Tribune- Banks at breaking point with developers

tribune.ie/article/2009/mar/ … evelopers/

Heard this before. I’ll believe it when I see it.

Eugene and the rest of board of muppets should have a long think this weekend about just how much money they could have saved themselves (and consequently the Irish public) if they’d announced this plan in 2007 rather than 2009.

And I too will refrain from believing this until I see it.

The following amazing article (tribune.ie/business/news/article/2009/mar/01/banks-finally-at-breaking-point-with-developers/) features in the Turbine yesterday, part of which states that one leading developer will offer creditors and the banks 40c in the € for his debts.

So, two things come to mind:

  1. If this developer does succeed in getting away with this amazing deal, how is the developer being punished going forward? Bad credit rating? Not being able to borrow ever again? Somehow I suspect that bygones will be bygones for such developers and they’ll just get back to business as usual in a year or two.

  2. If developers can achieve such a tremendous outcome, why can’t homeowners? If this type of debt forgiveness is being given to developers, would it not make sense for homeowners who bought at the peak to band together, and approach the bank to say “listen lads, you lent us too much, will you please write down our debts by 50%, and sure if things go well in the future we’ll give you some equity upside in our gaffs”? The ironic thing is that I can hear people say “but the writedowns by the banks in this situation will be bailed out by the taxpayers”. But wait, most of the heavily indebted homeowners who bought at the peak are taxpayers… :laughing:

Surely it would be outrageous if banks granted such deals to developers, and then refused to offer similar remedies to homeowners? If that does happen then it will be the biggest rear entry of all being visited on the poor (mostly PAYE) workers who purchased at the peak.

Looking forward to Pinster explanations.
In particular, ideas about how to organise such an effort.
After all, we know that the banks and the government typically ignore street protests and are in fact happy to let them happen to help the public vent some steam.
I think it would be much more difficult to ignore a concerted effort to arrange a wholesale write down for homeowners on the same basis as developers get. Unless of course the developers will be punished, which I personally doubt.

Developers and people with similarly sized loans and deposits have a fundamentally different relationship with the banks. There’s nothing fundamentally wrong with banks treated different types of customers differently.

The problem with letting homeowners write down their debt is primarily the one you highlighted - yes they’re taxpayers but their share is no more or less than another taxpayer who doesn’t get the use of the house. I can’t see any national writedown being implemented without the government also getting to own a chunk of your home. The whole idea would be madness but that’s the minimum I’d expect.

As for whether these developers will experience sanctions, I don’t know if their formal credit rating would be effected but the downside of having a personal relationship with the bank is they know who you are and remember history of your relationship. Odds are they won’t get favourable terms next time if there even is one.

moved to the “The Return of the Banana Republic, Pt. VI The Slippery Slope” forum

There was no mention of AIB liquidating or moving in any shape or form against all their bankrupt developer golfing buddies during AIB’s results announcement today.

They wrote off a million for Haughey in the 1980, so what’s a few billion to a the developers now. Whatever it takes to protect and preserve the kleptocracy.

You’ll notice there has been no suggestion of Eugene moving his permatan elsewhere from de establisment.

So you want a campaign for 60% across-the-board default on debt? And how would that work in respect to the State guarantee? Would our creditors be happy?

I pointed out in this post that the banks really have to start putting some of these developers in to liquidation and possessing their assets to set an example to others.
viewtopic.php?f=15&t=18989&p=212204&hilit=hazard#p212204

I think I remember from one of the tribunals that CJH never paid the loan that was outstanding because the banks never took steps to recover it. The developers are following the same strategy it would appear.

Unfortunately, there is a tendency on the Pin to interpret the comments and questions of other Pinsters as literal.

Think of my suggestion as a thought experiment.

One of the key points to note about how things have developed over the last 9 or so months is that the normal rules of investing / valuation do not necessarily apply because of the levels of government intervention in the economy. So who knows how this could be implemented and what the effects would be. Is it that different from suggesting a “bad bank” backed by the government. After all, on a 10-year basis how big is the difference between a €50 million loan to a developer for land bought in 2006 and 100 €500,000 mortgages to people who bought houses in 2006?

Therefore, I’m not calling for anything - I’m just suggesting that why should there be one rule for developers and another for homeowners.

Some people will say “that’s always the way it is”. But in fact it is only that way because developers know how to work the system and homeowners don’t and because developers are big and homeowners are small.

So by getting together a large group of homeowners and educating them on how to deal with banks at a group level the above unfair advantages of developers can be negated.

Mortgage Holders of Ireland! Unite! :laughing:

I suppose there have been sillier associations, could be a job in there for someone if they were arsed! Tom Parlon’s next gig?!?

Banks will look at each situation seperately and work out what the best is for themselves. There is not one rule for developers, if one has an amount written off it does not mean all developers will be given a write off.

Guys are fucking killing themselves becuase of the pressure banks are putting on developers, it is not all hugs and foregiveness.

I think that this may be giving too much credit to the banks.

They haven’t demonstrated an ability to “work out what is best for themselves” in the boom, so I don’t have any confidence that they would do the same in the bust.

A possible suggestion of “the best thing for the banks to do” would be:

  • Write down debts appropriately (but don’t write them off).
  • Take all the equity in all underwater developments that they have lent to off the developers who own it.
  • Try to get a lien on all other assets from developers for which personal guarantees were provided.
  • Pay the developers (or any developer) and small management fee to continue with development where possible and a nominal share of the upside (which can be offset to a small degree agains the liens mentioned above).

However, in the eyes of many banks this is likely to be “too much hassle”. So what is likely to happen is that there will be mass write-offs, developers will manage to hold onto equity, and then when things do come around they will do well again (since the debt will be manageable).

I mean, who will win - the developer who has their whole life riding on retaining upside in a particular development, or the overworked restructuring team in one of the banks who are simply paid a salary and are looking at 20 different developments. I know who I’d bet on.

How do you think that Larry Goodman is where he is now after being bust in the mid-90s. All thanks to the wiles of the restructuring departments of the Irish banks.