Duties of Care

Here is a thought or, hopefully, an action-provoking mind experiment.

If the State and it organs and sponsored bodies corporate fail in their duty of care to the citizen, consumer and customer then does the citizen, consumer and customer still owe a duty of care to the them?

The President of the High Court has unprecedently addressed himself to the general populace and said that the Courts will extend every assistance to those who cannot meet their obligations and asking them to present themselves to the Courts sooner rather than later. Is he hinting that he will cut deals on behalf of the plain people of Ireland that are usually the preserve of the mega-rich.

Many sections of the ‘apparat’ of the State – the politicians, the regulators and the banks- have failed in the duty to the citizen, the consumer and the customer.

The politicians failed to see that the economy was overheating and that corrective action needed to be applied. They failed to keep an eye on the future because they were too busy avoiding getting caught on crimes they had committed in the past. Specifically, FF were engaged with helping ‘Bertie’ wriggle off the hook of his dodgy cash and then wriggle off the plank of his leadership and then anoint Mr Cowen as his squeaky clean successor. So for 18 months after the election, for which the pump had been massively primed (SSIAs and extensions of Sec23 tax breaks and broad hints of stamp duty breaks), FF were focussed on their past sins and the Opposition were likewise.How smug we had all become that we were able to ignore the whiff of smoke from brushfires erupting worldwide.

The regulators did not fail; they never got going. There is not one instance in the recorded history of this State of a civil servant intervening to protect a citizen against the inadequacies or depradations of the politicians. The judiciary occasionally and the press rarely. Granted, there are legions of instances of work being seen to be done such as the regulators harrying small businesses and announcing their implementation of the latest EU directives. (More on this in a post that is being drafted currently.)

The banks failed on so many levels. To protect their shareholders, their depositors and their borrowers by only lending on a basis that was ‘workable’ in the long term for the borrowers. In NO circumstances can lending such as 110% mortgages on huge multiples of unverified salaries for unprecedented durations be deemed prudent. The whole thing was predicated on ever rising property values.

This is triply wrong. First, it is against everything in the textbooks and theory that they then espoused and promoted so vigorously. Secondly, it flies in the face of the direct personal experiences of the bankers themselves. These guys (and they are uniformly ‘guys’) were working in the middle tier of the banks when the Irish banks had a particularly rough ride in the UK property crash of the early ’90’s. Thirdly, at least one of the banks decided to sell all of its own property into our pension funds in late ’05/ early ’06. This means that they saw the top of the market and called it and then kept lending to the developers and their retail mortgage customers.

So, what of the ‘duty of care’ of the citizen, the consumer and the client.

The citizen has the right, frequently exercised, of defenestrating Goverments and I cannot see this one being returned.

The consumer has only recourse to the courts and eventually the ballot box when they are dissappointed by their regulators. I don’t see many taking the legal route in these straitened times.

The clients ‘duty’ to the banks is a continuing and enduring one. Most of the power is in the hands of the bank who set the rate and have lawyers on tap to ‘handle’ the obstreporous. But the banks have now overreached themselves. They know it. The courts know it. Now, even the churches are on the side of the defaulters.

How long before the first person with negative equity from a 110% ’06 mortgage starts putting the payments to one side and says to the judge when they come before him “I can meet the payments on what its worth now but not on what i paid for it”. If the banks have been seen to give writeoffs to developers or if the Govt. can recapitalise the banks, why can’t the Courts do the same for the people.

If that seems wrong, or illegal or immoral to you, then can I ask how you might feel about the alternative, which is for folks to just hand back the keys and say ‘Sue me’. It is happening in the States and in the UK and it could easily start happening here.

There is an old saw about when you owe the bank €10,000 you have a problem, but owing 100,000 you both have a problem and owing a million then they have a problem.

There are lots of million Euro mortgages out there. I think that for some people it’s time to turn lemons into lemonade.

Update

This article makes for interesting reading in the NYT
Thoughts on Walking Away From Your Home Loan