Cassandra Voices

Tag: Daniele Idini Cassandra Voices

  • Dust in your Eyes: War and its Image

    The bomb might be dropped any time soon now, apparently.

    The end of all ends, a nuclear war, looms among the narratives of where Ukraine and Russia’s war might end. Timothy Snyder warns in this regard that a nuclear bomb ‘would make no decisive military difference’; adding that looking at ‘the mushroom cloud for narrative closure, though, generates anxiety and hinders clear thinking. Focusing on that scenario rather than on the more probable ones prevents us from seeing what is actually happening, and from preparing for the more likely possible futures.’

    As much as we can agree with this statement, and as much as it is nothing but a prediction for one of the possible futures, other geopolitical analysts such as the Italian Lucio Caracciolo warn of the ease with which the nuclear option has entered public discourse, the talk shows and political debate.

    What now seems evident after Ukraine’s successful counter offensive in the north, and the ongoing systematic bombardments on its energy infrastructure, is that hostilities are continously escalating and we should prepare for a new phase in this war. If the unspeakable does happen, it will coincide with a new era of warfare. Maybe the last.

    How we develop historical awareness, and a particular narrative, depends more and more on which side of the Iron Curtain 2.0 we fall. For all our apparent enlightenment, time and again, we show ourselves incapable of building diplomatic bridges without brandishing the Sword of Damocles.

    The Bomb might be dropped anytime now. But a cultural bomb, the normalization of the possibility of nuclear war, has already dropped from the virtual skies that we carry in our pockets; conveying an endless stream of images, produced by and for everyone, but curated and filtered by a few.

    No one can say when it started dropping. Maybe with the invasion of February 24, or maybe 2014. Some say even 2001. Regardless of the date, we join other generations of humans that must now worry about the existence of nuclear weapons; of the apocalypse.

    The first shockwave comes in the form of war’s inevitability as soon as Russia’s tanks began rolling down towards Kiev; until the last moment many, including me, were unconvinced the troops amassed at the border would ever march. The taboo of a land war directly involving nuclear superpowers was still intact.

    We are generally shielded, or not even exposed, to pictures revealing the true horror of warfare. For the most part, what is put in front of us depends on the political agenda of warring superpowers or various forms of commodification of suffering. One wonders whether we are now even capable of autonomously creating our own memories; or freely perceiving the present and past, never mind the future under such conditions of conditioning.

    The effect of an endless flow of images, tailored and auto-curated to arouse emotions – residing alongside our most intimate obsessions – requires acknowledgement. Their capacity to induce fear and trigger desire are the preferred tools of contemporary propaganda and such tools are used by both side of the Iron Curtain 2.0.

    Global Civil War

    The political consequences of a lack of cognitive freedom in response to weaponized imagery and information are not new in history but, as with every historical constant, is a question that ought to be explored.

    The times we live through are what the philosopher Franco ‘Bifo’ Berardi calls the Global Civil War, where:

    ‘[…] relations among individuals are wired and subjected to automatic connections: political power, therefore, is replaced by a system of techno-linguistic automatisms inclined towards the automation of every space of life, cognition and production.’

    For example, how we react to the pictures of Nord Stream II’s bubbles or the Crimea Bridge strike, depend mostly on which conveyer belt of opinions and positions (“the techno-linguistic automatisms”) we find ourselves exposed to.

    The same goes for how we perceive the veracity of the images of the massacre of Bucha, as well as Russia’s depiction of neo-Nazism in the Ukrainian armed forces, which was previously extensively covered in our media as well.

    Voraciously consuming images of war – of a particular war – I often consider the extent to which images are being used to perpetuate suffering rather than end it.

    Just like in the times of COVID-19 – if your memory stretches back that far – it now takes a great deal of discipline to regulate the right dose of news consumption, as the induced anxiety can be overwhelming. Never mind the moderation necessary to digest and discuss it; or put ourselves in another’s shoes.

    With a diabolical enemy in our sights, such as our culture demands, as well as a defined timeline of events, wherein we struggle to look past February 24, 2022, we weary of discussing strategic failures – reckless dependence on Russian gas – and broken promises – NATO’s expansion eastwards despite undertakings – over the last two decades by Western governments.

    Are we capable of comprehending and reconciling Russia’s (not just Putin’s) very real phobia around encirclement – something that history teaches us is hundreds of years in the making – alongside Ukraine’s legitimate path to independence, which also goes back centuries? Is there now scope for rational dialogue?

    Filo-Putinisti

    Recently, one of Italy’s most prominent newspaper, Il Corriere Della Sera, published the names and pictures of ‘influencers’ who, allegedly, the Kremlin benefit from. Labelled ‘filo-Putinisti’, among these are independent journalists, academics and politicians, treated as ‘enemies of the people’.

    It is not very different to how Clare Daly and Mick Wallace have been treated by the Irish Times.

    To call for a strategy that would include negotiation with Putin’s regime would be to go against what Italian journalist Nico Piro calls the ‘Pensiero Unico Bellicista’ (Unique Bellicose thought current). Unequivocaly taking NATO’s side is what counts. Whoever doubts the legitimacy or even the sanity of ‘interventionism’, even in the closet, is accused of aiding and abetting the enemy.

    How is it that we have been shielded from what has been happening in the Donbass since 2014? Fourteen thousand died in brutal trench war raging at the edge of Europe. Now, suddenly, we feel the heat of the battle across Europe, and simultaneously wonder whether we will have sufficient energy to heat our homes.

    Let’s keep pretending Putin’s invasion came as a surprise. Countries don’t invade each other anymore. Nuclear superpowers don’t engage in land wars anymore. Right?

    The mnemonic silence over the war in Donbass, has morphed into a cacophony of coverage in the wake of a fully fledge invasion, filling, for months, the void left behind by the receding pandemic, as ominously Europe faithfully follows the dictates of a declining US Empire.

    Actually, it seems that as much as rest of the world is preoccupied and even annoyed with Putin’s invasion, it is now giving the finger to the West, after centuries of exploitation.

    It seems incredible how the US, apparently so tired of being an Empire, and on the retreat elsewhere, is still willing to unleash the most pervasive and subtle of propaganda campaigns, suppressing dissenting opinions in countries it sees as vassals, perhaps in order to preserve itself, or what is left of its power.

    This is no time for negotiation is the message, or better still, there was never time for any. Negotiation cannot occur with a genocidal dictator, or can they?

    The propaganda operates not just to change the narrative of the past; it makes one forget that there was a past; or that the past is always brought to us through competing narratives on the battlefield of time and discourse.

    Now, with our sense of time destroyed, and with that an opportunity to discuss, and possibly negotiate, we become more and more ready, and even eager, to kill one other. This is the paradox of a time we had dared to call the “End of History”.

    The Dust

    To remember is, more and more, not to recall a story but to be able to call up a picture.
    Susand Sontag, Regarding the Pain of Others (2003)

    As Susan Sontag remind us, representations of war and suffering have a long history and contain codes of production and consumption: From Goya’s print series The Disasters of War; to Fenton’s Crimean war pictures; Picasso’s Guernica; and pictures of the 9/11 terrorist attack exhibited in the exhibition ‘Here is New York’.

    Francisco Goya Disasters of War – Museum Boijmans Van Beuningen

    Nonetheless, exposure, or really, the immersion in the infosphere, where the weaponization of images and messages is unprecedented, cannot be compared to any of the previous decades of warfare.

    There is now an overwhelming revival of violence in this all-pervasive info-sphere. The message of its inevitability seems a deliberate imposition to distract us from those past and present voices with a lot more to say than a fleeting frame destined to be rapidly replaced in our compulsive doom-scrolling.

    At the same time, it devalues those frames, often taken by the rare photojournalists who are able to go where it really matters – at great risk to their lives – and actually convey what their subjects are unable to. Often because they are dead.

    The curated, over-mediatic exposure of one tragedy instead of another is not really a novelty in the way we use and experience imagery of a current context of interest, but, as well explored in a recent podcast by the Economist, we live in a radically more transparent battlefield.

    The abundance of what is called Open Source Intelligence data, of which photography is a key component – its democratization as with the latest Iranian protests – is to be welcomed, even if it is a double-edged sword.

    On the one hand, we can say that we have never had as many tools available to us in the search for truth. On the other, the concept of truth, or what is truthful, has never eluded us to such an extent as in recent times.

    In an attempt to clear the view amidst the Fog of War, we create individual, atomized fog, which follows us wherever we go.

    Little wonder that in our so-called liberal-democratic hemisphere we have no idea how to bring democratic oversight to social media platforms; even leading some of us to cheer on the idea of Elon Musk, the richest man on earth, taking control of such a decisive device for dialogue and confrontation as Twitter.

    No amount of moderation, fact-checking, algorithm-driven-filtering or surveillance, can keep pace with the endemic disinformation present in our feeds; as much as no amount of critical thinking, rational argumentation and corroboration can prevail over a propaganda machine built right inside our minds.

    In Vogue

    There’s little doubt that photography carries the popular connotation of bearing truths: ‘the image doesn’t lie.’ But we don’t need not look too hard to work out how easy it is it for a photograph, and its caption, if not to lie, to deceive. If not to manipulate, then to be as alluring as a Vogue feature can be.

    Annie Leibovitz’s photograph of Ukraine’s First Lady Olena Zelenska before a grounded Antonov plane and surrounded by fierce special forces is, in my modest opinion, a photographic masterpiece.

    Having said that, going through Rachel Donadio’s piece, and Leibovitz other pictures I recognise how instrumental this is to the current war struggles. Via the gloss of what many desire – to be a celebrity or to become a hero – the image of a presidential couple of a devasted country becomes something we aspire to.

    With each blast we feel more and more impotent at creating the conditions for dialogue to occur. Is it possible that neither Putin’s Russia and his allies, nor the West, composed of thirty NATO members supporting Ukraine is willing to take a step back from the brink?

    How are we to create the conditions, if the dominant message is one founded on our utter impotence, because it’s always the other sides fault?

    Hannah Arendt remind us in her essay “On Violence” that

    It is often been said that impotence breeds violence, and psychologically this is quite true, at least of persons possessing natural strength, moral or physical. Politically speaking, the point is that loss of power becomes a temptation to substitute violence for power […] and that violence itself results in impotence.

    If we are actually talking about the possible, and rational, use of the most powerful weapon available it is exactly because power is slipping away from the Western alliance, as much as from Putin’s regime.

    Nothing new in that as the re-allocation of power is one of the preoccupations of history itself, seldom unaccompanied by violence. But what does it mean when the existence of nuclear arsenals capable of causing our premature extinction are carelessly normalized as facts of life? Like any other storm. Like any other crisis. Like something we’ll remember. You see the path? And where it leads?

    In 1955, Bertolt Brecht published a book called Kriegsfibel or War Primer. It was a collection of photographs, cut out of newspaper and magazines, which he re-captioned with his own verses.

    Such a document now exists not only thanks to Brecht’s artistic sensibility, but also because new generations survived to look at it again.

    “What are you doing, brothers?”-“An iron tank”.
    “And with these slabs here?”-“Bullets that will pierce those Iron armors”.
    “And why all this brother?”-“To live, nothing else”. From Bertolt Brecht’s Kriegsfibel

  • Podcast: Italian Election Special

    In our latest podcast Frank Armstrong is joined by Massimiliano Galli and Daniele Idini to digest the result of the recent Italian general election.

    This has resulted in a resounding victory for a Right or ‘Far Right’ coalition composed of The Brothers of Italy (Fratelli d’Italia) led by Giorgia Meloni, League (Lega) currently under the leadership of Matteo Salvini, and Silvio Berlusconi’s – ‘the Highlander of Italian politics’ – Forza Italia.

    For Massimiliano the result is entirely predictable, as Meloni led the only party that had remained on the side line during the period of Mario Draghi’s unity government. He adds that the only certainty in Italian politics is that the right will always form successful coalitions.

    According to Daniele, Meloni represents a wider movement of European conservative parties. But he expects her government to gain legitimacy, and not rock the boat in terms of European membership or NATO’s involvment in the war in Ukraine. However, he suspects that not much will change for the ordinary person.

    Daniele says: ‘Italian people like to vote for the new thing, even though behind the new thing there is the same people from the last twenty or thirty years.’

    He also draws attention to the electoral law of 2017 which favours coalitions, and which is now favouring the right. Nonetheless, he wonders how the parties will be able to govern effectively given their differences, particularly in terms of foreign relations.

    Massimiliano explores the undercurrent of resentment in Italy that leads to political instability. He draws attention to the low salaries compared to other European countries, and the paradox of working class people voting for parties that oppose a decent system of social welfare.

  • Italy: Is Super Mario’s Party Over?

    Mario Draghi’s ‘technocratic’ government has fallen, or so we’ve heard. Now it feels like we are facing into the most important election in generations.

    According to the latest polls, a (far-) right coalition is on the brink of power. The spectre of international interference, especially coming from the East is (again) on the front pages and the distinction between information and propaganda – journalism and intelligence – has never been so difficult to discern.

    And as we approach two months of political campaigning in the middle of the busy tourist season (I suspect there are plenty of cancellations in 5 star resorts…) this could be the right time to ask: how are elections won nowadays. Is it only the votes that counts? Or does social media superiority, which is nothing less than the understanding of current communication trends and technology – often with outside interference – actually determining most democracies’ fates?

    With these questions in mind it is worthwhile reminding ourselves how we’ve got here.

    I can’t recall a time when Italians believed a government would last its full term. Italy’s apparently chaotic political life has become a cliché, like how beautiful everywhere is to visit, but try living there…

    Youth unemployment hit 49% as of Feb 10, 2021 in the southern region of Calabria, with the national average of 29.7%. Deeply entrenched divisions in wealth distribution between North and South and the ever more precarious nature of employment often determines whether an area or a community can lift itself out of poverty, or is the first to feel the weight of any crisis, whether it is Covid lockdowns, inflation, housing, energy or hunger. The latest available figures show that roughly 19% of the Italian population is now at risk of falling into poverty.

    Despite these bleak figures Italy’s economic recovery after Covid-19 was promising, but after the fall of the 5 Star and Democratic Party-led government thanks to a typical palace coup – compliments to Mohammed bin Salman best friend, the Saudi-funded, Matteo Renzi – again a capable leader is needed.

    At that point, the authority of a brilliant surgeon was called for in a code red emergency to save the country from spiralling doom. Someone who it was claimed saved the Eurozone from the apocalypse with three words. Someone whose position as Prime Minister seemed like a personal sacrifice, almost a burden to endure in the name of patriotism. In an atmosphere like a coronation, Mario Draghi came to power after the most prestigious career one can think of at the highest echelons of world finance and international banking.

    In order to avoid early elections, President Sergio Mattarella called “Super Mario” to the rescue, with a mandate to form a broad coalition of national unity.  I remember when Draghi first addressed the Senate as Prime Minister: “Today unity is not an option, it is a duty”, he said, as he prepared to lead one of the broadest coalition ever attempted in Italian political history.

    He indicated that Italy is doing just fine, will survive the operation, but that a long recovery period lay ahead. We just needed to be reasonable and support a government of “National Unity” where almost all the political forces were expected to support it from both chambers: Almost 90% from the chamber of deputies and 85% from the senate.

    Encompassing Matteo Salvini’s Far-Right Lega, Enrico Letta’s center-left  Democratic Party, among others, along with a dash of Berlusconi’s Forza Italia and the Populist 5 Star Movement.

    2018 Election Results.

    In case you are wondering, there is no definitive consensus as to whether the 5 Stars is left or right wing. This changes depending on where the criticism is coming from.

    Its leader, and deposed Prime Minister, Giuseppe Conte, had to share the cabinet table with Matteo Renzi’s Italia Viva – the main instigator in the downfall of the previous government.

    What could possibly go wrong?

    The only remaining opposition came from a few small parliamentary groups, mainly independents, and Giorgia Meloni’s Brothers of Italy, which is now the strongest far right political party. They are not fascist, or so they say, but it isn’t difficult to find nostalgic sympathy for His Excellency Benito, or even Adolfo, among followers, right up to some of the leadership, as was revealed by last year by FanPage, and is well explained by David Drover in the NYT.

    Mario Draghi was, and still is, the leader of a party that does not exist yet he retains extensive sway over how Italy is governed. One can almost recognize a cultist aspect projected by his persona, and now by his ‘agenda’, which has filled the void of political vision formerly filled by both left and right factions.

    Now a strange mix of old faces ranging from Enrico Letta, to the former leader of the 5 Star Movement, Luigi Di Maio – and even some ex members of Forza Italia – are his disciples available to spread the word.

    In very simplistic terms the unified message that triumphed with Draghi’s government is that the country would not survive without a broad, caretaker government, led by who knows, and that the vast majority of civil society has a moral duty to support him, “Whatever it takes”. Says who? Is that NATO on the line?

    The current crisis can be traced to what was the largest party in parliament – until its recent split – the 5 Star Movement, simply attempting to present certain amendments to the bill “Aiuti” or “Help”, to the government, that they deemed necessary in areas such as welfare, tax, ecology; as well as attempts to reconsider Italy’s role in the context of the war in Ukraine.

    A range of polls since Russia’s invasion reveal that about half of the Italian population does not support weapons being sent to Ukraine. It’s only natural that political factions seek to capitalize on popular opinions, as much as it would be naïve to believe foreign powers, be they Russia, China or NATO, wouldn’t be attempting to exert influence, especially at a point such as this.

    This approach by the 5 Star Movement was apparently ignored, leading to the government’s fall, and to the Lega and Forza Italia seized the opportunity to call for an early election.

    It begs the question: why shouldn’t the largest party in government demand reforms for which it has a mandate?

    This current crisis could actually be a long delayed awakening of a political system which has remained comatose, at least since Berlusconi’s time.

    It’s just a shame that an unholy trinity of Berlusconi’s FI, Meloni’s FDL and Salvini’s Lega may have the numbers to become Italy’s next government coalition. This is the equivalent of Le Pen winning in France, and will surely destabilise all of Europe.

    He’s Back! Berlusconi alonside Giulio Andreotti in 1984.

    By the way, I did say Berlusconi. Guess what? He’s back! With a pledge to plant one million trees, because his party has always been environmentally conscious after all. It’s a bad case of United States of Amnesia that Italian would consider Burlesconi suitable for the presidency of the republic.

    We seem to have forgotten that we already know so much about how his political ascent (and wealth) came about. At the age of eighty-five, he is looking forward to becoming President of the Republic, even while he is still under investigation for his past connections with Cosa Nostra.

    Then again, while he was Prime Minister Conte secured an EU Recovery Package worth about €220 billion, which is expected to flood Italy’s economy with money in the coming years. Who else should we trust to manage this if not the same people, or their disciples, over and over again?

    At all times, we may safely assume, with the approval, or background manoeuvring, of a foreign actor.

    Is that NATO (or the US government) on the line again there?

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    Feature Image is a work by Office of U.S. House Speaker from https://twitter.com/SpeakerPelosi/status/1446579056720416773.

  • The Fog of Law

    You enter here a taut quintet
    Where theorists can shift or shape
    How we make sense of market flow;
    How men and how it’s mostly men,
    Explain the ways our commerce works.
    No Flash of insight, more a slow
    Encroachment that in turn creates
    Our understanding how by stealth
    New certainties of common sense
    Construe the weave of life and wealth.
    Micheal O’Siadhail, The Five Quintets, Dealing, Canto 1, Mechanisms, p.67.

    ‘Is what is written on a piece of paper worth the paper it’s written on?’ was the simple question posed by the Master of the High Court, Edmund Honohan, at the beginning of a recent Decision, delivered on the 9th of February, 2022 in the case AIB PLC vs Gary Lennon.

    Curiously, unlike other Decisions, this is still unavailable on the court’s website, and certainly didn’t make many headlines; although an article in the Irish Times provides a simplified account.

    Could this be because of its seemingly complex legal arguments; or perhaps because it reveals too much about how banks and Vulture funds are taking advantage of Ireland’s permissive legal environment?

    The Decision relates to a case in which AIB were claiming payment of an outstanding debt, from Mr Lennon. However, Mr Lennon counterclaimed that AIB had not furnished the necessary evidence to the Court entitling them to substantiate or prove the claim.

    The first thing that a bank or vulture fund needs to do when claiming payment of an outstanding debt or repossess a house, is to prove, with supporting hard (’probatory’) evidence, that it owns the rights to that property or debt.

    Unsurprisingly, this often proves a difficult exercise after the individual debts are bundled up (securitised) and sold on the international market via ever more and more complex financial structures; Section 110 companies, SPVs, Subsidiaries of subsidiaries. These structures allow our banking system to handle non-performing loans, but also to facilitate a lot more capital outflow, often in the form of un-taxed profits.

    AIB PLC vs Gary Lennon

    In this Decision (which to be clear is not a judgment) by the Master of the High Court we find, apart from the case in question, some serious warnings in relation to the use in courts of the Civil Law and Criminal Law (Miscellaneous Provisions) Act 2020, which now allows business documents, previously considered mere hearsay – out of court statements that are generally inadmissible in proceedings – as evidence in financial cases.

    Simply put, when it now comes to such cases, it has become acceptable for a bank to adduce hearsay evidence, laying claim to a property or debt, and for this to be accepted in good faith.

    Thus, according to Honohan’s Decision, creating a situation where:

    In banking cases, the plaintiff has deep pockets and a reputable firm of lawyers to present the case. Is there any risk of an overarching judicial prejudice in the plaintiff’s favour?  The lay litigant thinks there might be.

    We cannot overlook, either, the alarming phenomenon of banks telling the courts to not even think of requiring their witnesses to come to court and submit to cross examination. A belief that summary judgment is there for the asking?

    Confusion around what actually constitutes acceptable evidence and the institution of legal procedures that overwhelmingly favour big financial institutions over ordinary citizens, could be yet another channel for regulatory capture.

    There is currently €16 billion worth of loans on this roulette table in Ireland, all of which are in some way securitised and being traded as we speak.

    With politicians and the media are now furiously engaging with more accessible aspects of the housing crisis, like simplistic explanations of supply and demand, and the necessity for foreign investment, it is also important to look into how the law has been altered to give more leeway to banks and Vulture funds.

    Citizens, as much as the financial institutions, should demand a justice system that satisfies basic criteria of fairness and impartiality. This should make it realistic for any citizen to challenge a bank or Vulture fund.

    This ought to be regardless of how deep, shallow, or broken, your pockets are.

    “Wolf of Golfgate” Country

    Readers may be familiar with a movie about the 2008 subprime market collapse called ‘The Big Short.‘ It is constellated with explainers like Margot Robby in a bubble bath illustrating subprime mortgage backed securities, and chef Anthony Bourdain making a fish soup with left over mortgages with low values to explain securitisation.

    The financial collapse, as described in the movie, actually happened, after some twenty years of head spinning financial innovations. In that period, investment banking went from being a relatively boring and stale career into what may be referred to as the “Wolf of Wall Street” life.

    Fast forward about a decade, banks get bailed out, while austerity cripples the most vulnerable. 2013 is the year that Reits and Cuckoo Funds came to Ireland and begin to dictate the kind of supply of housing the Irish should have. This has led to the artificial inflation of prices in the housing market.

    In the Land of the Wolf of Golfgate there are thousands upon thousands of loans being bundled together, as we speak, and traded around the world like you would soya beans or any other asset. The reality on the ground is that these are mostly homes that many of us are living in, or should be.

    Securitisation and other complex financial structures to recover outstanding debts, are not always a bad practice and are actually an essential tool to limit banks’ exposure to risk; thereby ensuring a country’s financial stability.

    But if financial predators go unchecked, especially when it comes to housing, and the courts are not up to speed with the financial innovations involved in the cases that it encounters, the country offers fertile ground for those financial entities, and their money, to become overwhelmingly more powerful than the ordinary citizen.

    As Edmund Honohan warns in his recent Decision:

    Courts are not yet up to speed with the byzantine multiple-player transactions in the capital markets. Even the Financial Times, in a full page ad in the edition of 27/28 November 2021 warned “Fakery is now everywhere, Regulation has failed.” Our courts are still exploring the mechanics of securitisation. Wait till we start getting “synthetic” securitisation! And as for encryption and blockchain software, who will interpret the “hash”? (77)

    Moreover, in this often unbalanced relationship between the judiciary and high finance, the use value of a house is deemed to be superseded by its exchange value.

    Another explanation is that unequal access to quality legal representation creates a great disparity between individual citizens and these institutions when it comes to access to housing stock and credit.

    This is an issue for which a petition has recently been launched to address a problem that could affect over 200,000 people. It is called ‘Legal Support for possession proceedings on homes.‘

    Extra Virgin Political Oil

    For the above to happen as smoothly and quietly as possible, you need lubricant in the machinery, which normally comes in the form of extra virgin political oil. This speed up things and make sure the machinery of claims and repossessions works like clockwork, and without any unnecessary impediments.

    As we previously mentioned, one of the widespread practices for banks, Vulture funds and Cuckoo funds, to lubricate the passage of cases, is to present hearsay evidence, something somebody says out of court, and for it be accepted in good faith: This practice now seems even easier despite ad hoc clarifications in the Civil Law and Criminal Law (Miscellaneous Provisions) Act 2020.

    The Act was passed shortly after the case, Promontoria (Aran) vs Burns, wherein Promontoria, a notorious investment fund, often referred to as a Vulture, (I didn’t say it, it’s hearsay) was barred from presenting business records in evidence, and therefore lost the case.

    At that point most people in the country were absorbed with dealing with a pandemic, and shortly afterwards there was the Golfgate Scandal, which included Brian Hayes, CEO, Banking & Payments Federation of Ireland; a prime examples of Ireland’s revolving door between politics and the private banking sector.

    With an urgency rarely seen for other problems, such as the homeless and healthcare crises, the Act was fast-tracked through the Oireachtas.

    Here is how Minister of Justice and Equality, Deputy Helen McEntee introduced the Act in the Dáil debate on the July 30 2020:

    The commission’s report recommends that records compiled in the course of business, because they are generally reliable, should be admissible in civil proceedings as an inclusionary exception to the hearsay rule, subject to the safeguards that have been set out in the Bill. Separately, the Court of Appeal was called in a recent case, Promontoria (Aran) Ltd. v. Burns, to interpret and apply the law as it currently stands regarding the admissibility of business records in civil cases. Both judgments delivered by the court last April were clearly of the view that the law in this area needs to be updated by legislative reform. More recently, the Judiciary has specifically identified legislative reform of the civil law rules on business records to my Department as among the most urgent priorities for it to be able to advance cases fairly and without unnecessary delays and costs to all parties concerned.

    It introduced the possibility, or rather encourages the use of business documents as evidence, even if they are mere hearsay, although it does allow the other party to challenge the validity of such evidence.

    But best of luck if you are a lay litigant, without legal aid and in a precarious financial situation, attempting to challenge a skilled team of lawyers pitted against you, by the bank or Vulture fund in question, full of good faith.

    The inherent risk to private citizens posed by the the misinterpretation of this new law in front of the disarming power of the law firms which the banks rely on, was articulated in an earlier decision by Ed Honohan, AIB PLC vs McGrane, on the 9th June 2021, under the heading EU Charter of Fundamental Rights:

    Given that at least some of these issues – contract terms, debt restructure etc. – are now the subject of EU Directives, the courts will have to satisfy themselves, under Article 47 of the Charter, that the defendants are given “effective access to justice” and, for cases of complexity of the sort above described, that “Legal Aid shall be made available to those who lack sufficient resources insofar as such aid is necessary.

    Most litigants in person just show up in court on the day the case is listed and it may then be too late to make up for lost ground. The chances of framing and corroborating a second bite at the cherry, on Appeal, may be vanishingly small, even if they manage not to miss the ten-day deadline for an Appeal (which many do).

    Writing in Prospect Magazine in 2018, David Neuberger, former President of the UK Supreme Court, said: “Without the rule of law society becomes unjust, violent and poor. It is of fundamental importance that courts are open and accessible.

    “Accessibility means that people with grievances and those being sued must get access to legal advice and to courts. It is an affront to justice if people cannot understand or enforce their rights.

    It’s always a difficult task to communicate to a wider audience how the intricacies of the law, full of carefully crafted language, are at play in underpinning how our society, and economy operates.

    Especially when true complexity arises, actual trials are needed and the public needs to know it can trust their judicial public servants “the adults in the room”, in the making of these key decisions.

    The thicker the blanket of legal fog, the more political “good intentions” and “good faith” are but a faded image of what people’s actual needs are.

    This leads to a society dominated by cynicism, unable to envisage any change, and politically impotent.

    Feature Image by Gareth Curtis

  • The Brick Wall: Access to Justice

    I’m living in cloud cuckoo land
    And this just feels like
    Spinning plates
    Radiohead, Like Spinning Plates, Amnesiac 2001.

    Ten years on from the Irish Banking Crisis and the subsequent taxpayer funded bailouts, how are we faring in term of regulating the financial sector?

    In view of the possibility of another property bubble, it is surely vital to ensure appropriate access to justice, especially for those with limited resources.

    Prior to the Crash, banks through their own internal regulatory mechanisms – including risk management and third party auditing firms – were, essentially, allowed to regulate their own affairs, which unfortunately permitted a lax regime.

    On a rare occasion that a risk manager signalled grave breaches of conduct to the Central Bank of Ireland – as in the case of whistle-blower Jonathan Sugarman – he was largely ignored. And, even though thanks to his revelations we know a great deal more than we would otherwise about widespread banking mis-conducts, Sugarman subsequently had his professional and personal life destroyed. That message is surely not lost on colleagues intending to pursue a similar course.

    Back then, inadequate regulatory frameworks allowed underestimation of risk and outright profiteering in the banking sector. Yet there are reasons to believe that, despite the successes boasted of by the regulators, thousands of people are still being failed by the State.

    Despite concerns being raised in February, 2021 by Sinn Fein deputy Pearse Doherty that “2,865 complaints to the Financial Ombudsman remain unsolved for over 12 months” very little attention has been paid in the media to enduring dysfunctions in consumer protection frameworks, potentially affecting hundreds of thousands of consumers of financial services.

    Regulatory Capture

    Regulators come in two types: smart and dumb. The latter are more likely to make mistakes, and the market will learn about mistakes when firms squawk.
    Ernesto Dal Bó in the Oxford review of economic policy, Vol.22, NO.2

    Could this be a subtle example of so-called ‘regulatory capture’, which is said to occur when a particular industry holds an excessive level of influence over a statutory agency designed  to monitor and regulate it?

    Ernesto Dal Bó offers two interpretation of the phrase:

    According to the broad interpretation, regulatory capture is the process through which special interests affect state intervention in any of its forms, which can include areas as diverse as the setting of taxes, the choice of foreign or monetary policy, or the legislation affecting R&D.

    According to the narrow interpretation, regulatory capture is specifically the process through which regulated monopolies end up manipulating the state agencies that are supposed to control them.

    Either of these descriptions could easily be used to describe successive Irish government’s cosy relationship with foreign multinationals. Witness how in 2016 then Taoiseach Enda Kenny unashamedly set out Ireland’s stall as ‘the best small country to do business in’. Attracting financial service companies to a friendly, relatively unregulated, environment appears to remain high on the government’s agenda.

    But insofar as this is a legitimate goal, the way it is achieved, for example, by perpetuating dysfunctions in regulatory mechanisms, have grave consequences for the public at large, especially in terms of access to justice.

    Ombudsman

    One mechanism to provide access to justice is embodied in the role of the Ombudsman.

    This word come from Sweden where its first use is recorded in the 19th century. Meaning “Commission Man”, it involved oversight over the abuse of power by public administration. The position evolved with changing times and industries, to become globally adopted, assuming the part of an impartial mediator between individual complainants and large, well-resourced organizations.

    To give a simple example with a bit more context: what if you have a complaint against the misbehaviour of a credit institution with which you have a resulting outstanding debt?

    In Ireland, anyone in such a predicament can avail first of internal complaint procedures within the credit/insurance/pension providers. If this proves futile, as often seems to be the case, you can either go to the Financial Services and Pension Ombudsman (FSPO), or for the better-resourced, proceed directly to the courts.

    The FSPO was established in order to provide “an impartial, accessible, and responsive complaint resolution service that delivers fair, transparent and timely outcomes for all our customers, and enhances the financial services and pension environment.”

    It’s role is crucial in ensuring basic standards of consumer protection especially in a sector such as financial services, which bears significant responsibility for a dysfunctional property market

    This article is not disputing that the Office has fullfilled aspects of it’s responsabilities to date, and recognises the challanges of the past two years of the COVID-19 pandemic. The Office’s results are well presented in their annual digests of decisions, and were compellingly illustrated by the current Head of the FSPO, Ger Deering, in his Opening Statement to the Oireachtas Petitions Committee the 25th May 2021.

    What we are interrogating is why a large number of complaints, seem to have been closed in preliminary scrutiny on a narrow, legal interpretation of the Act. It is also unclear whether the FSPO is sufficiently staffed and organized to make use of the necessary banking knowledge in order to fulfil all its statutory duties.

    Boasting Figures

    Ben Hoey, an experienced ex-banker who founded Quartech services, a mortgage mis-selling advisory firm, has been assisting individuals with the filings of such complaints and has made us aware of some of the challenges encountered.

    Having submitted over fifty complaints over the last two year to the FSPO, as well as two FOI requests in June 2021 and most recently a judicial review, he also raises serious concerns over the ability of FSPO to carry out its duties.

    In an Opening Statement to the Oireachtas Petitions Committee, Mr Deering boasted: “In 2020, I am happy to report that, despite the challenges of the pandemic and remote working, we closed 6,193 complaints, an increase of 35% on 2019.”

    But thanks to Hoey’s FOI requests, we now know that 2,110 of these cases never entered the dispute resolution or investigation processes.

    Those numbers also slightly differ from the ones found in the annual report of 2020, and are presented in a way suggesting that 1,401 cases were actually sorted within a very short time frame.

    There are, undoubtedly, cases that were legitimately rejected as indicated in the Act. But in order to gain more detailed explanations for preliminary decisions, made in the first registration and assessment phase, the FOI requested documentation and records in relation to reasons for closure. Unfortunately, in this case the answer was ‘no records exist.’

    This is just the first stage of the complaint; the staff needs to interpret the Act and establish if the newly arrived complaint falls within the FSPO jurisdiction.

    It relies on training and guidance materials, which have also been released, and from this we see that when issues of jurisdiction arise, there is an over-reliance on the legal profession and a marked absence of the necessary banking expertise.

    In general, we know that if a complainant does not accept the preliminary rejection, and responds in writing, he or she receives a letter issued by the legal department. But in order to interpret and respond to this one would likely require legal advice.

    This doesn’t come cheap as the FSPO is well aware, since it spent €1.8m (46% of staff costs) on “Legal Fees” according to their 2020 accounts. By comparison the equivalent UK body filed no such expenses. Recall that the role of an Ombudsman is to be an impartial mediator between individual complainant and large, well-resourced organizations.

    Some of Ben Hoey’s clients received letters up to twenty-two pages long, containing dense legal terminology, supporting FSPO arguments not to investigate; rather than a professional financial analysis of the issue in question.

    Others have seen their complaints dragged out for years, stuck in the earliest phase of the “statutory complaints procedure”; which was established in order ‘to afford complainants an informal, expeditious and independent mechanism for the resolution of complaints.’

    From the point of view of some complainants, it feels as if the process of adjudication has been designed to keep their case out of the FSPO jurisdiction, thus keeping the number of cases that the Office investigates to a minimum.

    When the Financial and Pension Ombudsman positions were merged into their current form in 2018, the new organisation should have been structured, and staffed, to handle a increasing number of annual complaints. It appear from the latest annual report that this has been achieved, but when we get into the granular detail, we see that up to a third of these may have been inadequately handled.

    Given that a significant percentage of such disputes are in relation to mortgages and to a dysfunctional housing market, we can surely appreciate the importance of such an institution.

    The stigma attached to debt is a deep scar that afflicts many in an apparently prosperous country. Given that a level of responsibility lies with the lending industry, we should expect the Department of Finance to ensure that the relevant agencies such as the CBI and the FSPO that protect such individuals are adequately resourced.

    Yet the total count of full time employees of the FSPO is just 85 as of the end of 2021. That amounts to roughly twenty staff per million inhabitants in Ireland. By comparison, its counterpart in the UK employs double that with 3,000 staff, or approximately forty-four per million.

    A Stairway to Heaven

    Since Ger Deering was recently nominated by the Minister for Public Expenditure and Reform, Michael McGrath, to become Ombudsman and Information Commissioner, we expect that the position of Head of the FSPO will soon become vacant.

    We now have access to another FOI request providing insights into the recruitment of Ger Deering to the office in 2015/16, at a point when the Financial Services Ombudsman FSO and Pension Ombudsman were still separate bodies.

    A series of interviews were carried out with eight candidates on February 17-18, 2015 for the first round, and on February, 27, 2015 there were final interviews with the remaining three candidates, the “Board Members Guidelines” resembling a basic template for corporate hiring.

    All of the interviewers had impressive CV’s and expertise, including Mr John Hogan, then Head of Banking Policy for the Department of Finance and recently appointed as Secretary General.

    Revealingly, Hogan contributed to the “The Keane” Report on Residential Mortgage Arrears, which was criticised by Deputy Luke “Ming“ Flanaghan in 2011. The Report rules out the introduction of any scheme involving blanket debt forgiveness.

    Notably, the majority of complaints received by the FSPO pertained to financial and banking issues.  One would expect that any individual considered for that role – with powers to make legally binding decisions – would have extensive experience within the banking sector.

    By analogy, if one looks at the skills required of managers and other positions with supervisory roles, employed in the banking and insurance sectors that are imposed by the EU Single Supervisory Mechanism, we find clear guidelines in regard to required banking knowledge or one can even look up the job description for an FSPO Case Manager in PTSB.

    Yet in the advertised job description for The Financial and Pension Ombudsman we see theoretical banking or financial knowledge being “desirable” instead of “essential”, nor is there an examination process, beyond a standard interview.

    This is not to question Ger Deering’s managerial skills, nor his ability to adapt and learn, but when the job requires him to lead an oversight body over the banking, insurance and pension industries, his work experience is not what one would expect for the appointment.

    We know that the Office contains some banking expertise thanks to the qualifications of less senior staff, who have to deal with an enormous workload. But an appointment process for the top job focused on legal and managerial skills may perpetuate the current imbalance between the private and public sectors.

    In the forthcoming recruitment process for a position such as the FSPO, it is surely in the interest of the Department of Finance to appoint a person with more than generic managerial skills, and for some form of competitive examination to occur. Otherwise, it will be difficult to convince an increasingly sceptical Irish public that the government is genuinely intent on levelling the playing field between ordinary citizens and “too big to fail” corporations.

    Shared Responsibility

    One might say that appointing an ex-banker to the position creates a dangerous revolving door between banks and regulators, and is itself a recipe for regulatory capture. That argument is right to a point, but does not take into account that the necessary banking expertise might be found outside the banking industry itself, such as in auditing and accountancy firms; or by casting the net internationally to guarantee a greater degree of separation between the regulator and the regulated, especially in a small country such as Ireland.

    And, insofar as it is important to have sound legal advice, it is important that this is not set out in such a way as to intimidate complainants, and that the Office receives the same level of financial consultancy as the banks themselves.

    When we talk about consumer protection in the financial industry, we are really talking about the level field that the government promises, in relation to an industry administering one of the most powerful means of control, which is the complex socio-psychological phenomenon of debt.

    While some are celebrating that ‘The Boom is Back’, a significant proportion of the population is still struggling to overcome the effects that the previous boom and subsequent financial collapse actually brought; and, as in the period of austerity, the burden of bad choices is still carried almost exclusively by the most vulnerable and least resourced.

  • Housing: A Banker Speaks Out

    It is often said the current Irish housing crisis is mainly the result of a lack of supply of new houses; a supply that slowed down and never really fully recovered following the burst of the property bubble in 2008.

    Developers lament a lack of initiative in governments past and present; housing plans replace one another, at least in their facades. The latest example is the Fianna Fail Housing Minister Darragh O’Brien’s Housing for All replacing, or rather refining Rebuilding Ireland introduced under Fine Gael’s Eoghan Murphy – all while multiple cranes never really stopped crowning Dublin’s skyline.

    The spin is that this lack of supply, in turn, generates scarcity, which translates into higher prices.

    Thus far, the solution we have been served is to create a tax-friendly environment: a de-facto tax haven, to attract reliable (and well-resourced) institutional landlords and investment funds – commonly referred to as Vulture or Cuckoo Funds – to accelerate badly needed developments, besides keeping the Irish banking system afloat.

    Apparently, such entities are best placed to pursue ambitious housing schemes, and the management and maintenance of as much of the national housing stock as possible. And supposedly, as in the Housing for All plan, it is the market that is best equipped to understand and deliver the population’s needs, down to every neighbourhood and community.

    Unfortunately, however, the nature of this demand, might not be guided by the community’s needs, but the obligation of a certain profit margin for a financial instrument; held in a pension fund – perhaps owned by a kindly grandmother somewhere else in the world – while enriching the asset managers of these private equity juggernauts.

    What actually gets built, and at what price, is increasingly under the control of entities that hardly take into account the repercussions for society at large. In some cases they simply up sticks to gnaw on bones elsewhere. The Cuckoos have been here for a long time, locking in the spread between ever increasing rents and the financial costs.

    The influence of the banking and financial sector over the delivery of housing has become ever more evident. Thus, the quagmire of basic supply and demand arguments have little or no bearing on how a complex infrastructure such as housing is managed.

    It is within the banking sector, and regulations set by the ECB and Irish Central Bank that a substantial proportion of the residential properties of this country are held, packaged and repackaged, and sold in bundles to foreign investment funds in a process called securitization.

    For most people, despite the shocking revelations arising out the 2008-09 Crash, the inner workings of those dynamic sytems remain out of reach. We therefore find it necessary to look for guideance from someone who really understands the relationship between the current housing crisis, and the financial markets underpinning this.

    Ben Hoey has worked in commercial and investment banking for the past thirty years. After leaving Ireland in the 1980s, he went on to become CFO of Merrill Lynch International:, CFO of Bank of Ireland Capital markets in the wake of the 2008-09 crisis, and managing director of Kennedy Wilson Europe until 2015. Then, as he likes to put it, he failed to retire.

    He is now in the process of setting up his own Fintech business, aimed at creating a Rent to Buy structure.

    It was while analysing a distressed home loans portfolio on behalf of the Not-for-Profit organisation called Right2Homes, that he awoke to the full scale of banking misconduct, and mis-selling of the mortgages in the first place.

    Hoey contends that up to one-hundred-and=fifty-thousand mortgages may have been affected, including some currently in the Courts for repossession hearings, and others that have already been repossessed by banks and Vulture Funds.

    He is now taking approximately one hundred test cases of misconduct and mis-selling of mortgages before the Financial Services Ombudsman: and that seems to represent just the tip of the iceberg.

    Today, Irish interest rates remain, intentionally, the highest in the EU in order to increase bank profitability. This allows the Vulture Funds to purchase swathes of property and maximise their returns. Nowhere else in Europe offers such attractive rates, and hence Ireland is plagued by the funds, who see us as easy picking. Distressed mortgage holders are simply the low hanging fruit.

    How can we explain why an entire generation is paying the highest mortgage rates in the Eurozone, or being forced to rent at at more than double the rate compared to ten years ago? Extreme commodification of residential assets lies at the heart of this.

    Image: ©Daniele Idini

    Ben Hoey: It’s all about cash flow. Property, as an investment, is valued based on its ability to generate cash. Cash is king, and that’s why these Vultures, even the Cuckoo Funds, can access so much low cost leverage. No one has a hope against them. That’s what’s wrong with the world. Capital markets are so cheap now that they can buy anything. And if you think that the current government policies and Central Bank policies is putting free cash into the system, you need to recognise that free cash doesn’t go to you or I. Free cash flows to the banks to make sure they are solvent and healthy. And it’s the banks that make the fortune out of the free cash from quantitative easing.

    Cassandra Voices: What would be the average rate that Vulture Funds will buy loans for? Is there an average or is it dependent on the amount of NPLs versus performing loans if it’s a mixed package, for instance?

    Ben Hoey: No, it will never be mixed. Even when Nationwide Building Society was sold off, it was broken into different portfolios of loans depending on the ability of the debtor to pay. For simplicity, there was the complete deadwood, ‘haven’t heard from them in years‘; to the guy struggling; missing every couple of months; to the performing ones [the loans that were regularly being paid off]. So even within the Non Performing world, they split them into different categories and then they’re priced accordingly per portfolio.

    In 2018/19, the average pricing for Irish bank’s non-performing residential home loans was circa 65 cents on the dollar. And that’s per portfolio. Nothing is ever priced per loan because it’s all priced on the cashflow of the portfolio. Cash flow primarily generates what price they’re prepared to pay for the portfolio in total. Then, once they work out that, they apportion the price back across the portfolio for tax and regulatory reasons. Other factors such as equity in the home, negative equity, etc. do play a role, but they don’t care much about the price per loan, as each loan position will be managed individually and the portfolio will be managed and funded in its entirety; the objective being to maximise the cash flow on every loan.

    Image: ©Daniele Idini

    Cassandra Voices: The narrative supporting the presence of Vultures Fund in Ireland is that their investment is a necessary precondition for a stable banking market, and consequently construction industry. Why are we still seeing massive sell-offs of loan portfolios to Vulture Funds? Are the banks still in a sort of intensive care unit and in need of continuous injections of capital, as in the wake of the Crisis?

    Ben Hoey: I don’t think so. The banks are generally a cash cow. But what happened in 2009 is that there was a liquidity crisis as international investors and depositors withdrew their cash from the Irish banking system. NAMA was formed to solve that liquidity crisis in the banks. Most of the developer loans, which were completely dead in the water (with no cash flow), which were extensive relative to the rest of the banking market, were transferred to NAMA and again cheap, very cheap bonds were issued to support the purchase. All of those bonds were issued to the banks that transferred their loans. They effectively swapped their bad developer loans for low cost NAMA bonds which greatly improved their liquidity and capital position, as they could use those bonds to generate cash or liquidity in the market. NAMA was vital to addressing the liquidity issue in Irish Banking at the time.

    The interesting thing is that actually they didn’t start getting the residential loans off their books until about 2016, 2017 and 2018. So, there was clearly no rush as the liquidity crisis passed. The main reason that the banks in Ireland started to sell the residential loans was that the European Central Bank said: “guys, we are worried about the next crisis and you’re still living in the current crisis. So get your residential non-performing loans down below a certain percentage of your balance sheet.”

    It was typically seven percent on residential NPLs dropping to around five percent. So the Irish banks, faced with severe imposed capital costs, were strongly encouraged to sell their portfolios to hit these ratios. The European Central Bank brought in horrendous capital hits like a 100% reduction of your capital if you didn’t get below that level. So, for example, if you had a €100 million loan portfolio and you had provided say €60 million against it, your exposure to future losses was only 40, the ECB was saying: “if you don’t get below that ratio, then an ever increasing amount will be deducted from your capital, greatly limiting your ability to undertake new business.”

    We need a strong banking system which is ready for the next crisis. So after NAMA, there does not appear to have been a liquidity crisis for the Irish banks and, by their very nature, liquidity crises need to be solved immediately, as they are not like property and health service crises, which seemingly can go on for decades.

    In 2008-2009 the Irish government stepped in and did the craziest thing ever, which was to guarantee €400 billion of customer deposits, because all the international deposits were leaving the Irish banking system literally by the second. And they actually started to realize that, oh, my God, we have a bank account too that needs to be funded – and, they know, it’s going to run out of cash soon. And that was the problem. Nothing to do with lack of profitability. It was lack of cash or liquidity as it is better known in the industry.

    Cassandra Voices: So it was the withdrawal by investors, essentially a withdrawal of money by other banks or investors?

    Ben Hoey: By all the deposit base. Ok, not so much the Irish people, because they had access to the deposit guarantee scheme already. There was some stories of customers moving their cash to Switzerland and they all lost their shirts on the exchange rate. But no, in the main, it was the big institutional money that would have always chased the higher yielding banks. So, the Irish banks would have been paying a greater rate because they were less safe, because of country risk, etc. So as soon as those institutions got scared, they just pulled the cash out and the short term money markets closed to the banks. All right. And then that’s when the ECB had to allow Irish banks to start printing bonds. So they printed money. They issued bonds. But it was to save the banking system. Yeah, I think that was the bottom. Remember, you can only have a liquidity crisis over a short, very short, period. The liquidity crisis is a week or two weeks where – I always have to remind people – the truth is hard to establish, as each bank fights for survival and many assumptions have to be made by chief executives. It’s a very, very awkward position to be in.

    Cassandra Voices: Isn’t it the job of bankers to project a level of confidence that might exceed the reality of the picture?

    Ben Hoey:  The chief executive always has to take the optimistic view. Then, you know, you look at the Irish regulator at the time. He looked at that crisis. I don’t know where he got his information from. He came out and said that the Irish banks are well capitalised to weather the storm. So there was a man who wasn’t even a chief executive talking up the banking system in order to give it a chance of survival. I think a month later it was all over. But to have no liquidity is what kills a bank, not lack of profit, as the accounting rules are focused on the long-term profitability of the banking system.

    Image: ©Daniele Idini

    Cassandra Voices: But what happened to Iceland in your view? Did they do the right thing  when they more or less let their banks fail.

    Ben Hoey: They had no choice. There was no EU there to support them. You know what partially got us into the problem was joining the EU: the euro and cheap money coming into an economy that was used to expensive money. People thought, “I can service a million euros worth of tracker mortgage for six bob a week.” And so when we went into the crisis, the ECB helped us out. We are part of the euro. We couldn’t be brought down. But Iceland had no backstop. They were on their own. It was a common belief that the guarantee by the Irish Government of €400 billion of bank liabilities was stupid, but the markets ignored it. Do I think NAMA was a good thing. Yes, I think it saved the liquidity of the Irish banks.

    It’s after that period, after 2010, there was a tremendous opportunity for Irish banks to rebuild and innovate. And they didn’t. They just sank back in and took the cheap money and did the same thing day in and day out. And then they screwed their own customers, beat the shit out of them, treated everyone the same. Talked about moral hazard and how certain members of our community overborrowed and made a mess of it. I hope society never forgives them, but some people move on. So in answer to your previous question, after the liquidity crisis was solved they didn’t need to sell their NPLs, they wanted to sell them. They didn’t need the cash. In fact, the banks were overcapitalised in my view and wanted to repay capital.

    Cassandra Voices: So if the banks, after 2010, were not in need of cash, but they were forced by the ECB to sell most of their distressed loans nonetheless, why didn’t they consider more ethical solutions that would have protected family homes for example? Instead of selling to the American, Canadian or other international funds?

    Ben Hoey: Two reasons. Execution risk and moral hazard. The moral hazard in this case is: banks say we can’t give a discount to someone even though they might deserve it, or we may have lent them too much cash. We can’t restructure the loan fairly and write off some debt as their neighbours will want a debt write off too. You can argue all day as to whether that’s right or wrong, but that’s the moral hazard argument. So they have to sell to someone who would be seen to be not so fair. And there’s a lot of hassle and maybe a bit of shame. Moral hazard helps to embed that shame in people. So that’s the moral hazard,.

    Then there’s execution risk. If you consider, at the end of the day, you have a bank official charged with selling several billion euros worth of loans. So you have a small number of ambitious well paid people who want to continue to be successful. So do they sell to Brian Reilly and his not-for-profit initiative, who’s never done anything like this before, who appears to have the funding, but it’s never been executed? Or do I just give it to Cerberus, who will walk in the door with the cheque immediately?

    You know, the head of Lone Star, the richest Irishman in the world, John Grayken, visited some of the Irish banks selling assets, which is akin to Warren Buffett popping in for a chat; that’s powerful messaging to Irish bank officials who need a guaranteed sale. They are big talkers; you tell me the cheque you want and I’ll write it now. That’s execution risk. There’s no executive risks with the likes of Lone Star or Cerberus.

    Cassandra Voices: What do they ultimately want out of all of this if, at the end of the day, they’re buying something that’s not performing? The cash flow really isn’t there. Do they want the properties? What do they want out of this?

    Ben Hoey: The normal model was they would price the portfolio on the current cash flows and then, after the purchase, they would improve those cashflows or liquidate some loans, i.e. repossess. And, in certain cases, they do deals for guys to walk away. So, say the property was worth €100,000 for simplicity sake, and they gave the guy twenty grand to walk away. God knows what they bought the loan for, but they ask themselves: “is this the maximum cash we can get here?” So €100,000 sale price, minus the 20k that they gave them to walk away. That’s generated €80k today, and the today is very important. That would have fed into the model. So it’s all about maximizing the cash flow.

    When they couldn’t maximize the cash flow because the Irish courts didn’t cooperate, they minimized the cash outgoing. So, originally when you buy a non-performing loan book that actually has a bit of cash flow, you don’t use all your own money to buy it. You go to a London bank and they give you what’s called a loan on loan. So they lend you money, and probably at one and a half percent, up to 60 percent loan to value, secured on the loans you bought. So that’s really cheap. But your own equity needs are say, nine percent unlevered.

    After a while you think this is not going anywhere. I’ll just put the whole lot into securitization vehicle and then issue triple-A notes up to a high percentage, paying out 80 basis points. So, they drive down their funding costs, which again enhances the cash flow. Net cash flow.

    Yeah. It’s all about cash. Show me the cash. The trouble is that they couldn’t do deals with Irish people because there was so few who had any cash and had no access to cash. And the Courts wouldn’t allow them to repossess.

    Cassandra Voices: And what has all of this to do with the Housing Crisis? How does this affect supply and demand on the Irish housing market?

    Ben Hoey: You said “there’s no supply.” So how do you know that? Supply of what to who? No one has defined how many affordable and social houses our society can afford. We don’t actually know what supply we’re trying to meet. And, you know, like all journeys, if you start in the wrong place, you have no hope of getting to where you want.

    The pension fund, the Vultures, are just one mechanism of delivery. But who are we trying to supply to? The family paying a bit of tax, probably earning up to €80,000? They should be able to buy a home or rent it affordably. We’re not trying to supply housing to a German pension fund. They don’t need housing. They need profit.

    Cassandra Voices: But a larger section of society in Ireland actually needs housing. And instead, what you are saying is that we are supplying Vulture and Cuckoo Fund profits, through the delivery of housing for their needs, and not the Irish people?

    Ben Hoey: Can you imagine if Apple said they were going to build a new phone with special features and they were going to sell it to a German pension fund so they could sell it on to our citizens? That’s exactly what we’re doing here. We’re saying we’re building these houses for German and U.S. pension funds because they’re the only ones that can afford them. We put a profiteer in the middle – a middle man. And that’s what happens when you commodify an infrastructure, a key infrastructure like housing.

    Image: ©Daniele Idini

    Cassandra Voices: Is this by design where we are now in terms of housing?

    Ben Hoey: This is inevitable when you make something a tradable commodity. You’ve turned homes into an investment class. There’s no rules anymore. The cheapest money will get the deal. And that’s the fundamental issue.

    What would happen if the Vultures took the airport over and were charging everyone €300 a head to get through? It wouldn’t happen because it’s so obviously wrong. But so is just about everything obviously wrong with the family home market. And you can see the effects. You go to Dublin, North Docks and South Docks; There are thousands of beautiful apartments, worth €600,000 to a million sitting empty because the German and U.S. pension funds want that type of housing, as they were told there’s loads of wealthy young people living in the city. How’s that worked out? Again, their money is so cheap that they can leave those apartments empty, and wait for rents to recover.

    There’s no crisis for them, even though their flats are empty. We’ve actually allowed a particular type of Vulture investor to dictate the supply of family homes to the Irish market.

    Back in the 1990s and early 2000s, we started building stuff all over the country where it wasn’t needed. We’ve learned from our mistakes, but we’re building the wrong sort of property in the right place: and this kills me as a capitalist to say it but… stop treating family homes as a commodity that can be traded. It will make the cost of labour very expensive and the country very unproductive.

    Image: ©Daniele Idini

    Cassandra Voices: Would it be possible to gradually stop treating the residential property market as a tradable commodity?

    Ben Hoey: No, I think you have to go back to basics and look at the complete supply chain: who ultimately is the rightful owner? Is it the individual, the government, or is it a commercial operation? And then you’ve got to put the right structure in place. And the funding naturally comes. Everyone looks out to different models such as the Austrian model etc. And they do work, but you can’t just pick and choose bits of them. You’ve got to look at the whole structure, holistically.

    Cassandra Voices: Ultimately it comes down to a vision of the society that we want to live in. And in order to define this we need a political environment that is willing to build an economic system that takes into account the needs of the population at large, and as you said is willing to define, in the first place, what those needs actually are. In the case of the Irish housing markets, the problem doesn’t seem to to be about access to financial resources, but again, who has access to it.

    Ben Hoey: When I was listening to you there, I was thinking about how we got rid of the British landlords in the past, who took the land with the backing of military power. And we’ve replaced them with, private equity, the Vultures who have employed not military power, but their cheap money. If only you knew the pain they go through before they decide to buy or to build. If you watch that pain, that risk mitigation, you realize how naive we are. The governments says build, build, build. But the clever money agonizes before it decides what to do. The Vultures know exactly what they want. But we don’t. So we end up being picked off.