Bailing out the rich and powerful

By eirigi

The contrasting fortunes of workers and the business class during the current economic recession are encapsulated in the Twenty-Six County government’s proposed legislation establishing an Assets Management Agency (NAMA), a scheme that proposes the state take over of ‘toxic’ loans from banks.

While the Dublin government seeks innumerable ways to bail out bankers and developers, the crisis in capitalism continues to wreak havoc on working class communities. Unemployment is expected to reach over 500,000 by the year’s end. By then, at least one in five will be reliant on welfare payments while trying to pay exorbitant mortgages on over priced houses.

Just last weekend, workers at the parcel delivery company, UPS in Tallaght, were informed that 200 jobs were being slashed. Workers at Thomas Cook who occupied the Dublin offices in protest at the loss of jobs and meager redundancy offers were hauled before the courts for daring to stand up for their right to work.

Meanwhile, Dublin dockers are being denied the right to work by the British company Marine Terminals Ltd. In scenes reminiscent of the 1913 Lockout, Dublin workers have been locked out by the company now employing scab labour to work at cheaper rates.

The Dublin government’s response to the growing crisis facing workers has, unsurprisingly, been to ignore the plight of the working class and to instead secure the vast wealth of property developers and the profits of private banks.

Workers face a daily barrage of comment from government ministers, IBEC, the right- wing press and quack economists about the need to ensure ‘competitiveness’. This new mantra is simply an attempt to force workers to accept jobs cuts and pay cuts: all in the ‘national’ interest of course.

There has been no attempt by the state to intervene to secure jobs at companies such as Waterford Crystal, where a viable company was allowed to go the wall and skilled workers thrown on the dole.

Rather, workers who have been in no way responsible for the economic depression face the greatest burden. This has come in the form of income levies, increased pension levies, increased VAT charges, slashes across the public services, and if recommendations from the Commission on Taxation are implemented, additional taxes in the form of water charges and domestic property tax.

So what of those who were directly responsible for the current crisis? Have they been made to pay for the mess which they created? Emphatically, no: an unholy trinity of bankers, developers and politicians has worked assiduously over recent months to secure their collective interests.

Measures taken to date include the bank guarantee scheme, supported by all political parties in Leinster House with the exception of the Labour Party. The guarantee scheme means the taxpayer is liable to bear the cost of losses on bank loans, which include up to 1,000 development borrowers with loans in excess of E10 million (8.8 million pounds), ten of which have loans of more than E500 million (439 million pounds), while some have debts in excess of E1 billion (879 million pounds).

The state also chosen to nationalise the losses of Anglo-Irish Bank and has injected E7 billion (6.2 billion pounds) of tax-payers’ money into the Bank of Ireland and AIB. Meanwhile, the McCarthy report recommending over E5 billion (4.4 billion pounds) in cuts hangs like the sword of Damocles over the public services.

All of that has not been enough to satisfy the rich and powerful. So, in September, the Dublin government will present the NAMA legislation before Leinster House. If passed, the Twenty-Six County state will use taxpayers’ money to purchase E90,000,000,000 (79 billion pounds) worth of bad debt from the banks, in the form of loans to some of the richest people in the country. Thus, in the course of the current crisis, the only state intervention into the market has been to secure the interests and profits of a tiny wealthy elite.

At the height of the boom, the extent of profits made by the Twenty-Six County state’s largest construction companies and banks was astounding. In 2007, the two largest banks in the state, AIB and Bank of Ireland, declared combined profits just short of E4,500,000,000 (4 billion pounds). This orgy of profiteering was secured through property and financial speculation.

In 2005, the top 25 property related companies in the Twenty-Six Counties declared combined profits in excess of E500 million (439 million pounds) and a turnover of E5 billion (4.4 billion pounds). Ordinary workers, heavily encouraged by the state and establishment media to ‘get on the property bubble’, were offered 100 per cent mortgages on houses that were grossly overpriced.

Over the 10-year period, 1995-2005, new house prices increased by 254 per cent across the state, with prices in Dublin rising by an extraordinary 305 per cent. By 2007, the average price of a new house in Dublin reached E416,000 (366,000 pounds). Over the last 12 months, house prices have consistently fallen, with the average price of a new house in Dublin sitting at E290,000 (255,000 pounds). Consequently, tens of thousands of households are now saddled with negative equity and unmanageable debt.

As some economies in Europe begin to emerge from recession, there is the prospect of interest rate increases, deepening the crisis facing mortgage holders. However, unlike wealthy property developers there is no scheme in place to rescue ordinary households. The same reluctance to foreclose on property developers will certainly not be extended to mortgage holders.

The Dublin government proposals to establish NAMA amply demonstrates that the interests of the business class in the Twenty-Six Counties overrides all others. The scheme proposes the transfer of ‘toxic’ loans from the banks to a state run asset management agency. The Dublin government has said that it will pay above the current market value of the loans it buys, basing its calculations on long-term ‘economic value’.

This is simply a device to inflate property values, which have collapsed in recent times and exposes the taxpayer to massive long term debts. There are approximately 10,000 bank loans to be processed through NAMA, much of it on property outside the state. As the courts heard during Liam Carroll’s application for protection against liquidation of his company Zoe Holdings, the company could pay back just one-quarter of the money it owes to the Irish banks. The state, through NAMA, is proposing to buy toxic loans at a 25 per cent discount; meaning the taxpayer will be paying three times the amount the property could be currently sold at.

Housing associations such as Respond have reported that banks are refusing to issue mortgages on houses below a certain value: a clear example of banks attempting to artificially inflate house prices and expand profits for their shareholders. The current system of private banking has demonstrated that private shareholders and financiers can determine the future of millions of people. Banks must be nationalised in order that the economy be organised in the interests of the people.

Rather than bailing out developers, the state should seize the assets of those developers who have defaulted on their loans. The latest Department of Environment and Local Government housing needs assessment estimates that 56,249 households across the Twenty-Six Counties are on housing waiting lists; yet thousands of housing units bought or built by speculators and developers lie empty. These should be secured by local authorities and allocated to those currently on the housing waiting lists.

Foreign property belonging to defaulting developers should be sold and the money invested in socially useful programmes in working class communities.

The debate on NAMA commences in Leinster House on September 16 and will be vigorously opposed by eirigi, along with other left-wing groups, community organisations and trade unions. On Saturday, September 19, a rally against NAMA will assemble at 1pm at the Garden of Remembrance, Parnell Square. This will form part of a wider campaign to defeat the programme of cuts proposed in the McCarty report.

Urgent Appeal