by Gabriel Donohoe
Irish banks have been tripping over themselves recently to announce yet more increases in mortgage rates. The latest is Allied Irish Bank (AIB) who will now stick its borrowers for a further 0.5%. This follows a Bank of Ireland (BoI) increase of 0.45% last week which in turn follows other hikes in mortgage rates by financial institutions like Permanent TSB and EBS.
Consecutive mortgage increases this year alone have raised BoI’s variable rate to 3.49%, this at a time when the European Central Bank (ECB) has held its rates to 1% for the 15th month in a row. The increases will further pressurize already hard-pressed borrowers and will drive many of them into default to join the 30,000 homeowners who are now hopelessly in arrears. Widespread suffering and sacrifice is now the lot of the Irish people, all generated by the greed of the banksters.
Terence Flanagan, a spokesman for the main opposition party, Fine Gael, said:
“While the ECB rates remain unchanged, the banks have chosen to rip off variable mortgage holders to pay for their own reckless behaviour. Homeowners are at the pin of their collar trying to make mortgage repayments…These variable rate increases will exacerbate the problem.”
This act of treachery is how the banks have repaid Irish taxpayers for bailing them out of their own criminal recklessness to the tune of billions of euro. The bailout comes on top of generous state guarantees to the banks’ depositors, guarantees underwritten by the taxpayers and without which the banks could not function. The hard-earned money of the Irish people was used to save privately owned banks from huge losses, but now, having been restored to financial health, the ungrateful banks plunge their fangs into the veins of their saviours.
This is all so reminiscent of an old fable concerning a boy and a semi-frozen adder. (Isn’t it peculiar that an ‘adder’ is a snake and it is also a colloquialism for a banker, an ‘adder’ of figures.)
The boy found a snake almost frozen to death on a mountain path. The snake begged the boy to warm him up inside his jacket before he died from the cold.
“No,” said the boy. “If I pick you up, you will surely bite me.”
“I promise I won’t bite you,” the adder said. “What good would that do? You would die here on the mountain and so would I. Please warm me up inside your jacket.”
“All right,” the boy said. “I trust you then.”
The boy picked up the snake and continued on his journey, warming the adder inside his jacket. When the boy got to the base of the mountain he found that the snake had thawed out. As he removed the creature from his jacket the adder suddenly lashed out and bit the boy in the neck.
“Why did you do that?” the boy cried out, knowing he had been dealt a mortal wound. “And after I saving your life.”
“Boy,” the snake said, “you knew what I was when you picked me up. You should have known better. Don’t you know I can’t control my own nature?”
What a salutary lesson! Adders of the snake species and adders of the bankster species have much in common. Their cold-blooded reptilian nature separates them from the rest of humanity. It is their natural instinct to gorge themselves on easy prey, to kill without hesitation or compunction. That, as we have learned to our cost, is the essential nature of the beast.
And it has long been the nature of banksters to feed off the lifeblood of society. They have cunningly devised a monetary system that allows them to create money from debt; it is a magical system so cleverly designed that it entraps borrowers for all time. The banksters create the money of the world out of thin air but will only do so when a borrower pledges his indebtedness to them.
But, ingeniously, they don’t create the interest. Interest has to be paid back along with a principal sum that was created out of nothing. How can borrowers pay back interest that hasn’t been created and which doesn’t exist? They have to keep borrowing more and more to continually bring new money into circulation. That is the only way they can come up with the interest on their loans. The whole scheme is a relentless treadmill of increasing debt that enriches the banksters and impoverishes the people. It is debt slavery, pure and simple. The peoples of the world are transformed into slaves of the banksters.
When the Irish banksters were challenged about these recent mortgage rate increases they responded that they were forced to raise the rates because they were losing money. They ‘regretted’ the need to charge more but said they had to become profitable in order to help turn the economy around. These declarations of regret and protestations of civic-mindedness are completely disingenuous and nothing more than a crock of horse manure. They are as sincere as the tears of the crocodile before he devours his victim.
According to Michael Quirke, AIB’s Head of Mortgage Products:
“Funding availability on wholesale money markets for Irish financial institutions remains difficult. Unfortunately, we have little choice but to introduce this pricing change, which is a measured response to the significant challenges which must be overcome if we are to achieve an economic return on our loan book and thereby return to a sustainable business model”.
Brendan Nevin, BoI’s Director of Consumer Lending, explains the reasons behind the increases:
“Funding mortgages has become increasingly costly. For example, we are paying more to customers for deposits than we are receiving for mortgages.
“As a result of this, our current mortgage pricing is unsustainable.
“While any increase is regrettable, we have no choice but to make this move to ensure we remain open for business and continue to support our customers and the Irish economy going forward.”
Re-read Mr. Nevin’s second sentence, “we are paying more to customers for deposits than we are receiving for mortgages”. Do you believe him? Do you think he’s telling porkie pies?
On the face of it, to the uninformed majority of borrowers, it might seem like Mr. Nevin is telling the truth. We’ll ignore for the moment the fact that banks can borrow from the European Central Bank at 1% and charge 3.49% for mortgages. Banks also need depositor funds so that they can leverage new loans into existence. Let’s say that they pay these depositors 5% interest on their savings. They would appear to be losing 1.51% if they then only charge 3.49% for mortgages.
But that is certainly not the case, not by a country mile.
Through the fraudulence of Fractional Reserve Lending, banks can create 10 to 12 times or more of new money based on customer deposits. According to the Bank for International Settlements (BIS) they must keep on hand a minimum reserve of 8% of deposits in case some customers want to withdraw their cash. The balance they regard as ‘excess reserves’ and can be used to create new money as loans.
For example, a customer deposits €10,000. The bank holds €800 in reserve and can lend out €9,200. This is newly created money and exists alongside the original €10,000 which is still in the customer’s account. When the new €9,200 is deposited in the same bank, or any other bank, the bank holds 8% of that in reserve and can create a further €8,464 of new money. This can go on and on until some €125,000 of new money is created. And the original depositor still has €10,000 in his account.
So, if the bank paid their €10,000 depositor 5% interest, it would cost them €500. If they only loaned out €10,000 at 3.49% they would just earn €349, a loss of €151. This is what the weeping and hand-wringing BoI (and all banks) want the public to believe. But through the leverage of Fractional Reserve Lending the bank can expand its interest percentage to 43.63% of customer deposits which means they actually earn €4,362.50, giving them a grotesque net profit of €3,862.50 on the original €10,000.
This is usury of the most despicable kind. It is immoral, unethical, and cruelly punishing on borrowers. That it is tolerated by governments is utterly baffling and unpardonable.
What is the solution?
There are a number of solutions. One of them is explained in the next article, “Irish Government To Auction National Assets: Criminal Stupidity Or National Sabotage?”