From top: The Cruise Park housing estate in Tyrellstown in West Dublin, whose developers’ Ulster Bank loan was bought in 2014 by a Goldman Sachs vulture fund; Dr Rory Hearne
Homeowners and tenants need protection from vulture funds such as those owned by government advisors, Goldman Sachs.
Dr Rory Hearne writes:
There needs to be an immediate suspension of the sale of Irish housing loans to the vulture funds and emergency legislation to protect tenants and those in mortgage arrears from eviction.
There is also a need to investigate the role of Goldman Sachs, the vulture fund involved in evicting residents of Tyrrelstown, in advising the Irish government.
Goldman Sachs is a multi-billion dollar US multinational investment fund company. It is involved in more ways than we realise in Ireland. Beltany Property Finance is the Goldman company involved in the Tyrrelstown development and it bought the loans in 2014 from Ulster Bank.
Goldman also played a key role in advising successive Irish governments on the restructuring of the banks from 2008 to 2013 (for which it was paid €8million), and it is still contracted by the Department of Finance to advise it on the potential sale of AIB.
Surely there are potential issues of ‘conflict of interest’ and the profiting from ‘insider knowledge’ here?
Goldman could have gained intimate knowledge of the properties and assets held on the loan books by the Irish banks such as Ulster Bank. Goldman, as other vulture funds, tend to make significant profits from buying these ‘toxic’ or ‘distressed’ loans at discount prices and then selling them on when the markets rise – as is going on now in Ireland.
Questions need to be asked about why Goldman Sachs remains in such a prominent position advising the Irish government on the restructuring of the Irish banks. Especially given this clear conflict of interest where Goldman can profit from this intimate knowledge it gains of the restructuring of these very same Irish banks.
Is it because of the close relationship between Goldman Sachs and governments?
For example, Mario Draghi, President of the European Central Bank, is a former employee as was the Treasury Secretary in the US. And then there is Peter Sutherland, recently retired Chair of Goldman Sachs, who is a leading member of the political establishment in Ireland.
Haven’t we seen disastrous outcomes from this close relationship between politicians, financial institutions and property before?
Goldman Sachs was actually charged by the US Securities and Exchange Commission for its role in causing the 2008 financial crisis – directly linked to its role in the subprime housing mortgage market.
Goldman, profited from, and played a role in causing, the 2008 financial crash and the 2010 European debt crisis. Rolling Stone magazinehas called Goldman “the giant vampire squid” for its vampire like profit squeezing from economies and the devastating impact on ordinary people’s lives.
And yet it continues to hold huge influence over governments?
It begs the obvious question. Why would you ask a financial investment fund, who have consistently shown that they will always act in ways that are most profitable to them, for advice on an economic and social crisis like our banking and housing crash?
You only ask investment funds like those if you want to know how to maximise the interest from vulture funds in buying up distressed properties and assets.
And this is the heart of the explanation of the current situation in Tyrrlestown and our ever worsening housing crisis.
It is the thinking that underpinned the decisions taken when the Irish housing market and banks collapsed and the scale of the losses and mortgage arrears crisis became apparent.
Government and policy makers focused on removing the ‘problem’ of toxic housing loans from the bank’s balance sheets in order to save the banks and help them return to profitability and ‘healthy status’ as soon as possible.
This was the priority in policy decisions. The impacts on home owners and renters living in the houses and any future housing crisis, was a distant consideration.
Policymakers knew (thanks to the advice from the likes of Goldman) that the non-bank funds buying these loans (bundles of mortgages) would be mainly interested in high rates of profit and making that as quickly as possible by selling off the property as soon as the housing market would recover.
So the result was the ‘pillar’ Irish banks (and European financial system) were ‘saved’ by the taxpayer bailouts and the sale of distressed toxic loans (i.e. developer’s loans –land and thousands of houses like Tyrrlestown) to various vulture funds and subprime housing companies.
The price for this policy is now being paid by the families losing their homes in Tyrrelstown and the tens of thousands more who will face a similar situation in the coming months and years as receivers, banks and vulture funds all look to profit from a rising property market.
The other associated price for this approach is the escalation of rents and the homeless crisis which arises, in part, from the failure to introduce rent control. Rent control would have reduced the interest of vulture funds in buying up Irish distressed property and that explains the political coolness towards it.
The scale of the increase in ownership of Irish housing, particularly mortgages in arrears, by non-bank vulture funds is staggering. My analysis of central bank figures shown in the table below reveals that these ‘non-bank entities’ (vulture funds) now hold 47,461 mortgage accounts.
And of these 19,818 are in arrears of more than 90 days, with 13,050 of these in arrears over 720 days. Therefore, these funds hold almost 25 per cent of all mortgage accounts in arrears of more than 720 days.
Their increasing role is shown by the fact that they have doubled their holding of the total Irish mortgage stock in just two years from just 2% of the total stock in 2013 to 5% in 2015 (6.3% in value terms).
Something can be done to change this and protect people in their homes from the vulture funds. It requires the government temporarily suspending all further sales and repossessions of housing and loan books including Irish residential property by either NAMA or the banks.
A new housing and homes agency should be immediately set up to purchase these distressed properties and work on solutions that protect the tenants and homeowners in their homes.
Furthermore, emergency legislation is needed to strengthen tenant’s rights to enable them stay in their home, and rent control is required to avoid economic evictions of tenants.
Finally, the Department of Finance and other government contracts with vampire vulture squid, Goldman Sachs, should be ended immediately.
Dr Rory Hearne is a policy analyst, academic & social justice campaigner. His column appears here every Wednesday. Rory is an independent candidate for the Seanad NUI Colleges Panel. He writes here in a personal capacity. Follow Rory on Twitter: @roryhearne