State Bank Grants Political Control of Home Debt

08 August 2011 - Which Way to Pay

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State Bank Grants Political Control of Home Debt

Concern is brewing that political control of Irish banks will enable less scrupulous politicians to abuse their power and reward supporters by means of forgiving mortgages and lending money, or such is the opinion of UCD academic Morgan Kelly. Over the weekend, Prof Kelly commented that state ownership of large parts of the banking system creates "vistas of patronage that Charles Haughey wouldn't have been able to dream of”. To a packed St Canice’s Cathedral which hosted the Kilkenny Arts Festival on Saturday, the professor also said; "you might do well to join Fine Gael. You might find that a party card with a low number is a big asset".

Indeed, Morgan Kelly predicts that with the inability of some to repay mortgages an organised opposition to repayment and the emergence of some "Michael Davitt figure" may emerge drawing parallels to the 19th century nationalist agrarian agitator who founded the Land League.

The State has almost full control of Allied Irish, Anglo Irish, Irish Nationwide, EBS and Irish Life & Permanent and is the largest shareholder in Bank of Ireland. With these banks being expensive to operate, Prof Kelly furthered his outlook by indicating they would be sold without the dismissal of two-thirds of all bank workers – the number required to make banks profitable again and not "loss-making, gold-plated semi-states".

The entire banking sector should cost around €1.5bn a year to operate for a country of Ireland's size, however the cost of running Bank of Ireland and AIB alone come to €4.5bn.

Indeed, it is forecast that banks will face further losses from mortgages. An estimated 10,000 buy-to-let mortgages worth around €11bn look unlikely to be repaid given recent statistics and the ecomonic outlook. Indeed, this calculation is one of the reasons why Prof Kelly believes the national debt will be between €240-50bn by 2015. The official estimate is €200bn.

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