Peter Mathews (Dublin South, Fine Gael) | Oireachtas source

Sometimes it is easier to understand what is happening now when one knows where it came from. It is like studying the etymology of Mr. Sheridan's position. The banks are still bust and his colleague, Ms Fiona Muldoon, has stated that 50% of SMEs' €50 billion worth of exposure to the banks is distressed, impaired or non-performing based on the original terms of the credit financing.

The word "consumer" is unfortunate because the customers of the banks are either lenders or borrowers. They are not consumers in the sense of going into a supermarket or department store. As the bankers say, it is about relationships and trust. A mortgage is based on a 25 year period of trust with streams of money being advanced up front by the lender and coming back with interest attached. The income on the streams of money coming back to the banks is sticky. It is not renegotiable unless the fundamental terms of the relationship have altered and the bank has an opportunity to change the rate. We now know that parts of the banks' balance sheets, if considered as a big sector of industry, are income sticky and the other bits, such as the plastic cards and current accounts, offer opportunities to go into fourth, fifth or supercharge gear for income. That is the territory in which we are currently moving.

The trouble is that 150,000 bank customers in the sticky income part are in deep distress. Some of them are so depressed or fearful that they are taking their own lives. That position arose only because the banking sector accepted a wall of credit from other institutions in addition to the credit they got from the normal depositors in the system. This wave of extra money came, greedily, from abroad to bolster their balance sheets and the banks' management and boards topped it up further with short-term money from money markets to lend long. To do this over six years, with average loan to deposit ratios of 150%, is utterly dangerous from a financial engineering point of view. With that credit expansion, asset prices rose terribly and normal people, households and businesses had no option in this turbocharged credit expansion and asset bubble but to borrow on the terms offered by the banking sector and allowed by the Irish regulator and the international euro system regulator. The international counter-party appraisers, that is, the funds which invested in the banks also allowed this to happen.

When the bubble burst after six years, prices collapsed but loans did not. The establishment and the law are on the side of the lenders. We are now worrying about the epidermal or skin level of consumers' lives, that is, the charges they pay on bringing money to and from the banks and credit cards, which have increased by 23%, but the internal organs of the people and their businesses are deeply damaged by negative equity of up to €250,000 in some cases where loans totalled anywhere between €750,000 and €800,000. The banks funded those debts at not less than 75% even for those which were being relatively prudential. If they offered a loan of 100%, they funded the entire asset bubble price. If they funded the entire asset bubble price, why should they not be funding 100% of the negative equity outcome? That would give the consumers about whom we are now worrying the confidence and the justified and unassailable right not to be pushed around, talked down to or made to feel deferential with the discussions that are beginning to take place with the banks for the purpose of restructuring or writing off the impossible elements of the loans with which they are burdened. That is important for every borrower in that situation to understand. They need not be ashamed. The banks should be ashamed about negative equity after six years of a turbocharged credit and asset bubble.