‘Houdini economics’ of debt bailout plan

A MEMBER of a technical group proposing a bailout of the debt burden on mortgage has been accused of engaging in “Houdini economics” by a Clare Labour Party Deputy.

Deputy Michael McNamara made the claim in the Dáil on Tuesday night when he opposed a motion on residential mortgage debt tabled by members of the Dáil technical group. They included Deputies Thomas Pringle, Stephen Donnelly, Luke ‘Ming’ Flanagan, Finian McGrath, Catherine Murphy, Maureen O’Sullivan, Shane Ross and Mick Wallace.
The group argued that Finance Minister Michael Noonan, the controlling shareholder in the covered banks in the national guarantee scheme, should adopt a policy of using whatever emergency measures are deemed necessary to reduce the unsustainable debt burden on mortgage holders and ensure the means used minimise the burden on the taxpayer and ensure householders can contribute to Ireland’s national recovery.
Deputy McNamara agreed householders should be able to contribute to the national recovery but should not be facilitated in a way that further burdens taxpayers with debt.
“The technical group proposes in a rather non-technical manner – I have yet to hear a single proposal from it, other than a reiteration of the concerns shared by everybody in the House – that we can somehow magically write off the debt as if it would have no consequences.
“It would have consequences because, as those of us on this side are sorely aware, the banks, in particular the pillar banks, require capitalisation to ensure they can again play the role banks play in modern economies.
“They can lend money in the economy to allow businesses to acquire the credit they need to survive on a day-to-day basis and people to buy houses from property developers, such as Deputy Mick Wallace, who has told us 50% of those who acquired properties from him are now in negative equity.
“He proposes a system of Houdini economics in which we could all fly clear of the decisions made. Everyone who took out a mortgage did so in the belief he or she could repay it,” he said.
He stated the Government is fully cognisant of the fact that economic circumstances in the State have changed dramatically. It is for that reason the Minister for Finance has outlined, in considerable detail, the Government’s proposals and the requirements of lending institutions to ensure account will be taken of the changed circumstances.
He noted Deputy Mick Wallace referred to Eamon de Valera, who represented Clare long before his time and spoke about him refusing to pay back the land annuities as if somehow this was a magic solution without consequences.
“It was not without consequences. First, de Valera’s actions led to a land war, as well as an economic war, between the State and its major trading partner, which arguably crippled our biggest market for 20 years. Second, de Valera took these actions in a very different world from the one in which we live.
“It was a world in which the State could exist in splendid isolation from its trading partners. That is not the case today. We have to exist in a modern world in which international finance and international agreements made by the State must be fulfilled, including the bank guarantee, which my colleagues in the Labour Party opposed and which the Government Deputy Finian McGrath supported.
“Each of us is suffering the consequences and every taxpayer is shouldering the burden of that guarantee. I propose that taxpayers should not be further burdened and that the weakest and most vulnerable should not be saddled with further taxes,” he said.