Friday, December 18, 2009
America has the wrong approach for dealing with thieves. Rather than "looking backwards" at their misdeeds and "punishing" them, we merely need to ask that they not misbehave in the future, then monitor their behavior.
Believe it or not, this is how congressional leaders are addressing the thievery of three little-known gangs. Congress' compassionate approach is not meant for common robbers. No, no — lawmakers are happy to punish them to the hilt. Rather, the kid-glove treatment is reserved for thieves named Moody's, Standard & Poor's and Fitch's — the Big Three credit-rating agencies that exist to evaluate the worthiness of corporate-issued bonds, assigning a grade (from triple-A to "junk") that helps investors know the risk involved in buying the bonds.
But the Big Three run a rigged game that robs our pension funds and other investors. Moody's, S&P and Fitch are not independent public regulators, but for-profit firms that are paid fat fees by the very corporations whose bonds they rate.
Yes, this is an inherent conflict of interest! It allows rating firms to profit by merrily putting smiley-faced grades on lousy bonds, thus deceiving (and robbing) the public. For example, the Big Three gave thumbs-up to the subprime housing bonds that turned out to be worthless, leading to trillions of dollars in losses for the public and crashing our economy.
Yet, our soft-on-corporate-crime congress critters have declared these finaglers "too big to jail." Rather than taking the Big Three off the street, Congress is coddling them, meekly freeing them to continue their corrupt, for-hire, monopolistic system of credit-rating flim-flammery.
The Commercial Court has ruled that developer Bernard McNamara must pay almost €63 million to a group of investors, who along with the Clare businessman, part funded the purchase of the Irish Glass Bottle Factory site at Ringsend in Dublin.
The court also granted the investors summary judgement of €98m against Donatex Limited, a company owned by Mr McNamara, in relation to the same deal.
However, a stay has been put on the decisions until January so that an affidavit can be prepared in relation to what was described as Mr McNamara's deteriorating financial circumstances.
The claim arose in relation to a 2007 guarantee given by Mr McNamara over a loan advanced by the investors, through their Jersey registered company, Ringsend Property Ltd, to help the financing of the purchase of the site.
It was bought that year for a record €412m. The site is now estimated to be worth in the region of €60m.
In an affidavit, Mr McNamara alleged that the investors behind Ringsend Property Ltd include well-known businessmen Lochlann Quinn, Martin Naughton, Kieran McLaughlin and Barry O'Callaghan.
The investment opportunity was described at the time as a transaction offering 'the opportunity of participating with one of the most prolific and successful developers in the country in the development of the largest and most high profile property to become available in Dublin 4 for decades.'
Ringsend Property Ltd is seeking the repayment of its loan, because it claims a key clause of the loan agreement had been breached.
Monday, December 14, 2009
Shadowland examines the future for Ireland’s built environment in the shadow of NAMA.
The Shadowland exhibition takes place in the City Wall Space in the new Wood Quay Venue, Dublin City Council Civic Offices, from Monday 14 to Friday 18 December 2009.
A response to the current economic crisis, Shadowland highlights the lack of ideas and imagination in planning and construction over the last twenty years, which has left a legacy of half-finished projects, ghost housing estates and land zoned for development in inappropriate locations.
In a week when Greece and Spain both saw their credit ratings under attack (see article), the budget at least gave the government an opportunity to reassure international investors that Ireland, unlike some other EU countries, is serious about controlling its budget deficit and public-debt burden. Mr Lenihan has done this with the toughest budget in his country’s history. Public servants face pay cuts of 5-8% on salaries up to €125,000 ($190,000); higher earners (who will include the prime minister) will see their pay cut by 15% or more. Unemployment and welfare benefits have also been cut, though not pensions. Next year’s budget deficit, at around 11.6% of GDP, will be similar to this year’s.
The budget came against the background of a sharp contraction in economic activity, far greater than that experienced in other euro-area countries. GDP is projected to decline by 7.5% in 2009 and a further 1.3% in 2010. An unemployment rate of 12% this year is at least showing some signs of stabilising. But consumer confidence remains weak and households continue to save more and to spend less, thereby depressing tax revenues. Next year, almost half of all income earners will pay no tax. In an effort to widen the tax base, the government proposes to introduce a new property tax.
The budget will put the government into direct conflict with trade unions for the second time this year. The pension levy may have been accepted by the general public, but the unions still protested vociferously. In pre-budget talks, the government noted a hostile public reaction to the unions’ proposal for a temporary pay cut for public-sector workers and a promise of big public-sector reform. It chose a permanent pay cut instead.
These measures mark the end of two decades of social partnership, based on a consensus approach to pay bargaining between government, employers and unions. Whether this will usher in a long period of industrial conflict will become clearer in the coming weeks. Public-sector unions are already giving warning of a sustained campaign of strikes. But in these hard times they may not win much support from the Irish public.
Sunday, December 6, 2009
Like many he bought a flat off-plan in what was a red-hot property market. Today he is trapped, his passport confiscated until he repays bank loans he used to invest in a property that may never exist. If his work dries up before he can clear his debts he will go to jail.
We met at a coffee shop in Dubai’s vast Mall of the Emirates. Around us were some of Britain’s most familiar high street names — Next, Debenhams, Virgin, Costa Coffee and Harvey Nichols. For now trade is still brisk. “I’m struggling to know what to do really,” he said.
Borrowing from family to supplement his savings, Ross, in his early thirties, moved with his family to Dubai from South London in late 2006, put down a £60,000 deposit and arranged a £30,000 loan to help to cover the initial instalments on a £350,000 two-bedroom apartment in the Dubai Sports City development.
“The plan was to let the place out to cover the loan and mortgage but it was scheduled for completion by the end of 2008 and they haven’t finished the ground floor yet,” he said. Without the apartment to boost the family’s income, the high cost of living forced them back to Britain. The debts became overwhelming in a city where non-payment is a criminal offence. Ross returned for some contract work but he was held on arrival at the airport by the police.
The Sports City developer, Middle East Development, told him that work on his property will restart before the end of the year but will take at least 18 months to complete without any further delays. Even if it were to meet this schedule it will be three years late.
Ross’s options are stark. He must keep working to pay off the bank, borrow from his family, leave Dubai illegally and lose the apartment or go to jail. “The worst-case scenario is that I have to lean on friends or family to get the money together. It’s that or jail — it’s a no-brainer really.” For now he is looking no further than Christmas, trying to decide whether to fly his wife and three children out to Dubai for the holiday.
He is far from alone. The handful of cars dumped by expatriates at the airport each week bear testament to that, and talk of a speculative property market gone sour.
The scale of overbuilding in Dubai, paid for by a phenomenal debt binge facilitated by British and international banks, is hard to conceive until you see it. The world’s tallest building, the 2,600ft Burj Tower, is due to open next month. Its spectral presence looms over the city, its pointed top a needle to the bubble.