Bank Lending and Supermarket “200 Fresh Price Cuts”… Both a Joke

This morning I was greeted with the lack of bank lending and the 200 Fresh Price cuts in Superquinn on the front page of the Irish Times.

What I hear you say has price cuts in Superquinn and bank lending got in common apart from being on the front page of the Irish Times? Well let me explain.

So the bank lending that our TV and Radio advertisements says is happening all of the time is in fact not happening at all. In fact our lending levels are that of Greece, the country who our esteemed leaders keep telling us we are not like. Well, being at the coal face of the debt and lending crisis I can confirm what we all know it is no surprise to find out that lending is nonexistent.

What the Central Bank report on lending does is confirm to our elite leaders what every ordinary person already knows the “banks are closed for lending”. What they say in their fancy ads is not true and what our leaders have been trying to spin to the ordinary people is also that …. spin!

Even more worrying is that almost 30% of those who do apply for a loan do not get it. This is so worrying because they would not have even applied if they were not “sure” of getting approved. Added to this we are not told how much of the approved lending is restructuring of existing lending which is not new lending at all. Based on my coal face knowledge I would say the restructuring lending is in excess of 90%.

This Central Bank report confirms something much wider than simple lending figures or lack thereof. What it is confirming is that the €63b put into the banks to fix the banking system and get banks lending again had been wasted! Also the 1% loans which the ECB gave to banks in November 2011 and again in February 2012 are not being used to lend to the local economy but being used to buy high yielding government bonds increasing the banks profits but destroying the economy. Our Professional and Political elites scam the ordinary guy once again.

Now getting on to Superquinn. So a big “200 Fresh Price Cuts” campaign is on. I enter my local Superquinn this morning to be greeted by a young girl telling me of the great promotion.  Then right inside the door a variety of fresh bread is there with the “200 Fresh Price Cuts” stickers all over them. I go to get the one I usually get and guess what ……. the price has gone from €1.50 to €1.99!!! Do they think (like the bankers thing) that we are stupid?? Maybe now they will understand why Superquinn is lagging behind in their market. This is just another outrage which the ordinary person has to put up with. I just hope someday soon people will cry Enough is Enough!

So fancy ads on Radio, TV and newspapers and just that … Fanciful.

Cash boost ‘to create 13,000 jobs’ “Pathway to Recovery” or “Stimulus for the Elite Political and Professional Classes”?

Any plan to spend 2.25billion euro is welcome and especially in an economy such as ours. Though the amount does have to be taken into context, it represents less than 5% of the total amount put into our banks which have all failed and most of the funds have long since gone from these shores.

I have some concerns regarding the type of stimulus, the sectors it is being spent in and the real potential of such spending over a 6-7 year period.

So we have very limited resources available to us and even the actual source of the 2.25b is scratchy to say the least. The minister insisting that he is going to be able to raise at least 50% of the fund in Public Private Partnerships (PPPs) is in my view very ambitious. What makes the minister think that investors who have fled the country in the past 5 years will invest in an economy that is still contracting? Or is he planning to give the projects away as was done in the past (M50 and Eastlink Bridges)?

The stimulus fund is to be spent in three major areas Health, Education and Roads. All of which have had massive investment in the past and in the case of health and education continue to have massive funding on an ongoing basis. Health spending contributes to our doctors and consultants being paid some of the top salaries in the world. While teachers in our education system are amongst the best paid teachers in the EU (and possibly in the world though I do not have the figures at hand). Do these areas really need any more spending and will the additional spending just result in more overpaid professionals? I have no doubt but it will. Is this another case of the elite political and professional classes of the country looking after them selves’ again?

As for the proposed road infrastructural spending in addition to other projects that have been approved previously will the projects be so beneficial to the country to spend the very limited resources on? Again I very much doubt it. And again we in Ireland manage to build 1k of road for the same price of 3k in Germany so will we really be getting value?

So the stimulus is all about jobs. Construction jobs which will be gone in a few year’s time and then jobs for overpaid professionals in the colleges, schools and medical centres. Sounds like a really great “pathway to recovery”!

Would our leaders not be better off in looking to different places for stimulus such as encouraging small businesses to grow with additional funding made available through a new development bank (as promised in the program for government), real concessions for employing additional people. Encouraging investment with the reintroduction of capital allowances for SMEs. This is where real sustainable jobs will be created without future drain on the state through high wages and massive pension schemes.

It looks like we are in for the same old thinking again. The pathway to recovery is going to be a very long one with this kind of thinking!

ECB Interest Rate Cut/ Dermot Morgan/ Michael Noonan Turkeys and Christmas

ECB Interest Rate Cut/ Dermot Morgan/ Michael Noonan Turkeys and Christmas
In a week that saw major excitement about the EU making a “seismic shift” in its treatment of bank debt and a cut in the ECB main lending rates it just does not seem that much has really changed. By the end of the week our Mr. Noonan had to admit the EU “seismic shift” may have been more like a minor shift and although the interest rate cut will be a great help to the Irish people and economy he cannot force OUR AIB to pass on the interest rate cut! And of course OUR AIB decided not to pass on the rate cut to its customers.
It seams in Ireland the more things change the more they stay the same. I was lessening to a radio programme this morning about satirists and they played a clip from 1989 Dermot Morgan’s (who I had the pleasure of meeting at the height of his career) and RTE’s scrap Saturday and who was he taking off only the very current Mr. Noonan! Though he was not a minister at the time he was still in the tick of Irish political life. And now 24 years later when the country is in need of the most radical turnaround of any modern country we have at the head of our finances and indeed the most of government (Kenny, Quinn, Burton etc) people who have been around far too long. They have proven they are not capable of thinking outside the box (and FF are no exception here) to get the country moving again. Instead what they continue to do is prop up institutions like AIB, NAMA, ESB, etc …. which are holding back the country but keeping the old guard of which they are a major part, in the power and style they have been used too even through this depression we are going through now. Until we see some fresh people with new radical ideas we in Ireland who are not part of the golden political/professional circle are set for a very long and difficult road ahead.
It is a shame because our economy being small and flexible can be fixed very quickly but a major part of that fix involves a purge at the top of political and professional classes and we all know turkeys do not vote for Christmas!

Paul C Carroll FCCA

Personal Insolvency Bill 2012

The Personal Insolvency Bill 2012 was published yesterday without the usual fanfare associated with our current government’s announcements about their attempts to fix our broken state. The announcement was somewhat overshadowed with the (another) seismic shift by the EU on another form of debt relief  … Bank Debts …. Let’s all recognise debt forgiveness is alive and well but just not it seems for the ordinary person!

As some commentators have already stated the banks fingerprints are all over this bill which I would agree with. I also see that the finger prints of our privileged professional classes are also all over the bill too. Items which are unnecessary but included such as the necessity for an annual review of a personal insolvency arrangement (PIA) and many court filings smack of professional fee generating schemes and not adding any particular value to the process or to the debtors situation.

I would have several concerns with the bill as it currently is, the first of which is the amount of time a person who makes one of the 3 proposed arrangements available with their creditors is tied up in the arrangement. The time can be anything from 3 years in the case of very small arrangements under the Debt Relief Notice (DRN) to 7 years in a Personal Insolvency Arrangement (PIA). Is it really in the ordinary persons interest to be tied up for such a long time given that they have faced up to their debt issues and just want to get on with their lives?

Another major concern is with the position of strength of the creditors in all of the arrangements where at least 50% and in some cases 65% of all creditors have to agree to the arrangement. This effectively gives the creditor (in most cases the bank) control and we know they just inflect more hardship when they are in charge.

A very worrying aspect of the bill is the ability of a creditor to claw back some debt previously written off! So after the ordinary person puts themselves and their family through one of the arrangements, suffers the stress, worry and loss invariably suffered from the process. Then has some bit of good luck, in say 4 years time after the arrangement is made, most likely after a lot of hard work the bank is the one to gain from the good fortune! What kind of debt resolution is that?

The most positive aspect of the bill is the reduction of the term of bankruptcy, if someone takes the ultimate plunge, from 12 to 3 years. After the 3 year term is up there is an automatic discharge. The 3 year term is longer than the 1 year term in Northern Ireland and the UK but it is progress. Given the terms and length of the 3 proposed arrangements in the bill anyone with significant debts maybe better off  just go ahead with declaring bankruptcy and the 7 year ‘sentence’, annual reviews and possible claw back imposed by the so called arrangements could be avoided.

Paul C Carroll FCCA, Neo Financial Solutions, 01 4370908

Irish Insolvency Bill coming Friday

So the long awaited Irish insolvency bill will be published on Friday. I am delighted to see that it is on it’s way but I am very worried that our leaders will side step the real issues this bill needs to address. I have no doubt that the Irish insolvency bill will include lots of provisions for legal and accounting professions to get involved in fee generating processes. I am really worried that the irish insolvency bill will continue the scam of supporting bankrupt banks by not fully dealing with mortgage loans in the irish insolvency bill.

All the evidence to date with our leaders no matter which party is involved have shown an unwillingness to address the real problems of the ordinary person. Will the costs of the Irish insolvency process be too great for the ordinary person? Will the term in bankruptcy be in line with our neighbours and provide proper relief for the ordinary person? Will the massive issue of mortgage problems be tackled? These are simple issues which can be addressed simply if there is a willingness to do so. But I am fearful that a complex solution to a simple problem is on it’s way …….. first sign of which is the announcement that the Irish insolvency bill will be over 200 pages (i can hear the fee notes from the lawyers printing already) is not a good indication that we are going to have the simple solution to the simple problem!

Role on Friday and hopefully I am proven wrong ….. but watch out the professional classes in Ireland are about to again rip us all off!!

Financial distress caused by Debt

People who are experiencing distress over finances and in particular too much debt need to know they are not alone. Indeed no matter how much someone is earning excess debt is a burden and needs to be addressed. No matter if the excess debt is caused by the family home mortgage arrears and/or investment property arrears the stress is the same. We are told that if there is distress the lender should be informed immediately. However, most lenders are not in a position to deal with the current level of distress calls they are getting. As a result it can take in excess of 3 months to have a lender address the issue. This builds on the stress and usually compounds the problems.

People with mortgage arrears, expecting to go into arrears or those who are struggling to keep up with current payments should understand there is help out there. You can get independent, impartial and confidential advice which will review your mortgage arrears problems, income problems and present advice to assist with solving the problems. However, it is the you who has to decide what the appropriate action is having considered the advice given regarding mortgage arrears and loan distress.

Those in mortgage distress must also remember that banks are in trouble too and are ALL willing to look at some kind of debt forgiveness depending on the circumstances. Despite what is discussed in the media and by bankers and politicians alike debt forgiveness is alive and well in Ireland. The banks have had their debts forgiven by the taxpayer! Sean Quinn has had his forgiven by Anglo, the developers are in the process of having most of theirs forgiven by NAMA. SO it is about time that the ordinary person has some debt forgiveness on mortgages and other debts. All of the banks have been re-capitalised in order to absorb the losses on bad loans so it is about time that they started to hand this capital back in the form of mortgage debt forgiveness to ordinary people.

In Iceland banks went bust. Mortgages were put into a New Good Bank. Properties were revalued and mortgages were written down to 110% of the new value and the people could get back on with their lives. And now Iceland is growing at 5% interest rates are less then current Irish overdraft rates, unemployment is less then ours and our leaders keep saying “we do not want to be another Iceland”  …  just shows how in touch with reality they are!

So Mortgage debt forgiveness is possible and can succeed. Mortgage arrears and excess debt burdens can be dealt with and solved. Landlords with mortgage arrears can be helped, multi-able property owners and ordinary people with distressed mortgages can all be helped. It is up to the individual to address the situation either with profession help or on their own. A good plan of engagement with lenders and very positive attitude are the first steps to getting the proper debt relief if not debt forgiveness. Reducing monthly payments on mortgage arrears is a major stress reducer so why not go after it?

Negative Equity Mortgages

We have seen some attempt for banks to suggest that in limited cased negative equity loans can be a solution to some peoples housing problems. In particular where a couple have been in a small apartment and now wish to move to a house or larger apartment for expanding family reasons. However, in many such cases the original apartment is in negative equity in other words what the apartment is sold for will not cover the outstanding mortgage. Some banks may suggest you carry this deficit on too the next mortgage in the new house. This is a complete disaster for the customer and only benefits the bank by not having to realise the loss on the loan. So what the bank wants the ordinary people to do is to take the loss while they, the Banks, have the customer on the hook for another 20 or 30 years! Do not let this happen to you EVER!

Personal Debt Restructuring and Corporate Debt Restructuring

Debt restructuring whether corporate or personal is the necessity to reorganise your debts in order to ensure that you can attempt to have some financial security in the future.  Such a reorganisation can involve many parts including asset disposals, mortgage debt forgiveness, reduction in loan repayments, increase in income, debt forgiveness, corporate liquidation, creditor arrangements, and personal bankruptcy.

Debt restructuring is often undertaken when the debt mountain becomes too great and the person or entity is at breaking point. It is unfortunate that it is left that late because if addressed earlier it is often much more successful and the outcome is much more beneficial to the parson or entity endeavouring to restructure. This sounds like a bank statement and on this very rear occasion Neo Financial Solutions agrees with the banks. Though the motive for Neo agreeing with the statement is very different to that of the banks motive.

Debt Restructuring when addressed early can be done in such a manor that you the debtor can have control over what you do with your assets and limited cash resources. If you simply go to your bank and discuss the matter with them their object will be to “see how much money you have and see how they can get as much as they can off you”. Now, despite what the banks claim that is not in your interest. In fact it is directly against your interest because usually one of the first things any debt restructuring investigation will show is that you should be reducing your payments to banks for various loans and mortgages and not keeping the payments up or paying them more! In these difficult times the payment of a credit card bill and missing a mortgage payment may be the difference between feeding the family or not. And here at Neo Financial Solutions we always recommend feeding the masses rather then the Bankers!

Some of the matters that would need to be addressed in the initial debt restructuring assessment are:

All assets need to be listed and an approximate value put on each together with any loans/mortgages outstanding that the assets are securing. Details of all repayments being made on the loans and a description of the loan type i.e. mortgage, term loan etc. particular attention needs also be given to assets which may be owned but are not pledged to any bank or used to secure any loan.

Income needs to be itemised to include salaries, business income, rental income, etc. The level of income and the types of income is very important in the debt restructuring process, for example, income from rental income should be used to pay loans/mortgages on the properties producing the rental income. Other income should not be used to top up these payments and this usually form part of the restructuring package.

All expenses apart from the above mentioned loan payments expenses should be detailed with a view to reviewing and prioritising their importnace. It is very important to ensure that all expenses are given careful consideration and the importance of some over others are considered. This is a very personal thing and should be done on an individual bases because what is important to one person may not be as important to another.

Finally, whether for personal or corporate debt restructuring it is vital to consider where it is you want to end up and what assets you want to try and keep. This will enable the restructuring to focus on what is it is you are trying to achieve. When that objective is clearly defined it make the restructuring specialists job much easier and results much more definable.