Madam, – The Nyberg report is a great disappointment as it tells us little we did not already know. What then did we want to know? I would suggest that we wished to ascertain if there was one underlining factor that eventually brought about the collapse of Ireland’s financial sector. In my opinion there was.
Some 30 years ago, the then government decided to abolish building societies and all the laws and regulations, which controlled their operations. Up to that time building societies’ sole function was to finance house purchase from deposits received from the public. They were obliged to maintain reserve ratio to assets of 5 per cent and a minimum liquidity ratio of 10 per cent.
To maintain these stringent requirements, societies only lent a proportion of the purchase price of a house (75 per cent to 80 per cent), which also allowed for risk of default.
In the recession of the 1950s and the resultant property crash, building societies were able to fund all losses arising from the repossession of houses, from their own resources.
However, under pressure from the building industry and the banks the government allowed the banks to lend for house purchase in conjunction with building societies on a “level playing field” basis. What followed was not only disastrous, but inevitable. – Yours, etc,
Madam, – Last week’s Nyberg report asserts that we are all equally to blame for the current sorry state of this once proud nation. Why, then, are some of us being punished so much more harshly than others? – Yours, etc,