McWilliams: Central Bank can crack credit crunch

Pasted the whole article for convenience…

I don’t understand it very well but if it’s got the “fundamentals” thought out then it sounds good. Anyone with the knowhows: Is it a good idea?

If it was not for the leadership shown by the guys in the ECB, the Irish central bank would have been exposed as the incompetent shower they are by now. (How is that different from other central bank ??)
They’ve never shown any leadership or moral courage during the boom, why would they change now?

Here’s how the Irish banks are still operating and why prices have not tumbled so far, but the ECB is growing impatient with this.

I can’t see banks agreeing to this. Perhaps a mixture, some socialisation of the losses also?

I very much question the idea of giving large developers a break. The sector is too bloated as it is. If we keep credit flowing into these developers the market will not restructure. Insolvent companies should shed workers and loose their market share, have their assets should be liquidated etc…

Only the better developers should emerge at the other end of all this. If we keep a load of developers on life support, it will discourage investment and healthy firms from entering the market. I think the same can be said of the financial sector. It has become too bloated and a credit swap right now would only favour the most reckless lenders.

It looks to me like the construction sector and financial sector are playing a waiting game where those who can hold out the longest will get bailed out. If the government makes it clear that there will be no bail out, then we will get on the road to recovery much quicker.

We have enough developers to build 90k units a year , as we know .

We only need the capacity to build ( at most) 1/3 of that each year for the next 7-10 years !!!

I am surprised that David McWilliams overlooked that inevitability but maybe he is being leaned on to posit solutions not to highlight the problems he foresaw many years ago.

M1ke is right, developers must be culled .

Its the Empties Stoopid ( not David mind :nin)

This is exaclty what I predicated months ago would happen-I was railed because it meant that house prices would not drop to the levels that so so so many people on this board are able/willing to buy them at. I understand that pouring the cold water of reality onto the pleasant delusion of buying a house is not the wake-up call everyone wants, but unfortunatly you, like the VIs, have to start living in the real world.

Wishing does not make things better.

The banks are not protecting their developers and you are naive if you think they are. They are trying to protect their own skins and are juggling knives.

No one is buying because no one is lending. But the banks have already lent out millions on the strength of people buying later. So they are in a pretty dire place. They can’t lend because they can’t borrow from each other, and in not lending, they have killed the market for people who have borrowed massively from them. So they have two key choices: either they lend out to the people that can buy, or they support the guys trying to sell in the short term until they figure out a way that they can lend to the people who can buy.

If just one developer goes bust owing a bank a lot of money, it will cause huge problems in the way of audits, write offs and investor confidence. Given the hammering that the banks have taken so far, they can’t afford any more damage to investor confidence.

Banks cannot finish building incomplete developments. Incomplete developments cannot be sold. They need the developers. This is the only thing protecting a lot of heavily endebted developers right now. Where the sums of money are comparatively low (eg 15 million euros) they are being let go to the wall.

Your problem is this. You want it all and you want it now. The property market in this country is so completely insane, and the money trail is such a fucking spaghetti mess that it is going to take years to play out. The banks will not call in the loans as long as they can get away with it because if one developer goes down, it might well take a bank with it.

The banks are not protecting the developers. They don’t give a toss about it. Developers come, developers go. The banks are protecting themselves.

In all of this discussion about “bailing out” banks and property speculators, I find comfort in the realisation that the Government, no matter how much of our pension money it uses, does not have enough money to bail out this sector.

I do not because I do not believe that this would be adequate disincentive.

Hummm. You start of by observing

but then go on to completely contradict yourself, multiple times over:

they [banks] support the guys trying to sell in the short term (ie. developer!)

**If just one developer goes bust owing a bank a lot of money, it will cause huge problems…they can’t afford any more damage to investor confidence. **

Banks cannot finish building incomplete developments. Incomplete developments cannot be sold. They need the developers.

The banks will not call in the loans

**The banks are not protecting the developers. ** Well it sure doesn’t look like that to me - and that’s just from reading your post! :stuck_out_tongue:

The aggregate figure involved are such that we could not possibly bail the banks out if they bailed the developers out .

Its not a disincentive to talking about it but one takes some heart from the lack of serious government support for Country Tom and the myriad digout scams he kites by the week.

A Random Walk wrote:

I would think so too. However while I’m not at liberty to elaborate, let’s just say that the civil service has as many creative people within its ranks as their kissing cousins, the bankers…

Watch this space. :cry:

Okay. You’re clueless and disengenuous. The key motivation to the banks for protecting the developers is not to protect the developers, it is to protect the banks.

Understand? Do you think the banks would care about completing developments if they didn’t have them as security against debts?

Developers don’t matter to banks. Banks do and they are more worried about themselves than they are about the developers.

You would be naive to believe that protecting the developers plays any part in their motivation.

Calina wrote:

Yup, perfectly. However to protect themselves (“saving their own skin” as you put it), they are protecting the developers.


It’s a symbotic relationship.

“Developers don’t matter to banks”? :smiley: Oh dear. Well goodnight.

The more I call them to the light, the more they cower in the darkness.

You are right of course, lets look at what happened in Thailand 1997.

Thailand’s Ghost Buildings: The Wall Street Journal video
August 17th, 2007. … nal-video/

The banks can throw good money after bad and burn through their capital and maybe stay afloat for another three perhaps four years, they are not in any position to extend loans to most developers to continue their projects and as a significant number of said developers overpaid for the land, they cannot build and expect to make a profit due to the higher cost of servicing the loan and the fact that the prices of the units are falling and demand has fallen. They will cut their losses and run.

Abandoned Rail projects , Metro North anyone ?? … k_8_henge/

That project hasn’t even started!! Infrastructure is one area which will not be cut back, especially a means as important as bringing people to/from work and simultaneously opening up vast acres of well-located land for development.

Metro north is safe.

You can always get flush Crashanburn out of a thread by using numbers and links to numbers :nin