Brendan Keenan muses melancholic on our gilded Götterdämmerung but with two big what-ifs. What if Brian Cowen (or Charlie McCreevey) had rejigged incentives to promote more fixed rate mortgages as a hedge against ECB rate volatility/rates out of sync with local conditions? What if the department of finance treated the boom-related property taxes like the windfall they were and invested in a Stability fund? (many US states created similar ‘rainy day’ funds for similar reasons - interest rates for Indiana at a given moment may not be optimal compared with California):

Of all the follies of Irish governments since we joined the euro, one of the most glaring has been the failure to encourage fixed rate mortgages. I am not talking about those dreadful one- to three- year deals which the banks were throwing around like confetti. Those are not fixed rate loans; they are traps for the unwary and may yet turn out to another weapon of mass financial destruction.

It would not be so bad had they been charged at the actual fixed rate. But they were loss leaders: sold, no doubt, on the very hope that the buyers would come off the short-term fixed loan into a more profitable variable rate.

And so it has proved; although in much worse conditions than most people would have feared, or most banks would have hoped. The banks’ nefarious schemes have “ganged agley” — as Robbie Burns had it — because the credit crunch means they cannot make a profit on anything. Not even variable mortgages.

But they will in the end, which will make the cap even tighter. Not only will any ECB rate rises be passed on in full; a bit more will be added on. That will take another chunk out of borrowers’ disposable income, to the detriment of consumer spending, property prices, and the economy in general

A sensible definition of a “fixed rate mortgage” would be one that lasts for a minimum of five years — preferably 10. Few were on offer, and of course they are more expensive. While prices soared, few buyers were willing to absorb any increase in their monthly repayments by taking out a fixed loan.

Suppose, though, that there had been more generous tax breaks for long-term fixed loans? Higher mortgage relief, for instance, or perhaps relief only on such loans? Full tax relief only for those investors who covered their rear by locking in at what were very favourable fixed rates, by historical standards?

Or perhaps the incentive should have been given to the lenders? I accept that the details would be tricky. I accept also that buyers and investors, maddened by fear and greed, would have howled with outrage — accompanied by the usual cheerleaders in the media — about something which was being done to protect them from their folly. But facing down such stupidities, and exposing them, is what government ought to be about.

It was, in the awful cliche, a “no-brainer”. It would be tempting to conclude that our ministers and civil servants are brainless. Tempting, but too kind. The politicians are too venal to do the right thing, and officials too timid to push the imaginative thing past the politicians. Both seem much more comfortable — having had so much experience — when engaged in what they are now doing: coping with a mess.

This sounds right to me. It sounded so right last year that when we got a mortgage, we insisted on the longest fixed-rate product we could get from a bank. That turned out to be five years fixed. (A long way from the 30-year fixed my parents took out in 1971 - so I was and remain uneasy about the uncertainty of 1/6 of that time.)
Thanks to a really good mortgage broker - a line of work I’d unfairly pooh-poohed in the past - we managed to get a rate that wasn’t punitive for the five years. So far, Jean-Claude Trichet has proved me right.

The other obvious idea to avoid such messes is a Stability Fund, which would garner excess tax revenues when euro interest rates are too low for Irish conditions, and could be drawn down to repair the public finances in conditions like the present. Traditional Government accounting — not to mention the bone-headed Stability and Growth Pact — do not readily lend themselves to coping with the volatility inherent in Irish membership of the euro. But that is no excuse for doing nothing.

For almost a decade, policy has been quite inappropriate for a country which, because of its strong trading links outside the monetary union, is the most vulnerable member of the euro. Which raises the question: will our leaders do any better when this crisis is over, and we reach those sunlit uplands portrayed in the more optimistic sections of the ESRI medium-term review?

This seems like an even better idea, and one that would have been easier than moving the private sector to adopt new practices and sacrifice short-term cashflow for long-term loan book stability. (After all, with our new snazzy global wholsale money markets, who needs a stable loan book? Risk is distributed throughout the system! It’s an unsinkable ship! Oh.)

Anyway, a “stability fund” is something many US states started doing a couple of decades ago. Most of them call it a “rainy day fund” or as Indiana calls it, the “counter-cyclical revenue and economic stabilisation fund”. If you’re a small market (Indiana=6 million) inside a giant currency area (US=300m), interest rates set at the level of the whole won’t always suit all of the parts equally.

In case any department of finance boffins stop by, here’s a primer to US state rainy day funds.

Of course, some will say that Ireland used a chunk of its windfall to pay down the national debt and pay into the Penions Reserve Fund. These were indeed bits of prudence that may save our bacon - whatever about Brussels being upset if we breach the 3% GDP deficit threshold under the EU’s Stability and Growth Pact. I’d rather have Brussels mad at me instead of Standard & Poors.

Critics may also wonder, if these were such “no brainers”, why didn’t we all-wise and all-knowing pundits push them when it could have made a difference? Brendan Keenan has indeed mentioned it before - here’s one from a year ago. And David McWilliams has for many years opined about Ireland’s failure to face up to the changed reality to being in a massive currency area with no control over monetary policy - and points out regularly that .

But Keenan’s “no brainer” tactics were something that were not - repeat, not - part of the public discourse. As astute as McWilliams was in diagnosing the inevitable problems that would result from the structural situation - small market in large currency area - I can’t find an example where he advocates a move to fixed rate mortgage products or a counter-cyclical fund. And if Brendan Keenan has been making the case for them, he’s been making it privately and only sparingly in public.

So when the subs write that “we” blew the boom, the paleface is not in our Fianna Fail stars, dear Sarah, but in ourselves. “We”, the commentariat, were not as successful as we needed to be in making the case. No it’s not our job to be responsible for solutions. But a healthier commentariat puts policy innovations in play. If there’s a lesson here for us as well as the pols, it’s that we should stick our necks out a bit more - not just being contrarian but in framing alternative choices, the road not taken. Not necessarily advocating for them but helping less intellectually-curious folk who tend to hold office realise that there are other possibilities.