Sign in. It’s quick, free and it’s up to you.
An account is an optional way to support the work we do. Find out more.
Updated 5.20pm
A FORMER ADVISOR TO the late finance minister Brian Lenihan has told the banking inquiry that the “lethal expansion” of the Irish property market could have been avoided had there been intervention in 2004.
NUIG Professor Alan Ahearne, who worked for Lenihan between 2009 and 2011, told the Oireachtas committee that 2004 would have been “the best time to get in there” and avoid the subsequent increase in property prices beween 2004 and 2006 which was “particularly damaging”.
Ahearne has been described “the economist who told you so” and is considered to have been one of the few contrarian voices during the economic boom who warned of the dangers of the bubble.
The academic said that he had heard anecdotally that the property market had stalled in mid-2006 when houses weren’t being sold. But at various points during his evidence today he spoke of the lack of will across all sectors to intervene.
“This was extremely popular and there was lots of people getting money from this,” he told the committee set up to investigate the causes of the banking collapse that led to the 2008 bank guarantee.
Ahearne said that the boom “was great, it felt great at the time” and so “people didn’t want to hear that something was wrong”. He said:
Booms are very popular when they’re happening, the amount of money coming into people’s pockets is fantastic.
He was later asked by the Socialist TD if what he was saying was essentially echoing Lenihan’s infamous “we all partied” comments in 2010.
Ahearne, who was working for Lenihan at the time the comments were made, insisted: “I didn’t mention anything about partying… the result of these booms and bust are devastating on people.”
He said that Ireland’s property boom and bust was one of the biggest in history and certainly in the top three alongside Netherlands and Japan.
Ahearne highlighted 100 per cent mortgages being given out by banks during the boom as having been “extremely dangerous instruments”.
He said that at the time the financial regulator did not lack the tools to intervene saying it could have increasing loan-to-value ratio and have been more intrusive with banks.
But, he said, the regulator “put a lot of trust in senior management with the bank” and said that the “the implementation of regulation failed dismally”.
Of the political climate at the time, Ahearne said that in the run up to general election in 2007 no political parties were recommending the policies that would have stopped the bubble.
He said that if any party had written down policies that would have prevented the boom, such as tax increases, they would not have got elected.
Questioned by Sinn Féin TD Pearse Doherty, he later clarified that he was referring specifically to the three main parties at the time, Fianna Fáil, Fine Gael and Labour. Of their manifestos, he said:
“If you took the covers away, it was difficult to tell which party was which.”
On the bank guarantee itself, Ahearne was asked by Fine Gael senator Michael D’Arcy if he thought it was a good idea at the time.
The academic responded: “I didn’t know, I was sitting in an office in Galway.”
Alan Ahearne said later he was puzzled as to why the guarantee included subordinated debt i.e. not burning junior bondholders. He said: “I’m sure there was a reason, I couldn’t think of one.”
Media scrutiny
Separately, the banking inquiry is to hear evidence from current and former newspaper editors as well the former head of news at RTÉ, Ed Mulhall, later this month as part of its examination of the media’s role in the crash.
Inquiry chairman Ciarán Lynch said this evening that the hearings would focus “on the role of the media during the property boom in the lead-in to the banking crisis and any changes in approach after the crisis”.
To embed this post, copy the code below on your site
Rubbish,i was on the average industrial wage during the boom. i was not buying “investment” properties, or buying top of the range merc’s and bmw’s with easy money borrowed from reckless bankers. Some people i know did think the party would never end, and bought crappy apartments in spain or western europe as investments, apartments that are worthless now, but the buyers are still in debt uo to their eyes.
Ann maybe we should ask FF ,FG and Labour how much money has been laundered through NAMA since its inception – if any …Enda failed to mention the H.S.B.C. 350 for four years – did the Troika know about H.S.B.C 350 – of course they did – Our national debt is beginning to look very illegal indeed !
That’s it in a nut shell. The blind being led by the unscrupulous
I was making a very good living during the boom but, thankfully, still couldn’t see value in the Irish property market. I invested all my money in booze, women and travel with significant ROI. The rest I wasted.
No people wanted the truth not the “soft landing” bullshit we were fed
They say thst now but i remember the ABUSE you got from every1 in media n politics when you talked about banking instability or suggested property revenue being spent on long term things when its short term revenue was crazy. You were called a doom n gloomer, when Kelly tried to get a warning article published in indo they said it was too upsetting.
Everyones a monday morning quarterbacker, n you can already see the same..the EXACT same circle jerk of conventional wisdom on bank deregulation n the magic of low taxes = more revenue. The establishment has learned nothing…and why would they? We bailed them out, made it our debt, and let them portray us as dwadbeat sc_m if we didnt wanna pay it. There will b anothet huge crash in 5-6 years
Soon who where they to decide weather the people wanted to hear the truth or not, so why did they not tell the truth, they should all be locked up for failing in there duty to run the country and hide information from the public also not taken action when they knew what was happening
Eh?
Some people had to pay more to deal with the hangover though. At least the rich are still rich eh?!
Brian Cowen says – “Buy Topaz !” ……………and if you listen to him he will get even richer !
Ya mean the rich partied,and the poor are paying
If by partying they mean people having work then 98% of the country partied.
I suppose the usual rabble here will deny this but fine gael and Labour had a very handy ride as opposition parties, they hadn’t access to the crystal ball they seem to use every day these days.
That Fianna Fáil is even in existence never mind have 19 seats in the dail and will probably have double that after next election is shameful and every man woman and where FF are concerned child that votes for them should be ashamed. But then again FF and their supporters don’t do shame.
And this crowd is ready to do the same thing again
Ie: noonan
We want house prices to go up a little bit more
Enda
So you could sell 30000 houses tomorrow in dublin
Lemmings
Doong the same thing every 7 years
Selling 30000 houses in Dublin tomorrow would push prices down, not up. Apart from that little detail, very astute.
Ff sell outs the bringers of child deprivation and fg and labour as well._roll on march 21st
Don’t forget Sinn Fein voted for the bank guarantee.
don’t forget they are the architects of mass austerity in the uk part of this island
Interesting that Pearse Doherty pointed out that Ahearne was only talking about FF, FG and Lab.
You would swear that SF’s policy platform in 2007 included increasing LTV ratios or such like.
Sf sat beside fg, Labour and independents, each one fed the story that everything was grand, the good times were here to stay.
Using a crystal ball to predict the future is only a recent thing.
Dermot which FF cumann are you chairman of? You lot think 5 yrs out of power after destroying at least 2 generations is penance enough. Believe me if I had my way lenihan wouldn’t b the only one departed.
Oh for fuxxxxache.
I’m a member of the blueshinnerbotshirtfiannalabour cumann.
Weren’t SF still advocating raising the corporation tax during GE 2007?
I’ll answer that one myself.
Yes, yes they were.
That was the height if their manifesto that year.
We’re they?
That’s a terror.
It’ll be great when SF/IRA get in – with super-economist Jorry in charge.
They’ll sort everything out!
Hopefully shine a light Will.
Don’t worry about Jorry Will – worry about the Irish Republicans who consider certai9n tax dodgers enemies of the State – that’s what you have worry about Will !
And if Jorry doesn’t go after them baldheaded then Jorry is in big big trouble – for why wouldn’t a Republican leader chase down thieves that are within ?
Jorry’s texts seem to serve Enda’s political mission rather than Republicans – why does he do this – ridicule the Republic within the Republic and his home in Britain ?
Does Mary-Lou’s husband have shares in Eriva ?
Why aren’t Sinn Fein going to the High Court to seek an election after Enda has been exposed as breaking the self-confessed Covenant with his electorate and employer ?
Sinn Fein present more questions than answers as indeed do all political Parties in Ireland who have played paddy for a fool while they jollied within the Pale and in Europe – Haughey loved brothels in Paris at the Tax-payer’s expense by all accounts !
Kicky horse , kicky foal !
I hate when (certain) people use the term “paddy”, especially the sindo
I just knew something was not right/fair? When my 15yr old on Christmas Day got a hard earned CD player and was invited down the road to play with his friend’s €5000 quad whom as it has transpired is still being paid off for by me ..
Not everyone partied. Those who didn’t invariably are all well off now.
Everyone had a role. We all made use of cheap credit and people selling houses a year or 2 or 3 after buying and demanding extra 100k. Yes it was a problem in society. Safe as houses. Remember that saying
I treated myself to a van, a 03 Seat Inca.
It was the first noughtie reg plate I’ve ever had.
Good times.
I must I splashed out on an iPod at one point.
No shortage of garden decking with an accompanying patio heater for those brisk summer evenings.
I sold my Inca for €900 and bought a 05 Peugeot.
Good times.
Charles nobody wants to hear that. They want to blame everyone and everything else.
When the PlayStation 3 came out I bought one straight away, got a few games too but the best memory of my partying was a niece getting married on a Thursday, outrageous….I just knew I wouldn’t have to budget for it, nope….straight to the ATM and my wages were in….such hedonism.
Tesco Cava.
I remember meeting a friend in Dunne one Friday night. We were both discussing the rampant spending.
Her neighbours went to South Africa on their hols. He was bricklayer and she was a housewife. I’m not saying that they weren’t entitled to go but while I was doing evening courses to better myself, so many others were happy to borrow…
….and no:
1. I never bought a new car until I could afford one.
2. I never bought a play station
3. I didn’t go on any foreign stag weekends. I simply told my friends that they were too expensive.
4. I didn’t smoke or take ANY drugs.
5. I drank very modestly.
6. I saved money every month.
And most importantly I read books.
Tom…. You were lucky.
I lived for three months in a brown paper bag in a septic tank, i used to have to get up at six o’clock in the morning, clean the bag, eat a crust of stale bread, go to work down d’mill for fourteen hours a day week in-week out.
At least you were productive. Nowadays you spend every waking moment here whinging.
As regards me being lucky…yes I suppose the more money you save the luckier you get. (With apologies to Gary Player.)
It’s not rocket science. Acquire valuable skills. Acquire different skills if your skills don’t bring in enough money.
We’ve spoken before and we both come from humble beginnings. We’ve all had similar opportunities in life.
It was a joke Tom….monty python.
I’m glad you’re doing well.
I’ll be here whinging no matter who is in government, I consider it my patriotic duty.
During 2004-2008 I earned below and roughly the average industrial wage for some company that may as well have been operating in an African shanty town rather then in center of the capital of some apparently thriving economy. Looking back I think that my general mood and enthusiasm picked up during 2008, as they say the truth shall set you free.
Dick Bruton ..
A very simple choice – publish the list of Ansbacher Accounts or face jail for being complicit !
That is your future – you choose it son !
Isn’t that Alan Ahearne – he is head of Economics at N.U.I.G. or some such Title -a college where one’s menstrual cycle and their mammory glands are questioned on job applications -
I wouldn’t be looking to him for advice. And what is he doing in Dail Eireann if he has a department to run – double-jobbing – I smell H.S.B.C !
At the time of the economic collapse, Ireland had the highest level of personal debt in Europe – 200bn. Hundreds of thousands of people did party. Oh except everyone here. And their friends. They didn’t party either…
Tell me how you partied.
I bought a pair of skis in Aldi. Never had, nor never will ski. Same goes for the horse riding boots.
At the time of the economic collapse a packet of baby-wipes were 5 euro – they are now one euro – it wasn’t all party unless you consider getting fleeced for wiping your baby’s bum partying !
O’Reilly never partied, he’s no craic.
He was depressed during those years,Dermot #noonelovedfinegaelnoteventhemselves
You got a baby Hermes, there was at least one party *whistles* ;-)
The party ended with the first cry Cian ….and the Bundestag have been pissing on it since ….
it was a great time i made a fortune, great times
Where did you bank patjoejoe ? I hope we don’t find your name on the list later on in the month …
the troika are going to hang Enda and co. out to dry I heard – Bilderberg now consider them a serious liability and so much of their debt hanging on the wishes of the Irish people whom they have screwed royally !
Ah well !
cayman islands mostly
“Kenneth” was in the “clamping business” for a short while before selling it on :)
Ah the Cayman – just like Ireland in many ways -
A very lucrative money exchange programme ran by tax-dodging ex-pats – or banking sector as it is called among the w ankers and the indigenous population hammered with poverty and polluted with drugs !
Still it’s great we have the I.R.A. to keep an eye on things isn’t it ?
What a lovely photo to show this topic….I actually thought it was the relaunch of Beavis and Butthead!
They are still partying while we still pay
This pac enquiry is such a farce now that everybody thats appearing there has the same story, “i predicted the downturn, but nobody listened to me”. They don’t give a s–t, its turned into a self promotion opportunity, and the lousy politicians don’t care either as they’re getting paid to be on this stupid “committee”, and the more it drags on, its more money. What a joke, what a ripoff.
At the time no Politicians were prepared to inhabit the Real World, see also
http://thebottomline.ie/evidence-banks-government-acting-in-concert-to-fuel-reckless-lending/.
to a point you are almost correct except for the point you say ” crappy apartments” in Spain and Bulgaria has proven to be a sound investment
Yes the greedy bought the appartments in bulgaria etc. Now they cant sell them, someone i know ,was a seperated wife getting welfare, and she bought an appartment in bulgaria. That was my wake up call. I said to the hubby,you and i have been busting our balls all these years .and we still have years of colleve fees ahead. We must have done something wrong. We didenr, we were just to honest.
I’m just gonna leave this one here:
https://www.youtube.com/watch?v=THWbrFy5NWM
Advice from the ESRI in 2000 on cooling economic growth to maintain it at sustainable levels.
more like dumb and dumber Robbie
have your say