Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance) | Oireachtas source

I thank the Governor, Professor Honohan, for his attendance. I will summarise what the banks have said last week at the committee and what the Governor has said. The banks said, more or less: "We lent in good faith - maybe a bit recklessly. A big financial crash came along and people are in difficulty but we have the right to get our money back off mortgage holders. If they would only just engage with us, because we really want to engage with them, we will be fair and reasonable with them. The problem is that too many people are strategically defaulting or not engaging with us."

Professor Honohan has given a slightly more critical narrative in that he probably says: "The banks are not doing as good a job as they could." Broadly speaking, however, he is going along with the idea that heading along the current trajectory will mean it will be all right on the night with the current framework. I put it to the Governor that the banks are telling us an absolute fairy tale, that the Governor is blindly optimistic about what is actually going on and that there is a financial bomb likely to explode on the balance sheets of the banks, with pretty devastating consequences for our economy and for the citizens of that economy.

I want to illustrate that point with an example which, in my view, is typical. I will not mention names. A young couple from Dún Laoghaire, both working and with a low to middle income, take out a mortgage to buy a house in Wexford. They do not want to live in Wexford. Back in the day, the bank offers them money to buy a house in Dún Laoghaire. They decline because they believe they would never be able to afford it. They decide they want to get on the property ladder but they decide to be sensible and go to Wexford and hope eventually to work their way back to Dún Laoghaire. The crash comes. Their income has decreased by about 20%. The house they bought for €250,000 is now worth €80,000 to €90,000. Payments were at about €1,200 a month and they are now just about able to pay €700, and barely so. This is a less than interest-only arrangement, which means the debt is building up on them. The woman becomes pregnant and very soon will be unable to work so that their income will drop even more. For two years they write to the bank, begging for a permanent solution. All they get from the bank is moratoriums, temporary solutions and so on. Only when I raised the issue with the chief executive officer of that bank at a committee meeting when I said the bank was not engaging with the customers, does this couple finally get an appointment to meet the bank. At that meeting the bank representatives offer them another temporary arrangement whereby, because things may turn around and perhaps in a year or two, some sort of split mortgage can be considered. The couple, quite rightly, decline. They say they are sinking into a mire of debt and such an arrangement is no good to them. They point out that the bank recklessly lent to them and actually encouraged them to take out even bigger loans. They had hoped that the bank would be realistic, but after the meeting they conclude they have no choice but probably - although they have not fully decided yet - to hand back the keys. If this happens, the banks, which Professor Honohan says cannot afford to give a write-down, will be forced to take a write-down.