Negative Equity

September 8, 2013


Ellen Brown of will visit Ireland to attend three events,12th October, 11am-4pm, Springfield Hotel, Lucan; TBA 14th Oct, 15th Athlone.


Richie Boucher CEO Bank of Ireland has a basic salary of €690,000. We won’t visit bonuses and perks for now. No doubt Richie sees his salary as chicken feed when compared to what CEO’s of some of the largest banks in the USA get paid:

Instead let’s compare Richie’s pay to that of the CEO of the Bank of North Dakota:

“As state government employees, BND executives have no incentive to gamble their way toward enormous pay packages. As you can see, the top six BND officers earn a good living, but on Wall Street, cooks and chauffeurs earn more.

  • Eric Hardmeyer, President and CEO: $232,500
  • Bob Humann, Chief Lending Officer: $135,133
  • Tim Porter, Chief Administrative Officer: $122,533
  • Joe Herslip, Chief Business Officer: $105,000
  • Lori Leingang, Chief Administrative Officer: $105,000
  • Wally Erhardt, Director of Student Loans of North Dakota: $91,725″

So what is this Bank of North Dakota?

“In North Dakota, however, all that public revenue runs through its public state bank, which in

A solemn crowd gathers outside the Stock Excha...

A solemn crowd gathers outside the Stock Exchange after the crash. 1929. (Photo credit: Wikipedia)

turn reinvest in the state’s small businesses and public infrastructure via partnerships with 80 small community banks.

How the State Bank Creates Jobs

Banks are supposed to serve as intermediaries that turn our savings and checking deposits into productive loans to businesses and consumers. That’s how jobs are supported and created. But the BND, a state agency, goes one step further. Through its Partnership in Assisting Community Expansion, for example, it provides loans at below-market interest rates to businesses if and only if those businesses create at least one job for every $100,000 loaned. If the $1 trillion that now flows to Wall Street instead were deposited in public state banks in all 50 states using this same approach, up to 10 million new jobs could be created. That would effectively end our destructive unemployment crisis.”

Since 1970 a burgeoning shadow banking market in derivatives now reaching €700 trillion fed by Alan Greenspan deregulation and fueled by banking bonuses to lend out the largest loans possible without question and stimulated by political corruption and greed, exported its contagion to the rest of the world.

Since the Wall Street Crash of 2008 various efforts from Basil 111 to the Dodd Frank Act and the Volcker Rule have come into play to ameliorate the toxic lack of regulation in the financial services industry.

Such rules do not go far enough to protect both government and public money from the mixture of investment and commercial banking intertwining that led to financial collapse. They do not come close to the demands in a Glass Steagall follow-up response to the Wall Street Crash to regulate the financial industry.

“Glass–Steagall legislation is four provisions of the U.S. Banking Act of 1933 that limited commercial bank securities activities and affiliations between commercial banks and securities firms,[1][2]along with proposed similar provisions in the U.S. and elsewhere.”

Rather than banning derivative trading, some light brakes are proposed:

Provisions in

The following is reprinted with permission from Ellen Brown, …”Syria In The Cross Hairs..”

“In an August 2013 article titled “Larry Summers and the Secret ‘End-game’ Memo,” Greg Palast posted evidence of a secret late-1990s plan devised by Wall Street and U.S. Treasury officials to open banking to the lucrative derivatives business. To pull this off required the relaxation of banking regulations not just in the US but globally. The vehicle to be used was the Financial Services Agreement of the World Trade Organization.”

Relaxed banking regulations are still the norm following the crash of 2008.

Private banking in Ireland has now become part of this global network. The 20% shareholding interest of Irish stakeholder interest in BOI will copper fasten the stranglehold of international interests who’ve allowed Ireland to sink like a fly into its web of debt  prey to international debt spiders.

An alternative approach to banking is required in Ireland to protect Irish people from the austerity, eg €100 million cuts in education overseen by Ruari Quinn of Labour in the next budget, 1000 Irish people leaving this country each week. The yawning chasm of private debt and mortgage negative equity strangling the Irish economy.

Boucher deserves a salary cut of €500,000 for a less than smart appearance before the PAC.

Part 2

Here’s Wilbur Ross describing the current state of BOI. We’ll ignore his false statement of 2% growth rates in any quarter since Ireland’s financial collapse, but he makes some interesting points:

  1. Deutsche Bank have a stake in Bank of Ireland to the tune of 35%.
  2. Irish government have a stake of 20%.
  3. Private investors including public institutions on behalf of large scale investor funds own the rest.

Ross states BOI has 1500 UK post offices selling  its products plus it also owns a bank in Connecticut.

Wilbur Ross makes the point:

“What’s interesting is that when the new party came in it didn’t reverse the policies it accepted them and is now implementing them” “They are embracing the concept of private capital coming in…”

Ross refers here to Fine Gael/ Labour non reversal of the FF policies on banking and their support for private investors. I’m guessing he can’t believe his luck. He has the state taxpayers on the hook through their 20% stakeholder involvement ready for him as puppeteer to pull their strings  for any further recapitalisation needs or any other needs.

What more could private investors want?

Probably to scalp as many of those in negative equity on their mortgage book as is possible to maximise profit for private stakeholders, the 80% of BOI.

Any profit because these are international investors will be exported out of the country to usory without any obligation to stimulate lending to risky Irish SME’s.

Perhaps they should consider renaming Bank of Ireland, the Irish Bank of External Settlements…?

So it was with renewed interest in BOI one looked forward to the appearance before the Public Accounts Committee of the Dáil the CEO of BOI to provide more information to us on how BOI is doing given, for example, that 45% of Irish mortgages issued by the bank between 2005 and 2011 are now in arrears, or questions like:

  • The drag this puts the Irish economy under
  • How much the BOI is doing to stimulate the Irish economy through its lending practices
  • What reforms have been put in place to improve Bank of Ireland since the Irish financial collapse
  • What new regulations have been put in place governing its lending policies monitoring its loan book
  • Would it provide full disclosure and access to  all documents in the bank related to the infamous state guarantee and collapse of the bank leading to its ‘rescue’ by the state?
  • What bonuses does it pay its staff
  • How many mortgages on what terms were issued in the last year
  • Debt  write-down

The  following exchange between Richie Boucher under the rather anodyne questioning of Stephen Donnelly TD.

Note Boucher refers to the public statement of accounts of the bank. Note his distinct discomfort in providing any information beyond what the carefully crafted and very slim pamphlet (annual statement of accounts) covers. He dives into the booklet(similar booklets were provided previous to the crash telling of a soft landing) to reveal the €1.4 bn negative equity rabbit he’s created out of thin air.

Any real mark to market of such a figure as to the mortgage losses on the BOI loan book would laugh at such figures as the product of blind myopia and snake oil refusal to reveal true losses that might offend his shareholders.

Here’s Richie Boucher:

He says “I can give you the answers based on the disclosures in our accounts …” Stephen Donnelly asked the simple question if a mortgage of €500,000 could only realise €300,000 through the sale of a house did Boucher’s use of the term negative equity mean that house was €200,000 in negative equity?

Boucher embarked on an unctuous dissemination of disinformation by refusing to be drawn on the question using hide and seek disinformation terms such as the indexation of the mortgage book related to mortgage lending in general across the board…. He was distinctly uncomfortable on being drawn out to explain this single example.

English: Bank of Ireland HQ Baggot Street

English: Bank of Ireland HQ Baggot Street (Photo credit: Wikipedia)

It turns out ‘negative equity’ is not understood by Boucher in the terms we understand it. Its a jack rabbit conjuring trick. BOI and Boucher look at the €300,000 the house is now valued at, but they have no real interest in this. All they are interested in is whether the client can repay the mortgage at its current full value.

The client following an inquisitorial persecution on their ability to repay all or parts of the mortgage following a process of sucking blood from a stone will show an inability to realise full repayment of their mortgage under current terms.

All sorts of shenanigans will now come to bear on that client out of which Richie Boucher and BOI will magically use algorithms based on the indexation of loans and other abstruse mathematical formulae  to bury the bank losses.

The last thing any banker will wish to do with his bank under the spotlight is mark to market its losses. The first thing any government or regulator must do in such a situation is force a mark to market write down of losses.

It turns out unctuous bombast and snake oil means Boucher rewrites the English language to replace the term negative equity with ‘negative net worth’. Rather than answer questions outright on how many mortgages are under water from a mark to market valuation difference between the price that could now be obtained by selling a property and the odious mortgage, Boucher serves up the conjuring trick estimate of how much the bank can realise  back from its  mortgage loan book.

No doubt Boucher likes to delude his private shareholders with calculations based on a growing economy and other cosmetic cover ups of real losses.

It’s clear BOI(Bank of Ireland) is a misnomer. It’s no longer a truly Irish bank serving the needs of Irish people, its purpose is to serve the needs of international financiers wishing to extract usurious interest and profit from the people of Ireland. It cannot be relied upon to put the needs of Irish people first.

Overall, Boucher’s performance including his illusive refusal to answer questions combined with the overall light questioning brought the PAC committee’s ability to question bankers into question. A showcase for publicity seekers on the PAC, government back benchers made to look good, that something was being done to fix the banks….much ado about nothing.

Banks overstate their ability to get this money back and understate real losses. They use false assumptions that the economy will improve or the ability of the individual to repay will improve. Real losses are distilled into false propaganda that bend language into a distortion to hide their real losses.

Its schenanigan mathematics used to cover and understate bank losses. The client is the victim of scamming by the banks to create the Celtic tiger lending 100% mortgage spree fed by fat bonuses and mad salaries.

The client is being bled dry on top of this with taxes extracting his money that magically gave to the banks  the client’s  taxes for the losses incurred by the banks in selling the odious mortgage to the client in the first place…Joe Sucker in negative equity who has just lost his job due to the bank busts, paying through the noses through reduced social services, serf taxes and charges to bail out the banks, is to be further asset stripped of his mortgage debt repayable in full to the banks.

All endorsed and subscribed to by Fine Gael and of all parties, the Labour Party, government of the banks, by the banks, for the banks.You couldn’t make it up! Debt extraction is the new politics.

This madness is supported by government who are not forcing the banks to write down debt and burden share losses. Rather than have to pay twice for the Celtic tiger, such clients in negative equity should at least not to have to pay taxes. Their taxes should pay for their mortgages. That, or a basic level of debt write down from Ireland’s Sheriffs of Nottingham.

Donnelly then asks “Of the €28 billion of irish mortgage lending what is Boucher’s guess of the its market value..” Boucher: “We don’t mark to market our books..” Marking to market you recall was a favorite practice of Enron’s Berni Madoff who used this conjuring trick to overstate and vastly inflate false mushrooming estimates of his book value.

Boucher uses the practice of not marking to market to hide market losses. Horses for courses! According to Boucher, they expect the vast majority of their lending book to be repaid!

We have to listen to this unadulterated rubbish while at the same time expecting the bank to police itself.

Well done to Donnelly for his questioning even though his questioning was self limited and did not hit the mark. Unfortunately in its present 20% equity stake in the BOI the government has impaled itself as part owner making us liable for further losses if the bank fails. We need no greater evidence than this interview to show BOI should be immediately closed down and a public bank owned by the people serving the needs of Irish communities, be set up in its place immediately.

With a total loan book of €28bn Boucher states BOI have a €4bn impairment provision so we see it’s a delicate position re addressing this whole question of ‘negative equity’ and debt write off. The BOI needs to hide its need for further recapitalisation.

There’s a curious point around 9min into that video with Boucher stating €4bn and Donnelly stating €1.4 bn as the impairment but I’m sure this can be cleared up.

Let’s look at BOI a little more closely. Consider its name BOI (Bank of Ireland). Its a bit of a misnomer given who presently owns the bank and its new serf paradigm to extract as much from its victims remorselessly:

Wilbur Ross on Bank of Ireland and state involvement

Ellen Browne

Max Keiser on Michael Noonan and Irish banks

So the same suckers who paid up the scam Celtic Tiger bank loans to pay for tricked property prices during the Celtic tiger, the same taxpayers the banks lean on to pay up for bank losses, get the privilege unlike the rest of us only paying once through higher taxes, less social services, they are expected by the banks to pay up multiple times.

They get to pay the government for bailing out the banks and get to pay the banks for their negative equity. They get no debt write-down.

So what taxpayers are paying the most tribute to the banks? The answer is clear. People with disabilities in Ireland, who cannot even get a service never mind one that will be cut back:

So the corrupt logic is burden sharing for People with Disabilities, no burden sharing for the troika, the banks, the top 1%.

Bill Frezza writing in the Washington Post reveals how the large TBTF (Too Big To Fail) are laundering democracy to create a new empire of banks controlling politics and public finance.

For example, in Ireland, the banking sector has virtually taken over the Fine Gael party having already annexed both the Greens and the Labour Party.

We’re told we have no need of a reformed Seanad. The troika has replaced the Seanad both literally and metaphorically with its own troika influence.

But Ireland’s story is a mere offshoot of what’s happening on a bigger stage in the USA.

Here’s how it works:

Referring to Bernanke’s QE, Bill Frezza writes: “But what happens to all that freshly printed money after it gets parked on bank balance sheets if it’s not loaned to businesses and consumers? Perhaps we could sleep at night if it just sat there, as a cushion against the recession that lies ahead. But unfortunately, the “banks” appear to have flocked back to the derivatives casino, confident that as officially recognized TBTF institutions they are free to privatize gains, gorging on bonuses while the sun shines, knowing they can socialize their inevitable losses.

Falling Loan to Deposit ratios
Falling Loan to Deposit ratios

To see how much of your money they are playing with, take a look at the scariest economic chart of 2012.”

“According to legal scholar Saule Omarova, over the past five years, there has been a “quiet transformation of U.S. financial holding companies.” These financial services companies have become global merchants that seek to extract rent from any commercial or financial business activity within their reach. They have used legal authority in Graham-Leach-Bliley to subvert the “foundational principle of separation of banking from commerce”. . . .

Through banks similar to the now misnamed BOI extracting rent from the Irish people, these tentacles of austerity commerce replace the power of government with the power of puppet masters in the banking sector.

“It seems like there is a significant macro-economic risk in having a massive entity like, say JP Morgan, both issuing credit cards and mortgages, managing municipal bond offerings, selling gasoline and electric power, running large oil tankers, trading derivatives, and owning and operating airports, in multiple countries.”

“According to a recent piece in the Wall Street Journal, the loan-to-deposit ratio is now just 72% – conventional wisdom has it that banks would prefer that ratio to be as close to 100% as possible.”

QE in the US has been hijacked by the banks. It’s impossible for small to medium scale business investors to get loans. Mortgages are not being handed out even to the most secure of investors. The banks are coining it using deposit money to invest in easy money investments in the shadow economy. QE is being used by banks to set in train another crash.

“And when all of this comes to pass, like clockwork journalists and pundits will be sure to blame it on capitalism! As if real capitalism could exist when investors aren’t obliged to bear the risk of their own losses. Foisting losses on taxpayers, then debauching the money supply to cover it up, is not capitalism. Alas, it has become business as usual.”

Response to the crisis in 2008 followed by the crash in the euro zone of countries such as Greece and Ireland has been abysmal. This has happened in spite of Dodd Frank and Bailey pretence at  disinfecting the shadow economy  toxic derivatives market and failure to dismantle TBTF(Too Big to Fail) banks such as JP Morgan, Bank of America breaking them up into smaller and more manageable entities less threatening to the US economy.

In 1932, the Pecora Commission was established by the U.S. Senate to study the causes of the crash. The following year, the U.S. Congress passed the Glass–Steagall Act mandating a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds, and other securities.”

It’s now clear The Dodd-Frank Act has failed to regulate the financial markets. More legislation is required to break up the TBTF banks to smaller entities separating investment banking from commercial banking. New regulations for both are required with emphasis on the regulation and detoxification of derivative based shadow banking currently under the radar and dangerously deregulated.

More banks run on the public banking Bank of north Dakota model need to be set up. Shadow banking needs radical overhaul and disinfection.

To boost economic activity, preserve democracy, lessons should be learned from the experience of public banking in the US where profits go to communities rather than private investors.

Its time public representatives educated themselves to take on the banks to defend democracy to change commercial and investment private banking systems into more targeted public interest goals.

In truth this is an impossible task. There is a divergence between the interest of private banking and the public good.

What’s needed is a public bank that will make creative and positive choices to remedy damage done to the Irish economy by the worst practices of private banking interests within the BOI and other so-called ‘pillar banks’.

Such creative choices could include the release of the 45% of negative equity mortgages at a writedown to a new Irish public bank  run along similar lines to that of the BOI taking toxic mortgages out of the toxic grasp of BOI.

Further information on Public banking here:



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