Peter Bacon: Government knew and lied

But not in so many words …

Reported in Business & Leadership, 26th November 2010

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](https://www.businessandleadership.com/economy/item/26921-government-were-told-bad/)

To be honest, very little of this surprises me. When do the talks for the next bail out begin?

Blue Horseshoe

I’ve no doubt the govt lied and are still doing so. However why is this fucker starting to put a bit of distance between himself and the train wreck that is NAMA? He was the fucker that came up with it and told everyone “it was the only game in town” I would take anything this wanker says with a bucket of salt.

Looking for a continuance with the new government to avoid risk of dissolution of NAMA, wants a job with the big boys in Washington or Europe a la other “jobs for the boys thread”, wants to spray paint his putty underbody botch job to make it look all nice and dandy while quickly taking benefit of consultancy fees, etc. etc.

Good old Paddy Me Fein attitude here.

He’s trying to re-establish his credentials. Back pedalling.

Same Bertie licking insider who made several disasterous attempts to solve the housing crisis in the late
1990s with very expensive consultancy reports, which in turn provided many suggestions which made an
even bigger balls of the housing market. Then his final nail in our coffin-NAMA.
Why do people listen to ‘experts’ like him who are clearly just total lamebrains at the end of the day.

speaking of gobshites what happened to alan aherne?

Speaking of gobshite Alans, where is the Grand old Duke of Anglo.

It has been a while see i have seen the smarmy git smirking away telling us that we have the figures all wrong. Boy, was he right.

Tosser

He’s not gone away (unfortunately)

https://www.independent.ie/multimedia/archive/00746/alanDukes_i_746178t.jpg
Alan Dukes at the Compliance in Finance Conference in Dublin

Anglo chairman calls for ‘decisive action’ as deposits shrink by €13bn November 23rd.

Dukes lashes out at TD over NAMA fraud allegations November 20th.

media.newstalk.ie/extra/1468/popup

Starts at about 3.20mins.

I was going to post that question numerous times over the last year but I kept forgetting. Now I can barely remember what he looks like… Might be time for a FoI request to the Dept of Finance to confirm that he’s still alive.

Well he was out in Reillys on Wednesday night having a pint… pity he didnt do a segment for ZDF when he was asked :slight_smile:

My memory is that the first bacon reports were good …the government followed some of the advice and when this appeared to slow the market in late 2001/2002 the government undid the changes (restricting taxbreaks for intrest for landlords) and instead threw extra tax breals into the pot for shannon renewal , town renewal etc.

Not sure about his work later on but that was a great opportunity for us to put the breaks on which would have avoided most of the current mess.

here is a link

esatclear.ie/~buildingwithbacon/thebacon.htm

in 98/99 we were worried about house prices …how the government could not think it was a problem beyond 2000 is beyond belief …

Sorry have to disagree strongly- actions adopted in the 1998-2001 period, on foot of the Bacon report recommendations, saw a retreat of investors from purchasing housing . The measures adopted may have had a short-term validation as a method to curtail house price rises, but in so doing they reduced the size of the private rented sector in this period and led to large scale increases in private sector rental levels due to the lowering of rental unit supply.

People who had traditionally rented before buying, were now denied this option as mortgage repayments perversely became cheaper than rental levels. Agree that when the govt. restored interest tax breaks for landlords they then piled back into the housing market and pushed up prices to astronomical levels in the 2002-2006 period.

Tear up blanket bank guarantee, Bacon warned in full report - Eamon Quinn → tribune.ie/business/news/art … ed-in-ful/

That Eamonn Quinn piece is astonishing and well worth a read. Advisor after advisor is coming out and saying that they told the government to do x, y and z (mostly sensible things, some dubious, some less dubious if you take the other bits into consideration). NAMA only made sense if the banks were to be broken up and sold off as a result of the losses. Bacon advised this!

The government has cherry-picked all the bits of bad things that have happened out of their advice and ignored all the accompanying bits. It has been engaged on a massive pork atkins diet and has died of scurvy…

The timing, though, is interesting as it reflects rather badly on Mr. Lenihan…

Absolutely right. “Rashers” Bacon authored the two disastrous Bacon reports that introduced distortions into the property market, caused chaos, reduced house supply and caused rents to skyrocket. He is a fat jowly pompous Fianna Fail insider who is, among all the other rats, looking to flee the sinking wreck. He is trying to reinvent himself in order to get well-paid (€650 per hour) consulting work from the next government. He sees that Fianna Fail will be in opposition for two Dail terms and so this source of revenue will be cut-off.

Janey! Are you saying that the investment incentive removal actions suggested in the bacon reports could not have possibly worked? I think that this notion is something that should be analysed from a pin perspective. Is the corollary of this that any action to cool the bubble would have resulted in rocketing rents?

From my (admittedly, sketchy) recollection, his reports were the only case during the bubble where property price rises were identified as a problem (in a government report), and solutions were proposed. Not only that, but these were the only property market cooling actions taken during the bubble, to my mind. When they were seen to be actually working (flattening of house prices), the government could not remove them fast enough.

Is it possible that removing property investor incentives in ~2000/2001 would have been a disaster if they had continued?
that’s what I’m inferring from your post.

  • darwi

Of course they did not work. Prices - houses and everything else - are governed by supply and demand. Tinkering with the market without taking actions to increase supply achieves nothing. Increasing affordability by lengthening mortgage terms and offering 100% interest only mortgages fueled demand. Both these actions lead to substantial increases in prices. It was obvious at the time and is painfully obvious now, when those inflated prices have collapsed and hundreds of thousands of people who bought into FF/Developer/Banker lies have worthless houses.

Okey dokey, that’s fine but If I understand correctly, the actions you mention there (100% mortgages, extended mortgage terms) are not actions advocated in the Bacon reports nor are the actions taken by the government of the time in response to the reports.

The action I’m referring to is one where an artificial market incentive (investor tax breaks) was removed. From the little information we have, as they were short lived, they had a dampening effect on the surge in house prices. Certainly that is tinkering, but it is removing the effects of earlier tinkering that the bacon report identified as unnecessary, or no longer necessary as investors were sufficiently incentivised by the market.

So, given that the intervention (removal of investor incentives) slowed property price increases I’m wondering what would have happened had they been left in place. Would prices have taken off again of their own accord based on the increased yields from rocketing rents? Would the prices have flattened until they hit the inflation curve again? could they have fallen to the inflation curve?

If you will forgive me for reintroducing the first two lines of my original comment, these are the bits that most interest me

  • darwi

I think we really are in agreement. The correct actions that should have been taken were to increase supply while taking actions to limit access to too much credit. The tinkering Rashers recommended just temporarily affected investor-lead property purchases that lead to a reduction in property to let, increase in rents and some flight by investors to Northern Ireland and the UK.

The view was the investors were driving up prices, pricing ordinary house purchasers out of the market.

This is not after the event smartarsedness. This was a widespread view at the time and one I held. At the time, there was a shortage in supply with landbanks being accumulated and not being developed. A tax on undeveloped land was proposed but no action taken.

There was much financial speculation on land rezoning, lead largely by FF-lead corruption - Burke, Flynn, Redmond and others. But house supply was limited.

Tinkering with the market never works. It costs money, introduces distortions and never lasts. The market is bigger than all of us.

People who invest is houses to let are not necessarily evil. They have a real place in a balanced property market, giving people the choice to rent.

I have never done it because I could never see myself as a landlord, replacing lightbulbs at 3:00 am. But if others want to do it, let them.