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Thousands of homes targeted for seizure by banks


images

BANKS have initiated legal action to repossess thousands of houses and apartments, it has emerged.

This is despite a loophole in the law blocking repossessions.

A new report estimates that lenders have issued legal proceedings to take properties off up to 44,000 borrowers.

These are made up of residential and buy-to-let properties, according to calculations contained in a new report by Davy Stockbrokers.

An analysis estimates that what it calls non-cooperative borrowers number between 23,700 and 43,700.

FEARS

Letters threatening legal action have been sent to these borrowers.

And there are fears that large numbers of properties, particularly buy-to-lets, will be repossessed.

Legal action to repossess properties has been taken by both AIB and Bank of Ireland in around one in five of arrears cases, according to the report by Davy‘s Conail Mac Coille.

Ulster Bank said that up to a third of its property owners in arrears were making no payments at all. The bank said it would not hesitate to repossess in these cases.

Strong demand for family-type homes and the presence in the market of large numbers of cash buyers mean that a flood of newly repossessed properties can be absorbed.

A number of banks were also likely to keep repossessed properties on their books, take the rental income and slowly release them on the market, Mr Mac Coille wrote. Changes in the law to restore the right of lenders to repossess properties have been passed by the Houses of the Oireachtas and are expected to become law soon.

Davy reckons that arrears will keep rising this year, with large numbers of homeowners struggling to repay largely due to income decreases rather than job losses.

Two-thirds of those in arrears are in a job, according to comments by Central Bank governor Patrick Honohan.

For large numbers of borrowers in trouble the mortgage repayments are so high they represent more than half of their income, Davy reported, citing unpublished Central Bank studies.

A separate MABS (Money Advice and Budgeting Service) report found that distressed borrowers had just €777 a month left, after paying for utilities, food and childcare. But the mortgage was around €500 a month.

SPLIT

Banks will have to write down up to €11.5bn of mortgage debt. Most of this will be in the form of split mortgages where part of the mortgage owed is put to one side, and in most cases will probably have to be written off at the end of the mortgage term.

But one-third of borrowers are in such a bad financial position that a debt writedown will not work. These are mainly buy-to-let investors.

Half of investor mortgages are paying interest only. Despite this, almost 30,000 out of 150,000 buy-to-let mortgages are in arrears.

Irish Independent

via Thousands of homes targeted for seizure by banks – Independent.ie.

Public Inquiry · It is practically impossible to challenge the power of state corruption


The following editorial in today’s Irish Examiner is worth reproducing in full.

The header asks: Why are we pathetically complacent?

I don’t’ think the Irish people are complacent. I think rather they have, over the decades, being rendered totally powerless by the sheer weight of corruption within the political/administrative system.

Irish citizens can see the corruption, they are extremely angry about it, particularly since September 2008, but because the governing system is so infected with the disease it is, short of a revolution, almost impossible to make any serious challenge to the power of state corruption.

Challenging corruption – Why are we pathetically complacent?

Friday, July 26, 2013

It is not an exaggeration to say that the country was convulsed in the run up to the passage of the Protection of Life During Pregnancy Bill through the Oireachtas.

Tens of thousands of people marched, every media platform was dominated by debate on the issue. Croziers were dusted off and swung like broadswords in a way that once commanded obedience. Taoiseach Enda Kenny showed an unexpected ruthlessness to get the legislation passed.

We had, in Irish terms at least, a spectacular and almost unheard of form of protest — politicians risking careers on a point of principle.

It was, whichever side of the debate you stood on, a matter of right or wrong. A position had to be taken, remaining neutral was not an option.

Yet, and though the ink is barely dry on the abortion legislation, another manifestation of this society’s justice system’s dysfunction and ongoing failures, our seeming indifference to allegations of corruption — or the innocence and good name of those accused of it — presents itself and there’s hardly a game-changing ripple across the public consciousness.

There is certainly no prospect of 40,000 people marching through the streets of our capital to protest at yet another Irish outcome to an Irish problem.

Is it that we don’t care? Is it that five years after our banking collapse and not a single conviction to show for society-breaking years of Wild West banking that we are a beaten, abject people who have come to accept that for some people accountability is as remote and unlikely a prospect as levitation?

The collapse of the planning and corruption trial earlier this week because a witness is too ill to give evidence has served nobody well, not even the businessman, the councillor and the two former councillors in the dock. Though the principle of innocent until proven otherwise must always apply, too many important questions remain unanswered.

This one case may put the issue into a sharp, if fleeting, focus but there are myriad examples of our failure to adequately deal with the whiff of corruption.

Speaking to the Dáil’s Public Accounts Committee, former financial regulator Matthew Elderfield put it in the gentlest terms when he chided that we do not have a system capable of holding individuals to account or tackling white-collar crime.

How could it be otherwise? A report from that committee suggests that fewer than 60 state employees are focussed on white-collar crime. This figure includes all relevant gardaí, Central Bank officials and the Office of the Director of Corporate Enforcement staff assigned to the problem. We probably have more dog wardens.

It is surely, despite the occasional protest from cornered politicians, naive to imagine this is accidental. If it is, like our tribunals, it is profoundly under-whelming and utterly unequal to the challenge. More likely it is another example of our enthusiasm for rules but our fatal distaste for implementing them.

There is great, chest-filling talk about political reform, about a new political party even and changing the culture of how a citizen interacts with the state. Sadly, all of that will stand for nothing more than a cynical diversion unless we have a policing, regulatory and justice system capable of, and most importantly, enthusiastic about, investigating allegations of corruption.

It is said that a society gets the politicians it deserves and that may well be true, but it is absolutely certain that a society must suffer the consequences of the behaviours it tolerates. The evidence is all around us.

via Public Inquiry · It is practically impossible to challenge the power of state corruption.

It (fraud) will continue until you no longer give your consent


The following very strong, very revealing letter was published in the Irish Examiner last Saturday.

Beware third party rules on mortgage transfers

“In our view, the code could potentially slow the increase in mortgage arrears in Ireland, and may allow lenders to start repossession proceedings sooner.

“We view this as a credit positive for the senior notes in outstanding residential mortgage backed securities.”

Let’s translate this quote from the Standard & Poor’s ratings agency as they commented on the new Central Bank code on mortgage arrears.

The important line is the second one. Your mortgage was sold to third parties by your bank. These third parties are hedge funds, insurance companies, etc.

These are the senior note holders. Your bank was paid in full for your mortgage by these institutions. Your bank now acts as a debt collector for these third parties. Basically, they bought your promise to pay from the banks.

The Irish Central Bank rules clearly state that a debt cannot be sold on to third party investors without your consent. If it was then the debt is null and void.

The next question to ask yourself is was your mortgage sold on to investors? The answer to this question is the same as the one about the bear, the woods and toilet facilities he used.

So unless you received a letter stating your mortgage was no longer owned by your bank then your mortgage is null and void.

This is just another example of the multi-layered fraud that continues daily in this country, all perpetrated by the suited and booted ones.

It will continue until you no longer give your consent.

Barry Fitzgerald

Lissarda

Cork

via Public Inquiry · It (fraud) will continue until you no longer give your consent.

Anglo Irish Bank- Drumm didn’t want any ‘b*ll*xology’ from Central Bank ‘clowns’


Anglo: Central bank boss Honohan says people ‘energised’ by tapes

Irish Independent
Ganley shown minutes from Anglo Irish meeting on ‘overcharging’. Businessman Declan Ganley was shown minutes from a meeting at Anglo Irish Bank that raise serious questions about how interest was applied to loans.
See all stories on this topic »

Tapes show Anglo executives discussed run on deposits

Irish Times
Discussing how they might encourage the Central Bank to provide “fallback” funds Mr Drumm is heard to say it may be time for Anglo Irish to have a “conversation with our friends on Dame Street [the Central Bank],” due to the volume cash withdrawals.
See all stories on this topic »

David Drumm: ‘I’ll no longer be made a scapegoat for banking crisis’

Irish Independent
It is now about October 2008. Ireland has taken the disastrous decision to blanket guarantee Anglo Irish Bank as well as its other failed financial institutions. Con Horan, the man in charge of supervising Anglo for the Financial Regulator, is on the 
See all stories on this topic »

 

‘I’m beat, I am totally beat at this stage’ – ‘Oh, join the gang, ha, ha, ha!’

Irish Independent
The State has sleepwalked into guaranteeing the liabilities of Anglo Irish Bank. Ireland is on its way toward economic collapse and the humiliation of enduring a European Union/International Monetary Fund bailout that would lead to drastic cuts in 
See all stories on this topic »

Drumm didn’t want any ‘b*ll*xology’ from Central Bank ‘clowns’

Anglo executives discussed breach of liquidity rules in 2008

read full article

irishtimes.com

David Drumm attacked the ‘drip, drip, drip’ release of the tapes
RTE.ie
Former Anglo Irish Bank chief executive David Drumm has said he will no longer allow himself to be a scapegoat for the banking crisis. Mr Drumm issued his statement to RTÉ news, as the transcripts of more recordings he had with another former Anglo 
See all stories on this topic »

‘The market is drunk!’
Irish Independent
S&P, the bank credit rating agency, has just issued a new note warning investors to be wary ofAnglo Irish Bank. David Drumm, the bank’s chief executive, calls up John Bowe, head of treasury, to discuss what it all means for Anglo. The conversation 
See all stories on this topic »

Anglo: New tapes reveal meekness of State’s watchdogs
Irish Independent
I just was not asked about tapes, says Dukes. THE former chairman of Anglo Irish Bank did not reveal the existence of the Anglo Tapes to major inquiries into the collapse of the banking system because he was “not asked about” them.
See all stories on this topic »

Ganley shown minutes from Anglo Irish meeting on ‘overcharging’
Irish Independent
Businessman Declan Ganley was shown minutes from a meeting at Anglo Irish Bank that raise serious questions about how interest was applied to loans. Also in this section. Super-rich duped in €30m US land scheme · Beer could be the answer to all our 
See all stories on this topic »

Anglo Irish Bank


Sunday Independent to reveal more Anglo tapes
RTE.ie
Further transcripts of conversations between senior bankers at the defunct Anglo Irish Bank are due to be published by the Sunday Independent. In the recordings, former chief executive David Drumm and the bank’s then head of capital markets John Bowe 
See all stories on this topic »

Clip 16: Shower of Clowns

Irish Independent
Clip 16: Shower of Clowns. Comments. Email; Print; Font Size. Conversation between David Drumm, Chief Executive, Anglo Irish Bank and John Bowe, Director of TreasuryAnglo Irish Bank. Download our Free iPhone App Now · Download our Free Android 
See all stories on this topic »

Dukes suggests Central Bank knew of Anglo tapes in 2008

Irish Times The former senior politician who took over the running of Anglo Irish Bank after it was nationalised has indicated both the Central Bank and the Department of Finance would have been aware of the existence, if not the details, of recordings of senior  See all stories on this topic »

 

Seán Quinn used British Virgin Islands company to invest in Russian development

Irish Times

The offshore company was used several years before Quinn was accused by the former Anglo Irish Bank of using a British Virgin Islands company to put multimillion of euros in assets beyond the reach of the bank. Lawyers for Anglo Irish, now known as  See all stories on this topic »

 

Opinion: Anglo tapes leave job-hunting former staff reeling

Irish Times

But one group of victims now stand doubly victimised – former employees of the old Anglo Irish Bank, who are still on the staff of IBRC. Professionals who had nothing to do with the high-risk approach at the top. People who, quite literally never did  See all stories on this topic »

Anglo Irish Bank – Updates


Coming Soon to a Cinema Near you Bankula

Starring

David Drumm

The Undisputed  Master of Horror Banking

mySuperLamePic_da121ea7149f1d24c1361c21c2f6c810

Honohan – Anglo Tapes could lead to criminal prosecutions

Irish Independent
The development comes as the Irish Independent has learned the Director of Public Prosecutions is close to determining whether disgraced Anglo Irish Bank chief executive David Drumm will face criminal charges here, it is understood. In his first 
See all stories on this topic »

US firm of disgraced former Anglo boss shut by authorities

THE US firm set up by disgraced former Anglo Irish Bank boss David Drumm has been dissolved after he failed to file any company records over the last two years. read full article

independent.ie

Ireland President Michael D Higgins slams those involved with the Anglo Irish 

IrishCentral
Ireland’s President Michael D Higgins has slammed the content of the infamous Anglo Irish Banktapes and claimed those responsible do not speak for the Irish people. The President was cheered when he made the remarks at a community garden party at his 
See all stories on this topic »

 

Noonan: Sanctions against anyone who fails to cooperate with banking inquiry

Irish Independent
Minister Noonan made his comments in Limerick today where he agreed that the former Anglo Irish Bank chief executive David Drumm should co-operate, if he is part of any inquiry. The under fire former chief of Anglo has apologised for using 
See all stories on this topic »

 

Family defend Lenihan after Drumm attack on Anglo Tapes

Irish Independent
The tapes reveal that former Anglo Irish Bank chief executive David Drumm wanted to “punch” the former finance minister in frustration during the banking crisis. Ms O’Rourke said the comments displayed an attitude that Mr Lenihan did not succumb to.
See all stories on this topic »

Anglo tapes: Department of Finance records may provide answers to disturbing 

Irish Times
 be possible to forward legally privileged documents. Amid the drip-feed of information from Anglo, the wait continues for the full story of what really went on when the people of Ireland took on the debts of a crippled banking system. Tue, Jul 2 
See all stories on this topic »

 

Matt Cooper attacked by Drumm for Haughey comparison

Irish Independent
At the time, Cooper wrote: “It doesn’t help when David Drumm, the Anglo Irish Bank boss who was paid €5.9m last year, says that the Irish people are realistic and would tighten their belts when they had to. “Remember the hypocrisy of Charlie Haughey 
See all stories on this topic »

Fionnan Sheahan: Apologies are all well and good – but Drumm must face the 

Irish Independent
How did Anglo Irish Bank manage to get into a position where it would require a state bank guarantee, an injection, nationalisation and liquidation – contributing to the country as a whole needing a bailout, which is inflicting pain on every citizen in 
See all stories on this topic »

Time for Drumm to return and face questions after ‘sorry’


Herald.ie
Five things to do. It comes after former Anglo Irish Bank chief executive Mr Drumm apologised for the language and tone of the Anglo tapes – but not for the lender’s role in the economic crisis. His expressions of remorse and regret have been brushed 
See all stories on this topic »

 

‘Lenihan acted in Ireland’s interests unlike Taoiseach’

Herald.ie
The former Fianna Fail TD was also fiercely critical of Taoiseach Enda Kenny for saying there was an “axis of collusion” between her party and Anglo Irish Bank. In the latest revelations from the Anglo Tapes, former Anglo CEO Mr Drumm said he wanted to 
See all stories on this topic »

We’ll help gardai with probe, says Bank governor

THE Central Bank is examining whether Anglo Irish Bank “deliberately misrepresented” its position when it sought taxpayer support in 2008, according to the Governor Patrick Ho read full article

independent.ie

Ministers fear inquiry will prejudice future trials

CABINET ministers are worried about an Oireachtas banking inquiry, or witnesses before it, jeopardising any cases against former Anglo Irish Bank officials.read full article

independent.ie

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Anglo Irish Bank Update Plus Other Irish News


O’Brien’s Digicel loses out in Burma

Winners of sought-after licences include Norway’s Telenor read full article

irishtimes.com

Anglo bankers believed they could force an outcome at expense of State

Leaked recordings reveal bankers thought they could fool regulators read full article

irishtimes.com

Tapes show Anglo Irish boss demands
Belfast Telegraph
Anglo Irish Bank bosses were ordered to go down to the Central Bank with “arms swinging” to demand a multibillion-euro taxpayer bailout, latest leaked tapes reveal. Also in this Section. Man quizzed over double murder · Fast-growing firms create 90 
See all stories on this topic »

German media fury at jibes of Anglo bankers
Irish Times
On Tuesday morning Dan Mulhall, the Irish Ambassador to Germany, gave an upbeat assessment of Ireland’s economic recovery and its EU presidency on Germany’s equivalent of RTÉ Radio 1. Just 24 hours later, he had a far less pleasant task: sending an 

Anglo revelations ‘stomach churning’ says Varadkar
Irish Times
Revelations of the behaviour and attitude of Anglo-Irish Bank executives before and after the introduction of the bank guarantee in September 2008 were stomach churning, the Minister for Transport, Leo Varadkar, has said. Speaking in Dublin as he 

Complaint filed with gardai over Anglo executives

Anti-austerity campaigners ask for three senior bankers to be charged read full article

irishtimes.com

Prostitution Law » Bock The Robber

This proposed prostitution law is going to run into the same problems as all the other attempts to deal with the subject because it’s fundamentally not amenable to logic. I personally find the notion of prostitution revolting, but that’s not a reason to ban it.  I also find Youth Defence,  Bono and Fianna Fáil repulsive […]read full article

bocktherobber.com

Norris rejects call to criminalise purchase of sex

Independent Senator also criticises Taoiseach over Seanad abolition proposal read full article

irishtimes.com

Europe expects Ireland to exit bailout without a deal for AIB and the Bank of Ireland

Connection between Ireland’s sovereign and banking debts remains intact read full article

irishtimes.com

Ireland slips back into recession 

Ireland is officially back in recession after the government’s planned export-led recovery took a hammering. read full article

irishecho.com.au

Irish economy back in recession amid exports slump
Financial Times
The bad news comes after shocking revelations this week about Irish bankers’ attitudes to the billions of taxpayers’ money used to rescue the banks at the start of Ireland’s financial crisis. “The economy is still ‘flatlining’ and net exports are a 

ESB staff anger over €400m pension move

Trustees chairman warns payment to Government puts scheme under severe financial strain read full article

irishtimes.com

Quinn family fight against Anglo closest yet to banking inquiry

Material given to the Quinn family, in its battle with the former Anglo Irish Bank, indicates what would be revealed in a banking inquiry read full article

irishtimes.com

Varadkar says new abortion referendum would have to be about more than suicide

Minister asks FG colleagues to reflect on Bill before voting against it read full article

irishtimes.com

Timmins to vote against abortion Bill

Fine Gael TD for Wicklow to join two others and break Government ranks read full article

irishtimes.com

Banks can no longer ‘kick the can down the road’ on mortgage crisis, says Minister

Central Bank code on mortgage arrears a ‘charter for home repossessions’, FF says read full article

irishtimes.com

Anglo Irish Bank- News roundup


They gambled all our futures but it was just fun and games for bankers – Independent.ie

 

‘Fun and games, yeah.” The future of the country is being gambled and it’s all just fun and games for the executives in Anglo Irish Bankread full article

independent.ie

Tapes that reveal what really led to national collapse

Fitzgerald asked Bowe how they had arrived at the €7bn figure for the Central Bank. He replied: ‘As Drummer (CEO David Drumm) would say, picked it out of my arse’ read full article

independent.ie

The recording: Key quotes

* Look, c’mere . . . What’s goin’ on?’ read full article

independent.ie

Q&A: What’s in recordings – and why they’re so significant

Q The tapes are fascinating, but at the end of the day, isn’t it just two colleagues having a light-hearted conversation? Why should we care? read full article

independent.ie

Inside Anglo: Listen to the full recordings

Listen to the conversations between Peter Fitzgerald and John Bowe of Anglo Irish Bank. read full article

independent.ie

Two Anglo executives deny misleading Central Bank

The Central Bank was told by Anglo Irish Bank in 2008 that €7 billion in funding was needed to stabilise it – but a senior Anglo executive said to a colleague the true cost would be higher. read full article

rte.ie

Mortgage securitisation finally sent for full trial


This morning in the High Court in Dublin, after Miriam Freeman had spoken for 4 days on her motion against Bank of Scotland (Ireland), she has finally been vindicated in her long running case.  She has been ably supported by two of the founder members of DDI Ben Gilroy and John Squires, and by Awaken Longford and others (unnamed) who have all collaborated with the Freeman family to defeat all motions of Bank of Scotland (Ireland) in case of P FREEMAN & ANOR V BANK OF SCOTLAND (IRELAND) LTD & ORS.

Ben and John have been helping fight this case in their role with People For Economic Justice since it started 2 years ago, and in Court 16 this morning Mr Justice Gilligan dismissed the motions put by Bank of Scotland, and finally sent the case forward for full trial on the issue of securitisation.  The team has been seeking a full trial without success for some time and have been stymied by counter motions by Bank of Scotland.  So critical is this case that the Chief Executive Officer of Bank of Scotland had been required to fly from Scotland to be present in Court.

Now for the first time in Ireland the issue of securitisation of mortgages is going to be heard in court.  The ramifications of this will affect almost every mortgage in the state, as the vast majority of mortgages have been combined into financial instruments and sold off as securities to other investors.  It was this kind of securitisation that inflated the banking system to a state of bankruptcy and caused the financial bubble that sees us now forced into living under austerity.

In a separate case this week another motion supported by People for Economic Justice against an Irish based bank resulted in the bank settling out of court for a seven figure sum. For legal reasons because of the settlement the case cannot be quoted.

Ben spoke after the case saying that he hoped that those detractors who have been spreading misinformation about how he, and other lay litigants who take on the banks, operate in court, either in the media, printed press and in cyberspace, will be honourable and correct the imbalance they have caused to so many people.

There is now around 12 weeks for full discovery and responses before the case moves on and it may affect any current repossession cases.  What we must look at now is what will be the financial fallout.  We know the banks are bankrupt and we know the finance ministers have legalised bail-ins, we also know the heads of Ireland’s banks have just met at the Central Bank, a bank who’s legal position was described in court today as a grey area.  So now is a time that people must be aware and wary of what the government’s next move may be to protect their system

via BREAKING NEWS – Mortgage securitisation finally sent for full trial | Direct Democracy IrelandDirect Democracy Ireland.

Why you can’t see the ‘black book’ that was never used for the banking crisis


The Central Bank headquarters in Dublin (File photo)

NEITHER THE DEPARTMENT of Finance nor the Central Bank will release the so-called ‘Black Book’, a crisis management manual intended to assist officials during financial crises, which was never used during the bank crisis five years ago.

The ‘Black Book’ is referred to in the Nyberg report into the causes of the banking crisis which led to the fateful guarantee of Irish banks in September 2008. The report notes: “In the actual crisis no use was made of the Black Book procedures.”

The manual lays out procedures for emergency funding from a Central Bank or emergency liquidity assistance (ELA), guidance on legal issues related to insolvency processes and providing state aid to industry, and information on how to contact the responsible persons in a crisis.

It has been in existence since 2001 when it was prepared by the Central Bank of Ireland to provide for a set of processes and procedures to refer to during the management of financial crises.

But it was never used when Ireland’s banks were plunged into crisis at the back end of the last decade resulting in the eventual guarantee of all liabilities of Irish banks at an eventual cost of €64 billion, a move which later resulted in Ireland needing an international bailout.

The manual was referenced in a parliamentary question from independent TD Stephen Donnelly this week.

‘Strictest confidence’

Donnelly asked the Minister for Finance Michael Noonan if he would release a copy of the ‘Black Book’ as it existed at the end of 2006 or as it was redrafted in the crucial period leading up to the banking crisis between August 2007 and September 2008.

Noonan said the manual was passed to the Department of Finance “on the understanding it would be treated in strictest confidence given the nature of the matters treated in the document”.

He described the ‘Black Book’ as a document which lays out a “set of processes and procedures to assist it in the management of a financial crisis situation”.

“I do not therefore propose to provide a copy of the document,” Noonan said.

Contacted this week, the Central Bank declined to answer a series of questions about the document including the content in it, how many times it has been updated and when it was last updated.

A spokesperson said that the document laid out “the principles under which the Central Bank would operate during a crisis; operational procedures and terms and conditions for ELA; legal issues relating to insolvency laws and state aid to industry; and information and logistic issues such as arrangements for contacting the responsible persons in a crisis.”

The spokesperson declined to comment any further.

via Why you can’t see the ‘black book’ that was never used for the banking crisis.

via Why you can’t see the ‘black book’ that was never used for the banking crisis.

32,500 Spanish families put their house – Financial crisis


In Spain last year more than 32,000 families lost the roof over their head because they could not repay. Monthly mortgage According to figures from the Bank of Spain.

The Spanish central bank was last year seized 39 167 homes. In 32,490 of them involved the permanent home services. The rest are holiday homes and homes for rent. It is estimated that since the beginning of the crisis in 2008, some 400,000 homes in Spain were seized. Taken Suicide and protests in Spain have been large demonstrations against the controversial evictions. According to media reports, several people who were put out of the house, committed suicide.

via 32,500 Spanish families put their house – Financial crisis – De Morgen.

via 32,500 Spanish families put their house – Financial crisis – De Morgen.

The ‘Monarchs of money’ and the War on Savers


Quietly, without much public fuss or discussion, a new ruling class has risen in the richer nations.

These men and women are unelected and tend to shun the publicity hogged by the politicians with whom they co-exist.

They are the world’s central bankers. Every six weeks or so, they gather in Basel, Switzerland, for secret discussions and, to an extent at least, they act in concert.

The decisions that emerge from those meetings affect the entire world. And yet the broad public has a dim understanding, if any, of the job they do.

In fact, these individuals now wield at least as much influence over the lives of ordinary citizens as prime ministers and presidents.

Who are the world’s central bankers?

The tool they have used to change the world so profoundly is one they alone possess: creating money out of thin air.

There is an economic term for this: quantitative easing. More colloquially, it’s called printing money.

Since the great economic meltdown in 2008, these central bankers have probably saved the world’s economy from collapse, and dragged it into the unknown at the same time.

The amounts they have created are so vast as to be almost incomprehensible — trillions of dollars in pounds and euros, among other currencies.

At the end of 2012, the balance sheets of the world’s largest central banks, those of the G20 nations and the eurozone, including Sweden and Switzerland, totalled $17.4 trillion US, according to Bank of Canada calculations from publicly available data.

That is nearly a quarter of global GDP, and slightly more than double the $8.5 trillion these same institutions were holding at the end of 2007, before the financial crisis hit.

Stock markets have risen on this tide of cheap money. So has real estate. So, arguably, has everything else.

But there are two big concerns with what this new central banker elite has done.

One is that no one really understands the consequences of pumping such vast amounts of money into the world economy. It’s already distorted the prices of certain assets, and some fear hyperinflation or market crashes are inevitable (the subject of tomorrow’s column).

The other is that it’s caused a massive shift in wealth, from savers to borrowers, and is taking money out of the pockets of almost everyone approaching or at retirement age.

A war on savings

Probably the most painful of the consequences of quantitative easing has been borne by the elderly.

Most of that generation grew up believing that if you save and exercise prudence that you will earn at least a modest return on your hard-earned money to keep you comfortable in your old age, perhaps along with a pension.

But the money-printing orgy of the last five years looks to have shot that notion to smithereens.

Very deliberately, the central bankers have punished savers, pushing interest rates so low that any truly safe investment — and older people are always advised to play it safe — yields a negative return when inflation is factored in.

British pensioners Judy White and her husband Alan, at their home in Teddington, south of London: ‘I now have 50 per cent less.’ (CBC )

The policy has savaged pension and savings returns worldwide, but particularly in Britain, a nation of savers and pensioners.

There is more money in British pension funds than in the rest of Europe combined, and now that money is just sitting, “dead,” as some call it, not working for its owners.

Ask Judy White, a retiree in her late 60s who lives in Teddington, south of London, with her husband, Alan.

judy-white-280

British pensioners Judy White and her husband Alan, at their home in Teddington, south of London: ‘I now have 50 per cent less.’ (CBC )

This year, the Bank of England shattered her retirement. Her pension benefit was effectively slashed by half.

“I don’t understand what quantitative easing is, except that it’s printing money,” she says. “But I do understand that I now have 50 per cent less.

“What they have done is take money from people who have been really careful all their lives.”

On the backs of the virtuous

Actually, by the Bank of England’s own reckoning, the £375 billion of quantitative easing it has carried out since 2008 has cost British savers and pensioners about £70 billion, roughly $100 billion. (At the same time, the richest 10 per cent of British households saw the value of their assets increase over the same period, the bank reported.)

That cost to the elderly is largely because pension payouts in the U.K. are pegged to the yields on government bonds, and quantitative easing has forced those yields down to almost nothing.

Speaking for the Bank of England, Paul Fisher acknowledges that the bank has created a paradox: It does want people to save and be prudent — just not right now.

“We try,” he says, “to get people to do things now to get out of this mess, which in the long run we prefer not to do.”

In other words, might we please have some more of the wild consumer spending and borrowing that helped get us all into this situation, at least for a while?

Ros Altmann, a governor at the London School of Economics: ‘A monumental social experiment.’ (CBC)

ros-altmann-280

Ros Altmann, a governor at the London School of Economics: ‘A monumental social experiment.’ (CBC)

The plain fact, though, is that central bank- and government-imposed solutions to disasters caused by irresponsible, greedy, foolish behaviour are almost always carried out on the backs of the virtuous.

So it was with the bank rescues in 2008, and so it is with quantitative easing.

As Ros Altmann, a longtime pension manager and director of the London School of Economics, puts it, quantitative easing has amounted to a “monumental social experiment” — a large-scale transfer of wealth from older people to younger people.

“Anybody who was a saver and has got some accumulated savings will have had a reduction in their income,” she says.

While “anyone who had a big debt, particularly mortgage debts, would have had improvement in their income because their interest payments have gone down.”

As stupid as it might sound, older people everywhere would probably be better off if they’d abandoned prudence and borrowed more.

That is obviously not what the central bankers or our political leaders want. But that’s the situation they’ve created.

What’s the alternative?

This transfer from savers to borrowers has also been taking place here in the U.S. and in Canada, to varying degrees.

Some U.S. pension funds are in danger of default, at least partially because of these artificially low interest rates, and Canadian pension funds that are heavily invested in safer debt have been injured, too.

In an interview in his Ottawa office, Bank of Canada governor Mark Carney defends quantitative easing elsewhere, and his own low-interest rate policy, though he does acknowledge that it has been hard on pensioners and savers.

Like all central bankers, he argues the (impossible to prove) negative: There have been consequences, yes, but if we hadn’t done this, things would be far, far worse.

As for carrying out these solutions on the backs of the virtuous: “I don’t see a world where the virtuous are rewarded if we suffered a second Depression,” he says. “These are the stakes.”

Carney would prefer not to talk about the enormous power central bankers have gained since 2008, saying only: “We have a tremendous responsibility … because of a series of mistakes that were made in the private sector and the public sector.”

As Canada has performed better than most Western nations, Carney has not ordered any new money printing.

But he has kept interest rates down, and that has fed the real estate booms over the last few years in Vancouver, Toronto, Calgary and elsewhere.

imfsurge-300

See the surge in central bank holdings, the printing of new money, beginning in the spring of 2008 with the bank bailouts and the acquistion of long-term securities to keep interest rates down. (International Monetary Fund)

He scoffs at the suggestion that “the party” will end at some point. “I am not sure we are having a party right now,” he says. “It doesn’t feel like a party.”

And, in fact, he has repeatedly expressed concern at the huge debt levels Canadians are accruing, at least partly because of his low-rate policies.

But surely he understands the anger of an older person watching their savings being eroded, I ask him.

Carney smiles grimly. That question is clearly a sore point. He gets a lot of mail on the topic.

Canadians, he says, must understand that the alternative is massive unemployment and thousands of businesses going under, and “my experience with Canadians is that they tend to think about their neighbours and their children and more broadly … they care a little bit more than just about themselves.”

Asked whether central bankers are not in fact enabling irresponsible behaviour by speculators enamoured of cheap money, not to mention politicians who can’t curb their borrowing and spending, Carney merely remarks that voters in a democracy get the governments they choose.

via Neil Macdonald: The ‘monarchs of money’ and the war on savers – World – CBC News.

via Neil Macdonald: The ‘monarchs of money’ and the war on savers – World – CBC News.

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