what amounts to 2% of this figure to keep 77,000 people in homes.
The government’s 12 month moratorium on repossessions has ended for many, and will end for all in September. The truth of the matter is that if we are to take Mr.Elderfield's advice, then the government should stand idly by and watch the unfolding of a social catastrophe.
Mr Elderfield's justification is that other mortgage payers have 'gritted their teeth and are meeting their obligations'. So he is essentially blaming the 77,000 for their plight. This is an outlandish comment because: the vast majority of defaulters are victims of poor government policy arising from its cosy relationship with the construction industry which forced them to buy houses at hugely inflated prices; the government gave people no other option, building only 4,000 social and affordable housing units of the 80,000 a year demanded by the population over the period Celtic Tiger; and the mismanagement of the economy and the bursting of the housing bubble has seen unemployment hit 435,000 while the government does nothing to solve the problem. In fact, its taskforce met once last year before being disbanded.
Surely €1.54 billion could be set aside to pay these arrears. This could be given as re-mortages to defaulters by the Irish government. The defaulters could be asked to make minimum payments, covering interst on mortages at most, if possible, until they are in better financial circumstances. A further €460 million fund could cover the difference between the minimum payment and the actual monthly mortgage payment over the next 12 months until people get back on their feet. The situation could be reviewed at that stage. This is only one obvious way to tackle this problem. There are others.
The government would be foolish to listen to Mr.Elderfield. He is a financial regulator, not a policy maker, and has no democratically elected mandate. It is really time for people to demand a payback from the state, given the risk that they as taxpayers are being asked to take to solve the financial mess which they did not create themselves. The minium is to allow people stay in their homes. People need to stand up and not allow themselves be trampled on any further.
Dr Tom O'Connor @justeconomics
Tom O’Connor is a lecturer in economics, public policy and health/social care at Cork Institute of Technology.