Peter Mathews (Dublin South, Independent) | Oireachtas source

I do not want to go over the individual details comprising social housing and homelessness in four minutes. It is distressful that 90,000 families are on long waiting lists for up to ten years and that 190,000 mortgage holders are in deep arrears and horrible negative equity. I am appealing to the Economic Management Council, the Cabinet, the Taoiseach and the Minister for Finance to join up all the dots. There has been a failure to do that during the past three years.

I have been pressing hard for them to look at the overview, the provisioning in the banks and banks' capital cushion positions. The banks do not have enough. If they had enough, they would be writing down the mortgage debt to the collectible amounts equating to the embedded equity in houses. There is a very simple rule of thumb that anybody with experience knows to apply. If the rent for a house in Dublin, where the demand is supposed to be creeping up, is €2,000 per month, that adds up to €24,000 per year. The capitalised value of that at a yield of 7% is €360,000. If the house goes above that price in a market transaction, it is moving away from the sensible, anchor, economic value. Looked at another way, if the house is owner-occupied, the income in it is €65,000 per year and if one multiplies that figure by three, it is €190,000.

They are the anchor magnetic fields or poles that should be applied.

We were supposed to have had a banking inquiry and that is important because the prudential rules of fractional reserving and maintenance of proper balance sheets by the banks depends on the knowledge and capability of bank boards to maintain such fractional reserving, namely, to allow only the loans that they create over a period of time to represent about 90% of customer deposits taken in. If they start using other funds like, for instance, shorter-term senior secured bonds and build up their balance sheets, they create a credit bubble. It is a mathematical fact that if banks start increasing their loans beyond 100% of deposits taken in, infinite credit is created on the back of new financial instruments. If they do that, they create an asset price bubble and when that bubble collapses, as it is bound to do, people are left like beached whales. They have huge loans that were advanced to them, which they put into the asset bubble but the assets have gone away. The banks now have the audacity and temerity to insist on trying to collect all of the loans they advanced with money they got from senior secured bonds and other sources, which were all redeemed in full. A case in point is Bank of Ireland which had €61 billion of senior secured bonds in 2008, almost all of which were repaid in full. I am not going to even get into the Anglo Irish Bank example. How was that done? It was done through temporary advances from the ECB and the Central Bank of Ireland. That is how they got out but the customers of the banks, approximately 190,000 families, plus the 90,000 on the social housing waiting lists - 280,000 in total or four full Croke Parks - are distressed by debt and distressed by having no house. We should be saying this to the troika. They went away thinking we had turned corners and that there were green shoots. They were not told about the reality that the losses of the banking sector, totalling around €100 billion, have been heaped onto the citizens of Ireland in two ways, through national debt and banking debt. That is wrong. It is simply wrong.

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