We didn’t save the banks so they could drive people into despair

WE all know Charles Edward Trevelyan, created a Baronet in 1874 for his services to Her Majesty Queen Victoria.

At least, we sing about him all the time. For reasons that are hard to fathom, he’s celebrated at every major sporting event, especially where the Irish team is playing. If Ireland is playing well, and even if game isn’t going well and the crowd senses that the team could do with a lift, Lord Trevelyan is called on.

Perhaps, to be more accurate, it’s not Trevelyan we’re celebrating, but Michael, the man who stole Trevelyan’s corn and was sentenced to Botany Bay for his troubles. Michael, of course, stole the corn because his family was hungry, and his punishment was never to see his family, or the fields of Athenry, again. Trevelyan didn’t actually own the stolen corn. He was just the British civil servant in charge of administering relief to the people of Ireland during the years of the Famine. The only trouble was that neither Trevelyan nor the government he worked for believed in relief.

One of the great tragedies of Irish history was that the Famine occurred at the height of what was then known as laissez faire economics. Laissez faire, in my understanding, is literally translated as “let him who can, do” – and its corollary was “let him who can’t, do without”. The laissez faire government in Britain at the time saw the Famine as essentially none of their business. They could have prevented it by stopping the export of grain from Ireland, but saw that as an inappropriate interference in the workings of the market. They could have fed the people but saw that as a waste of taxpayers’ money (they did run some soup kitchens for a few months, but stopped them at the first sign of expense).

In implementing their policy they had a natural and formidable ally in Trevelyan, who didn’t just believe in the laissez faire policy of the time, he also believed that the Irish deserved what was coming to them. He described the famine as “a direct stroke of an all-wise and all-merciful Providence”, one which laid bare “the deep and inveterate root of social evil”. The Famine, he declared, was “the sharp but effectual remedy by which the cure is likely to be effected... God grant that the generation to which this great opportunity has been offered may rightly perform its part...” I don’t know whether Trevelyan coined the term “moral hazard”, but he certainly believed in it. If you fed hungry people, he argued, you encouraged them in their fecklessness and laziness. What man will go out to work for his family if there is free sustenance to be had? How can you rid the system of its inefficiencies if you allow people to sponge off the State? How can you ever get people to stand on their own two feet — especially people as lazy and shiftless as the Irish — if the State is always ready to step in and help? Isn’t it funny how our history is engrained with lessons like these, and yet we never seem to learn them? We know now that the first duty of the State — any State — is to defend its people. And yet in any choice between the market and the people there will still be “experts” who will spout about the importance of moral hazard. And the first rule of moral hazard is that the market must be defended against the people.

A man called MP MacDomhnaill wrote a letter to the newspapers last week. He is clearly a proud man, at the end of his tether. He reveals, and what a painful revelation it must be, that his family is going hungry to try to keep mortgage payments going.

There are two important things about that letter. First, MP MacDomhnaill is not alone. He was brave to do what he did, and thousands of other people throughout Ireland understood and shared his experience, even if they have yet to put pen to paper. The most recent figures, just published, suggest that there are 55,000 families in Ireland in mortgage arrears. But those figures take no account of the number of families in pain because of high mortgages. The St Vincent de Paul Society and others, like ourselves in Barnardos, are experiencing hunger in families on a pretty unprecedented scale in our time. All over Ireland, there is a huge increase in financial pressure — and a huge increase in things like mental ill-health caused by that pressure.

It’s not an issue of poverty, if that doesn’t sound like an odd thing to say, because it cuts across classes. In some ways, the man who thought he had fairly comfortably provided for his family a couple of years ago, and is now facing a mountain of debt and assets that are next to worthless, could be in more acute pain than others.

But the second thing that’s important about MP MacDomhnaill’s letter is that sooner or later, that man is going to have to listen to a lecture about moral hazard. Someone will go on the radio to say how much sympathy they have for him, but after all, if we help him, it will only encourage others to default on their mortgage payments.

Maybe that’s when the revolution needs to start — when they start lecturing us about moral hazard. When I hear a politician telling me that “ordinary taxpayers” won’t stand for seeing their tax euro spent on helping people in mortgage arrears, I think only of Trevelyan. The task of a real leader now is to encourage and enable us all to stand together, in solidarity with each other, to get out of this mess. And if that means helping people to save their homes, or even to make a fresh start free of unsustainable debt, I see nothing wrong with that.

I’m not arguing for some kind of blanket release from all our debts — that would be totally irresponsible. But we urgently need a structured approach that puts a clear and statutory onus on the banks to listen to people and to help. And we need non-traditional approaches to mortgage restructuring — 40-year mortgages, inter-generational mortgages if necessary — that will also have to be underpinned by law. We have extensively, perhaps excessively, recapitalised our banks and we didn’t do it so they could drive people into despair or hunger.

We need leadership now. We have a mounting crisis. It might still, to some extent, be hidden because people are trying to do the best they can on a month by month basis, but it’s there and it’s getting worse. We need to know that our government is putting a structured response together, and that we will see the shape of that response soon. So far, all we’ve heard is words. Ministers like Joan Burton have urged banks to be more forthcoming and helpful. But the banks only care about their balance sheets. This crisis will damage people irreparably, if it’s not doing so already. And words will be little consolation then.

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