John Crown (Independent) | Oireachtas source

This is a brief interjection. I call on the Minister of State to ask the Minister for Finance if he will consider some fundamental changes in the way we do our financial business with regard to the question of mortgage debt and bank sustainability. This is a time of national emergency. Let us reflect on when many people took the advice of bankers. They were a group the people in Ireland were brought up to believe could be trusted. They were a near priest class with whom people had a professional relationship. They were supposed to be counted on to give people advice which was in their interests with respect to what they could and could not afford in a mortgage.

As a result of systematic misleading, a large chunk of our population have found themselves with a level of debt that was never sustainable. However, these people had been advised by those who had a profound personal financial self-interest in telling them that such borrowing was sustainable. We should quickly move to the model of non-recourse mortgages. Anyone who wishes should be able to go to the bank, throw their keys down and tell them that the property belongs to the bank now and that they can keep it and keep the mortgage. This is the way in many countries and it would fundamentally change the outlook for many people here who find themselves trapped in debt or with the burden of negative equity.

These people cannot reinvest in any other part of our economy. Their entire future is in hock and it affects their social and geographic mobility. Their ability to change jobs is totally gone but this measure would restore it. In many cases it would still represent a financial catastrophe for people but at least it would be a liberating experience. It would not be for everyone. I do not imagine our banks would support the proposal but now we truly understood their essential culpability with regard to people making this mistake. It is often misrepresented in Germany and elsewhere that we went mad buying big houses. We did not. Most Irish people bought the same kind of house that their parents and grandparents bought. The only difference was that they bought it for five or ten times the price because they were led to believe that all the old rules of prudence which had applied were gone, rules such as that one should only take out a mortgage of two and a half times one's salary and that one should only take out a mortgage for 80% of the value of the property. These were no longer applicable and those days were gone. People were seriously advised that it was safe to take 100% interest-only mortgages to the value of three, four and five times their salaries. With respect, this was done with the complicity of several Governments, which were perfectly happy to take large sums of stamp duty from them as well. We should give consideration to simple legislation - perhaps it cannot be introduced in this House - to give anyone in a negative equity mortgage the opportunity of changing to a non-recourse mortgage.

I have put it to the Minister previously in the House that many people are in serious debt to banks and other lending institutions. At the same time some of these people have large amounts of personal savings tied up in pension funds, which they cannot access until retirement at 60 or 65 years of age. In many cases by the time those funds mature those involved will have lost their home or business because of the burden of unsustainable debt. I know of many people who would willingly get their hands on some part of their pension fund that is sequestered and untouchable until it is too late, pay the tax that would be due, and then use the money to pay down debt. The figure for Irish pension fund assets stored outside the country is approximately ¤100 billion. If only a small portion of that was redeployed not to satisfy the Government's payments to those who so unwisely invested in our banks as bondholders, but to deal with the other debt problem in the country, personal debt, I believe it would be a win win win situation. The Government would get more money in tax, the banks would get repayments on debts, which would otherwise simply go bad, and people would get some degree of liquidity which would help them to get their debt-ridden lives back on course. I thank the Minister of State for his attention. I will be supporting Senator Barrett and I hope the Minister of State will pass these message on to the Minister.