Vulture funds may represent the best option from bad lot

World of Politics with Harry McGee – harrymcgee@gmail.com

Vulture Funds; even the name is kind of sinister. Just above ‘public executioner’ and ‘common criminal’ in our societal hierarchy. This week, it was disclosed that Permanent TSB is moving to shift some of its non-performing loan books to the markets. That essentially means it is likely to be snapped up by a so-called vulture fund.

So what’s the public impression of these funds? They are international private financial companies that come in and buy distressed mortgages from the bank. They then go in with an ultimatum to struggling home owners – pay up or get chucked out.

And the image of those controlling the funds is typically of a heartless and rapacious billionaire, probably rigged out in braces and pin-stripes a la Gordon Gekko – that’s the narrative that has grown around them.

I’m not going to begin to defend them; they are international financial companies whose bottom line is profit for their shareholders.

What’s more they are not subject to the same regulation as Irish-based financial companies (and that is an issue that needs to be addressed).

Their horizon is not as long-term as, say, an Irish bank and they will be looking for shorter returns on their investment – but the notion they are turfing Irish families out of their homes is simply not borne out by the evidence.

Now over the next week or two, Fianna Fáil plans to introduce a Bill to require that these vulture funds be regulated by the Central Bank in the same way as indigenous financial institutions. The party also is opposed to the wholesale sell-off of non-performing loans by Irish banks.

But let’s look at the evidence, as presented by two of the most authoritative voices in this area.

Ross Maguire is a barrister who is a co-founder of New Beginnings, which has helped homeowners who have found themselves in mortgage arrears. Seamus Coffey is a lecturer in economics in UCC and chair of the powerful Irish Fiscal Advisory Council.

Look at Permanent TSB. Over 28 per cent of its €21 billion loan book is made up of non-performing. This is an enormous proportion of problem loans, five times higher than the European average.

Now, it is going to put of €4 billion of these loans up for sale. The likelihood that some or all will be bought by vulture funds.

For more, read this week’s Connacht Tribune.