Irish budget, 2012
The 2012 Irish budget was the Irish Government budget for the 2012 fiscal year, presented to Dáil Éireann in two parts on 5–6 December 2011. It was the first budget of the 31st Dáil, with the first part delivered by Minister for Public Expenditure and Reform Brendan Howlin, the second part delivered by Minister for Finance Michael Noonan; the budget contained tax increases, spending cuts of €3.6bn for 2012. The budget was preceded by a rare televised national address by a taoiseach when Enda Kenny spoke to the country two days beforehand; this was only the sixth time that a taoiseach has addressed the nation, reflecting the gravity of the Irish economic condition, in what Kenny stressed were "exceptional" circumstances. The address drew the second highest television audience of the year on Irish television; the following day, Thomas Pringle TD replied on television in an address on behalf of the opposition technical group of TDs in Dáil Éireann. In another departure from tradition, the cuts in public spending were announced the day before Budget Day by Minister for Public Expenditure and Reform, Brendan Howlin, in the Comprehensive Expenditure Report.
Increase in motor tax from 1 January. Reduction in the VAT rate on district heating from 21 percent to 13.5 percent, to benefit businesses. Farmers to be able to claim a VAT refund on wind turbines purchased from 1 January 2012. Broaden the base for pay related social insurance through removal of the remaining 50 percent employer PRSI relief on employee pensions. Broaden PRSI base to cover rental and other forms of income from 2013. Increase the rate of notional distribution on the highest value Approved Retirement Funds and similar products to 6 percent. Increase the rate of tax on the transfer of an ARF retirement fund on death to a child over 21 from 20 percent to 30 percent. Abolish the "citizenship" condition for payment of the Domicile Levy so as to ensure that "tax exiles" cannot avoid it by renouncing their citizenship. Increase the current rate of Capital Acquisitions Tax from 25 percent to 30 percent after Budget Day. Increase Capital Gains Tax from 25 percent to 30 percent after Budget Day.
Carbon Tax not to be applied to solid fuels. Household charge of €100 can be paid in installments. Increase in carbon tax to be applied to petrol and auto diesel from midnight following Budget Day. Reduce the Group A Tax-free threshold for Capital Acquisitions Tax from €332,084 to €250,000. Increase deposit interest retention tax from 27 percent to 30 percent. VAT increased by 2 percent. Government commits to not raise the standard rate of VAT beyond 23 percent during its lifetime. 300,000 people to move from liability to pay Universal Social Charge. Universal Social Charge: From 1 January, exemption level to be raised from €4,004 to €10,036. Revenue to collect USC on a cumulative basis in 2013. Additional new tax measures of €1 billion. No increase in income tax. General government deficit to be 10.1 percent of GDP in 2012 and 8.2 percent in 2013 - both below targets in troika bailout. A property relief surcharge of 5 percent to be imposed on investors with an annual gross income over €100,000. Increased mortgage interest relief for first time buyers buy from Budget Night up to a year, but nothing if wait until 2013 Non-first time buyers in 2012 to benefit from mortgage relief at 15 percent instead of 10 percent proposed by the last Government.
Mortgage interest rate relief increased to 30 per cent. No changes on residential stamp duty. Capital Gains Tax incentive announced. Fifty percent stock relief for all registered farm partnerships and 100 percent stock relief for certain young trained farmers forming such partnerships. Stamp Duty on commercial property including farmland to be cut by 6 percent to 2 percent from midnight following Budget Day. Nine per cent rate of VAT for tourism extended to open farms; the first €100,000 of R&D expenditure of all companies will be allowed on a volume basis for the purpose of the R&D Tax Credit. Corporate tax exemption for new start-up companies to be extended for the following three years and to be available for companies that commence trading in 2012, 2013 and 2014; the Bill proposing the introduction of a "household charge" passed by 90 votes to 47 votes in the Dáil late on 14 December 2011. The following day, nine TDs helped launch a nationwide campaign against the household charge. Statements on Expenditure by the Minister for Public Expenditure and Reform, Deputy Brendan Howlin Budget Statement by Minister for Finance, Deputy Michael Noonan Budget 2012 official website Department of Finance — Department of Public Expenditure and Reform Budget coverage at the Irish Independent Budget coverage at the RTÉ website Budget coverage at the Irish Times
Federal Housing Administration
The Federal Housing Administration is a United States government agency created in part by the National Housing Act of 1934. The FHA sets standards for construction and underwriting and insures loans made by banks and other private lenders for home building; the goals of this organization are to improve housing standards and conditions, provide an adequate home financing system through insurance of mortgage loans, to stabilize the mortgage market. The Commissioner of the FHA is Brian Montgomery, it is different from the Federal Housing Finance Agency, which supervises government-sponsored enterprises. During the Great Depression many banks failed, causing a drastic decrease in home loans and ownership. At that time, most home mortgages were short-term, with no amortization, balloon instruments at loan-to-value ratios below sixty percent; the banking crisis of the 1930s forced all lenders to retrieve due mortgages. Many homes were foreclosed, causing the housing market to plummet. Banks collected the loan collateral but the low property values resulted in a relative lack of assets.
In 1934 the federal banking system was restructured. The National Housing Act of 1934 created the Federal Housing Administration, its intention was to regulate the terms of mortgages that it insured. These new lending practices increased the number of people who could afford a down payment on a house and monthly debt service payments on a mortgage, thereby increasing the size of the market for single-family homes; the FHA calculated appraisal value based on eight criteria and directed its agents to lend more for higher appraised projects, up to a maximum cap. The two most important were "Relative Economic Stability", which constituted 40% of appraisal value, "protection from adverse influences", which made up another 20%. In 1935, Colonial Village in Arlington, was the first large-scale, rental housing project erected in the United States, Federal Housing Administration-insured. During World War II, the FHA financed a number of worker's housing projects including the Kensington Gardens Apartment Complex in Buffalo, New York.
In 1965 the Federal Housing Administration became part of the Department of Housing and Urban Development. Following the subprime mortgage crisis, FHA, along with Fannie Mae and Freddie Mac, became a large source of mortgage financing in the United States; the share of home purchases financed with FHA mortgages went from 2 percent to over one-third of mortgages in the United States, as conventional mortgage lending dried up in the credit crunch. Without the subprime market, many of the riskiest borrowers ended up borrowing from the Federal Housing Administration, the FHA could suffer substantial losses. Joshua Zumbrun and Maurna Desmond of Forbes have written that eventual government losses from the FHA could reach $100 billion; the troubled loans are now weighing on the agency's capital reserve fund, which by early 2012 had fallen below its congressionally mandated minimum of 2%, in contrast to more than 6% two years earlier. By November 2012, the FHA was bankrupt. Since 1934, the FHA and HUD have insured over 34 million home mortgages and 47,205 multifamily project mortgages.
The FHA has 4.8 million insured single family mortgages and 13,000 insured multifamily projects in its portfolio. Mortgage insurance protects lenders from mortgage defaulting. If a property purchaser borrows more than 80% of the property's value, the lender will require that the borrower purchase private mortgage insurance to cover the lender's risk. If the lender is FHA approved and the mortgage is within FHA limits, the FHA provides mortgage insurance that may be more affordable for higher-risk borrowers Lenders can obtain FHA mortgage insurance for 96.5% of the appraised value of the home or building. FHA loans are insured through a combination of an upfront mortgage insurance premium and annual mutual mortgage insurance premiums; the UFMIP is a lump sum ranging from 1 – 2.25% of loan value, paid by the borrower either in cash at closing or financed via the loan. MMI, although annual, is included in monthly mortgage payments and ranges from 0 – 1.35% of loan value. If a borrower has poor to moderate credit history, MMI is much less expensive with an FHA insured loan than with a conventional loan regardless of LTV – sometimes as little as one-ninth as much depending on the borrower's credit score, LTV, loan size, approval status.
Conventional mortgage insurance rates increase as credit scores decrease, whereas FHA mortgage insurance rates do not vary with credit score. Conventional mortgage premiums spike if the borrower's credit score is lower than 620. Due to a increased risk, most mortgage insurers will not write policies if the borrower's credit score is less than 575; when insurers do write policies for borrowers with lower credit scores, annual premiums may be as high as 5% of the loan amount. A borrower's down payment may come from a number of sources; the 3.5% requirement can be satisfied with the borrower using their own cash or receiving a gift from a family member, their employer, labor union, or government entity. Since 1998, non-profit organizations have been providing down payment gifts to borrowers who purchase homes where the seller has agreed to reimburse the non-profit organization and pay an additional processing fee. In May 2006, the IRS determined that this is not "charitable activity" and has moved to revoke the non-profit status of organizations providing down payment assistance in
Emergency Economic Stabilization Act of 2008
The Emergency Economic Stabilization Act of 2008, sometimes referred to as the "bank bailout of 2008," was proposed by Treasury Secretary Henry Paulson, passed by the 110th United States Congress, signed into law by President George W. Bush; the act became law as part of Public Law 110-343 on October 3, 2008, in the midst of the financial crisis of 2007–2008. The law created the Troubled Asset Relief Program to purchase distressed assets from financial institutions. A financial crisis had developed throughout 2007 and 2008 due to a subprime mortgage crisis, causing the failure or near-failure of major financial institutions like Lehman Brothers and American International Group. Seeking to prevent the collapse of the financial system, Secretary of the Treasury Paulson called for the U. S. government to purchase about several hundred billion dollars in distressed assets from financial institutions. Paulson's proposal was rejected by Congress, but the ongoing financial crisis and the lobbying of President Bush convinced Congress to enact Paulson's proposal as part of Public Law 110-343.
The Emergency Economic Stabilization Act of 2008 created the $700 billion Troubled Asset Relief Program to purchase toxic assets from banks. The funds for purchase of distressed assets were redirected to inject capital into banks and other financial institutions while the Treasury continued to examine the usefulness of targeted asset purchases; the legislation had its origin in early 2008, Secretary of the Treasury Henry Paulson directed two of his aides, Neel Kashkari and Phillip Swagel, to write a plan to recapitalize the U. S. financial system in case of total collapse. The plan, presented to Federal Reserve Chairman Ben Bernanke, called for the U. S. government to purchase about $500 billion in distressed assets from financial institutions. The original proposal was submitted to the United States House of Representatives, with the purpose of purchasing bad assets, reducing uncertainty regarding the worth of the remaining assets, restoring confidence in the credit markets; the bill was expanded and put forth as an amendment to H.
R. 3997. The amendment was rejected via a vote of the House of Representatives on September 29, 2008, voting 205–228. Supporters of the plan argued that the market intervention called for by the plan was vital to prevent further erosion of confidence in the U. S. credit markets and that failure to act could lead to an economic depression. Opponents objected to the plan's cost and rapidity, pointing to polls that showed little support among the public for "bailing out" Wall Street investment banks, claimed that better alternatives were not considered, that the Senate forced passage of the unpopular version through the opposing house by "sweetening" the bailout package. On October 1, 2008, the Senate debated and voted on an amendment to H. R. 1424, which substituted a newly revised version of the Emergency Economic Stabilization Act of 2008 for the language of H. R. 1424. The Senate accepted the amendment and passed the entire amended bill, voting 74–25. Additional unrelated provisions added an estimated $150 billion to the cost of the package and increased the length of the bill to 451 pages.
The amended version of H. R. 1424 was sent to the House for consideration, on October 3, the House voted 263–171 to enact the bill into law. President George W. Bush signed the bill into law within hours of its congressional enactment, creating the $700 billion Troubled Asset Relief Program to purchase failing bank assets. On October 8, the British announced their bank rescue package consisting of funding, debt guarantees and infusing capital into banks via preferred stock; this model was followed by the rest of Europe, as well as the U. S Government, who on the October 14 announced a $250bn Capital Purchase Program to buy stakes in a wide variety of banks in an effort to restore confidence in the sector; the money came from the $700bn Troubled Asset Relief Program. Over the next six months, TARP was dwarfed by lending limits. S. that year. After the freeing up of world capital markets in the 1970s and the repeal of the Glass–Steagall Act in 1999, the banking practices along with monetized subprime mortgages sold as no risk investments, reached a critical stage during September 2008, characterized by contracted liquidity in the global credit markets and insolvency threats to investment banks and other institutions.
In response, the U. S. government announced a series of comprehensive steps to address the problems, following a series of "one-off" or "case-by-case" decisions to intervene or not, such as the $85 billion liquidity facility for American International Group on September 16, the federal takeover of Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers. On Monday, October 6, the Dow Jones Industrial Average dropped more than 700 points and fell below 10,000 for the first time in four years; the same day, CNN reported these worldwide stock market events: Britain's FTSE 100 Index was down 7.9% Germany's DAX down 7.1% France's CAC 40 dropping 9% In Russia, trading in shares was suspended after the RTS stock index fell more than 20%. Iceland halted trading in six bank stocks. U. S. Treasury Secretary Henry Paulson proposed a plan under which the U. S. Treasury would acquire up to $700 billion worth of mortgage-backed securities; the plan was backed by President George W. Bush and negotiations began with leaders in the U.
The Federal Reserve System is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of financial panics led to the desire for central control of the monetary system in order to alleviate financial crises. Over the years, events such as the Great Depression in the 1930s and the Great Recession during the 2000s have led to the expansion of the roles and responsibilities of the Federal Reserve System; the U. S. Congress established three key objectives for monetary policy in the Federal Reserve Act: maximizing employment, stabilizing prices, moderating long-term interest rates; the first two objectives are sometimes referred to as the Federal Reserve's dual mandate. Its duties have expanded over the years, also include supervising and regulating banks, maintaining the stability of the financial system, providing financial services to depository institutions, the U. S. government, foreign official institutions.
The Fed conducts research into the economy and provides numerous publications, such as the Beige Book and the FRED database. The Federal Reserve System is composed of several layers, it is governed by the presidentially appointed board of Federal Reserve Board. Twelve regional Federal Reserve Banks, located in cities throughout the nation and oversee owned commercial banks. Nationally chartered commercial banks are required to hold stock in, can elect some of the board members of, the Federal Reserve Bank of their region; the Federal Open Market Committee sets monetary policy. It consists of all seven members of the board of governors and the twelve regional Federal Reserve Bank presidents, though only five bank presidents vote at a time. There are various advisory councils. Thus, the Federal Reserve System has both private components, it has a structure unique among central banks, is unusual in that the United States Department of the Treasury, an entity outside of the central bank, prints the currency used.
The federal government sets the salaries of the board's seven governors. The federal government receives all the system's annual profits, after a statutory dividend of 6% on member banks' capital investment is paid, an account surplus is maintained. In 2015, the Federal Reserve earned net income of $100.2 billion and transferred $97.7 billion to the U. S. Treasury. Although an instrument of the US Government, the Federal Reserve System considers itself "an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, the terms of the members of the board of governors span multiple presidential and congressional terms." The primary motivation for creating the Federal Reserve System was to address banking panics. Other purposes are stated in the Federal Reserve Act, such as "to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, for other purposes".
Before the founding of the Federal Reserve System, the United States underwent several financial crises. A severe crisis in 1907 led Congress to enact the Federal Reserve Act in 1913. Today the Federal Reserve System has responsibilities in addition to ensuring the stability of the financial system. Current functions of the Federal Reserve System include: To address the problem of banking panics To serve as the central bank for the United States To strike a balance between private interests of banks and the centralized responsibility of government To supervise and regulate banking institutions To protect the credit rights of consumers To manage the nation's money supply through monetary policy to achieve the sometimes-conflicting goals of maximum employment stable prices, including prevention of either inflation or deflation moderate long-term interest rates To maintain the stability of the financial system and contain systemic risk in financial markets To provide financial services to depository institutions, the U.
S. government, foreign official institutions, including playing a major role in operating the nation's payments system To facilitate the exchange of payments among regions To respond to local liquidity needs To strengthen U. S. standing in the world economy Banking institutions in the United States are required to hold reserves—amounts of currency and deposits in other banks—equal to only a fraction of the amount of the bank's deposit liabilities owed to customers. This practice is called fractional-reserve banking; as a result, banks invest the majority of the funds received from depositors. On rare occasions, too many of the bank's customers will withdraw their savings and the bank will need help from another institution to continue operating. Bank runs can lead to a multitude of economic problems; the Federal Reserve System was designed as an attempt to prevent or minimize the occurrence of bank runs, act as a lender of last resort when a bank run does occur. Many economists, following Nobel laureate Milton Friedman, believe that the Federal Reserve inappropriately refused to lend money to small banks during the bank runs of 1929.
Because some banks refused to clear checks from certain other banks during times of economic uncertainty, a check-clearing system was created in the Federal Reserve System. It is described in
2008–12 California budget crisis
The U. S. state of California had a budget crisis in which it faced a shortfall of at least $11.2 billion, projected to top $40 billion over the 2009–2010 fiscal years. On September 23, 2008, about 3 months after its due date, Governor Arnold Schwarzenegger signed the 2008–2009 budget. Worsening financial conditions since 2003 left the state with a large shortfall. A two-thirds vote is required to pass a budget, in both the original budget negotiations and in the attempt to revise the budget no political party by itself had enough votes to pass a budget; the majority Democrats fought to minimize cuts to programs, while most of the minority Republicans refused to accept any tax increase. The original budget was put together by Democrats and some Republicans using spending cuts, internal borrowing, accounting maneuvers. In November 2008, Schwarzenegger proposed spending reductions including the following measures concerning state employees: One furlough day per month, equivalent to a reduction in pay of about 5 percent.
Elimination of the Columbus Day and Lincoln's Birthday holidays. Employees who must work on holidays would receive holiday credit for use, as opposed to receiving time-and-a-half pay. Employees would more be able to work four ten-hour days per week. Overtime pay rules would be changed so that leave time would no longer be considered as part of time worked. In December 2008, Schwarzenegger ordered mandatory furloughs of two days per month for state employees, as well as "layoffs and other efficiencies" to achieve savings in the General Fund of up to 10%. Labor organizations filed lawsuits and took other actions in an attempt to stop the furloughs of state workers. On Jan. 29, 2009, a Superior Court Judge ruled that Schwarzenegger had emergency furlough power, on February the 3rd District Court of Appeal in Sacramento said the appeal to the decision came too late and was incomplete, so judges were unable to determine if a halt to state furloughs is justified. As part of the furlough, various state offices were closed on the 1st and 3rd Fridays of every month from February 1, 2009 through June 30, 2010, estimated to save the State $1.3 billion.
By February 2009 California State Controller John Chiang delayed $3.5 billion in state payments for at least 30 days because the state was experiencing cash flow difficulties. The state legislature passed a budget in February 2009 that depended on the voters approving tax extensions and money redirection into the general fund, which in May the voters did not approve. Governor Arnold Schwarzenegger proposed $16 billion in cuts and borrowing money from local governments. In the legislature, the Republicans agreed to lower the income of state employees, but the Democrats resisted these proposals and suggested increasing fees to be paid by smokers and oil wells. Neither party agreed to borrowing money from local governments. On April 1, 2009, the state sales and use tax was temporarily increased by one percentage point; the state had been selling bank-guaranteed short-term notes to get cash, but in June 2009 its credit rating was lowered. When the state asked for a federal guarantee of the notes, the Obama administration said it had no legal authority to back state notes and that the state should solve its own problems.
On July 1, 2009, Schwarzenegger ordered state workers to take a third furlough day each month. On July 2, 2009, the state government began issuing IOUs to meet its short term financial obligations. Five days Bank of America, Wells Fargo, JP Morgan Chase announced that they would stop accepting IOUs by July 10. Fitch Ratings dropped California's bond rating from A-minus to BBB. On July 24, 2009, the state government passed a budget that included $15 billion in service cuts, including $8.1 billion in education cuts. Eliminated from the final plan included proposals to borrow money from city and county governments and to drill for oil off the coast of Santa Barbara. Chiang announced in August 2009 that the IOU program would end the next month and that California would pay off 327,000 IOUs worth $2 billion; the budget crisis led to many layoffs at state universities in California. In order to curb the budget shortfalls, the California Board of Regents voted on a 32% raise in all tuition costs for state universities.
This led to the 2009 California college tuition hike protests. With the passage of Proposition 30 in 2012 and a improving economy, for the first time in many years, California Governor Jerry Brown's proposed budget plan for 2013 listed a small surplus. A major source of the deficit was a decline in state revenues from more than $100 billion in 2007 to about $85 billion in 2008—mostly due to declines in personal income taxes, corporate taxes and other taxes. News reports and commentators have cited the state's various legislative supermajority requirements as a contributing factor to the state budget crisis; the state has a long history of supermajority requirements with a 1933 state ballot measure mandating a two-thirds supermajority to pass the state budget and California Proposition 13 mandating another two-thirds supermajority to pass tax increases. The National Conference of State Legislatures notes that, as of 2008, only 9 states required a supermajority to pass the state budget and of those 9, only 3 required a two-thirds supermajority instead of the three-fifths supermajority to pass the state budget.
The NCSL notes that, as of 2008, 15 states required a supermajority to raise taxes and that California was among the 10 of those 15 that require more than a three-fifths supermajority. Proponents of ending the state's supermajority requirements note that "Since 1980, the California State
United States housing bubble
The United States housing bubble was a real estate bubble affecting over half of the U. S. states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, reached new lows in 2012. On December 30, 2008, the Case–Shiller home price index reported its largest price drop in its history; the credit crisis resulting from the bursting of the housing bubble is an important cause of the 2007–2009 recession in the United States. Increased foreclosure rates in 2006–2007 among U. S. homeowners led to a crisis in August 2008 for the subprime, Alt-A, collateralized debt obligation, credit, hedge fund, foreign bank markets. In October 2007, the U. S. Secretary of the Treasury called the bursting housing bubble "the most significant risk to our economy". Any collapse of the U. S. housing bubble has a direct impact not only on home valuations, but mortgage markets, home builders, real estate, home supply retail outlets, Wall Street hedge funds held by large institutional investors, foreign banks, increasing the risk of a nationwide recession.
Concerns about the impact of the collapsing housing and credit markets on the larger U. S. economy caused President George W. Bush and the Chairman of the Federal Reserve Ben Bernanke to announce a limited bailout of the U. S. housing market for homeowners who were unable to pay their mortgage debts. In 2008 alone, the United States government allocated over $900 billion to special loans and rescues related to the U. S. housing bubble. This was shared between the private sector; because of the large market share of Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation as well as the Federal Housing Administration, they received a substantial share of government support though their mortgages were more conservatively underwritten and performed better than those of the private sector. Land prices contributed much more to the price increases; this can be seen in the building cost index in Fig. 1. An estimate of land value for a house can be derived by subtracting the replacement value of the structure, adjusted for depreciation, from the home price.
Using this methodology and Palumbo calculated land values for 46 U. S. metro areas. Housing bubbles may occur in global real estate markets. In their late stages, they are characterized by rapid increases in the valuations of real property until unsustainable levels are reached relative to incomes, price-to-rent ratios, other economic indicators of affordability; this may be followed by decreases in home prices that result in many owners finding themselves in a position of negative equity—a mortgage debt higher than the value of the property. The underlying causes of the housing bubble are complex. Factors include tax policy low interest rates, tax lending standards, failure of regulators to intervene, speculative fever; this bubble may be related to the stock dot-com bubble of the 1990s. This bubble coincides with the real estate bubbles of the United Kingdom, Hong Kong, Poland and South Korea. While bubbles may be identifiable in progress, bubbles can be definitively measured only in hindsight after a market correction, which began in 2005–2006 for the U.
S. housing market. Former U. S. Federal Reserve Board Chairman Alan Greenspan said "We had a bubble in housing", said in the wake of the subprime mortgage and credit crisis in 2007, "I didn't get it until late in 2005 and 2006." In 2001, Alan Greenspan dropped interest rates to a low 1% in order to jump the economy after the ".com" bubble. It was bankers and other Wall Street firms started borrowing money due to its inexpensiveness; the mortgage and credit crisis was caused by the inability of a large number of home owners to pay their mortgages as their low introductory-rate mortgages reverted to regular interest rates. Freddie Mac CEO Richard Syron concluded, "We had a bubble", concurred with Yale economist Robert Shiller's warning that home prices appear overvalued and that the correction could last years, with trillions of dollars of home value being lost. Greenspan warned of "large double digit declines" in home values "larger than most people expect". Problems for home owners with good credit surfaced in mid-2007, causing the United States' largest mortgage lender, Countrywide Financial, to warn that a recovery in the housing sector was not expected to occur at least until 2009 because home prices were falling "almost like never before, with the exception of the Great Depression".
The impact of booming home valuations on the U. S. economy since the 2001–2002 recession was an important factor in the recovery, because a large component of consumer spending was fueled by the related refinancing boom, which allowed people to both reduce their monthly mortgage payments with lower interest rates and withdraw equity from their homes as their value increased. Although an economic bubble is difficult to identify except in hindsight, numerous economic and cultural factors led several economists to argue that a housing bubble existed in the U. S. Dean Baker identified the bubble in August 2002, thereafter warning of its nature and depth, the political reasons it was being ignored. Prior to that, Robert Prechter wrote about it extensively as did Professor Shiller in his original publication of Irrational Exuberance in the year 2000; the burst of the housing bubble was predicted by a handful of political and economic analysts, such as Jeffery Robert Hunn in a March 3, 2003, editorial.
Hunn wrote: [
Anglo Irish Bank hidden loans controversy
The Anglo Irish Bank hidden loans controversy began in Dublin in December 2008 when Seán FitzPatrick, the chairman of Anglo Irish Bank, admitted he had hidden a total of €87 million in loans from the bank, triggering a series of incidents which led to the eventual nationalisation of Anglo on 21 January 2009. FitzPatrick subsequently resigned his position and was followed within twenty-four hours by the bank's non-executive director, Lar Bradshaw and chief executive, David Drumm. A new chairman of Anglo, Donal O'Connor, was appointed from the board, a move welcomed by the Irish Minister for Finance, Brian Lenihan. A number of investigations have been launched into the reasons behind the three resignations; the Central Bank of Ireland is carrying out a review of the bank's dealings, although its Financial Regulator, Patrick Neary, has since resigned his position. So too did a number of other chairmen and executives involved with Anglo, Irish Life and Permanent and Irish Nationwide. Within days of the initial admission, an announcement was made that Anglo Irish Bank would be one of three that would be recapitalised by the Irish government.
The recapitalisation of Anglo Irish Bank was expected to be effected in mid-January 2009, following an Extraordinary General Meeting. Lenihan instead unexpectedly announced the nationalisation of Anglo Irish Bank the night before the EGM due to difficulties he encountered with the recapitalisation process. Recapitalisations of the other two banks mentioned were expected by the end of March 2009 but, according to Taoiseach Brian Cowen, were expected to be finalised in early February 2009 at a total of €7 billion; the nationalisation of Anglo Irish Bank on 21 January 2009 followed two more resignations earlier that month. On 7 January 2009, another director, Willie McAteer, becoming the fourth casualty of the controversy. Two days the Financial Regulator Patrick Neary retired amidst much criticism over his handling of the affair. After the nationalisation, the Chairman of Irish Nationwide, Dr Michael Walsh, resigned on 17 February, one week to the day that government-appointed directors announced they were investigating a deposit of billions of euro by Irish Life and Permanent, placed in Anglo Irish Bank before the end of its financial year.
Taoiseach Brian Cowen denied claims that he was protecting a "Golden Circle" of wealthy financiers from being identified. This mysterious group of ten businessmen is said to have received loans from Anglo Irish Bank in return for buying shares, in a move designed to keep the bank afloat. Starting in 1986, Seán "Seanie" FitzPatrick spent eighteen years as chief executive of Anglo Irish Bank, during which time the bank grew from a small operator into the third-largest bank in Ireland; when he became the bank's chairman in 2005, handing over the position of chief executive to David Drumm, the bank was recording annual profits of over €500 million. The Anglo share price peaked at € 17.60 an increase from under € 1 ten years previously. Anglo was valued at nearly €13 billion and FitzPatrick's 4.5 million Anglo shares were worth nearly €80 million at this time. Prior to FitzPatrick's resignation, the Anglo share price had dropped to €0.32, a drop of 98% with the entire bank valued at a low €242 million and FitzPatrick's stake reduced to €1.5 million.
The Financial Regulator first uncovered the €87 million loans in January 2008 when inspectors from the regulator's offices carried out an inspection into the loan book of rival lender, Irish Nationwide Building Society. The inspectors noticed that a large loan was provided to FitzPatrick at Anglo Irish Bank and repaid; the Regulator discovered at a date that similar loans were provided to FitzPatrick in September 2008 and repaid by him in October 2008. When the issue was raised with Anglo Irish Bank it was discovered that there were further loans between the two banks over an extended period of eight years, it is uncertain. Every Anglo annual report contained a note displaying the total loans given to directors of the bank; this total was measured at a single point in time. In the case of Anglo this occurred on 30 September. FitzPatrick, instead of revealing the true figures of his loans, transferred some of them to Irish Nationwide Building Society, returning them to Anglo at a date, he acted in a manner.
Financial authorities investigated. The Chief Executive of the Financial Regulator said that "a lay person would expect that issues of this nature and this magnitude would have been picked up" by the external auditors, Ernst & Young. After receiving legal advice Ernst & Young declined to appear before a parliamentary committee; this in turn led to inaccurate figures for the total directors' loans given for eight consecutive years in the end of year Anglo accounts. 2008 was the first occasion on which FitzPatrick revealed his true figure, that of €87 million or twice the total of the other twelve directors' loan figures. The situation was described as Ireland's version of Enron, the American energy company which went bankrupt in 2001, it was said that the principals would have been arrested if this had occurred in the United States. FitzPatrick issued a statement on the evening of 18 December 2008, linking his resignation with a €87 million loan he had from the bank. Ireland's Minister for Finance, Brian Lenihan welcomed the appointment of a new chairman, Donal O'Connor, an official with a substantial commercial track record, saying he "seems a natural choice" for the role.