The Sunday Times - Money Comment 20/09/09

Posted by Jill Kerby on October 20 2009 @ 20:16

Is the Great Recession really over in the US, France and Germany?


Last week at a seminar in Dublin hosted by the on-line bank RaboDirect to launch three new ‘sustainable’ energy, water and climate funds, I felt obliged to pour a little cold water on the proceedings.


President Obama and Ben Bernanke, the head of the US Federal Reserve, certainly seem to think the recession is over, though Mr Bernanke, who was speaking on the day of the first anniversary of the Lehman Bros collapse, cautioned that it was going to be a slow recovery.  


The Zurich-based Sustainable Asset Management (SAM) managers who were laying their wares before the RaboDirect audience last week didn’t have any particular views about the merits of the end of the recession, but they certainly believe their funds will be beneficiaries if there is a pick-up in industrial production and especially the capital financing that was very short on the ground last year. 


With unemployment still rising in all three countries as well as budget deficits, it strikes me that what is behind the recovery has more to do with the billions that’s  been poured into the financial, construction and motor sectors than because consumers earnings are going up or that they feel confident to start spending again.  


Stock market performance is no reflection of the reality of ordinary people’s lives, and this rally is no exception. 


That said, there are plenty of people with cash in RaboBank who are wondering what to do with their money and are eager for glimmers of hope.  These energy, water and climate funds have produced impressive performance track records since they were launched (SAM itself has specialised in these sectors since 1995, long before ‘green’ investing became fashionable) and there’s no question that the demand for clean, accessible water and energy is genuine. 


The end of the Great Recession is certainly good news for existing SAM investors but I think I might just stay on the sidelines for a little while longer.   However sustainable these funds may be over the longer term, there seems to be a growing number of sceptics – like me - who don’t share President Obama and Mr Bernanke’s confidence in the sustainability of this seven month stock market rally.  




The Comptroller and Auditor General was very unfair to single out MABS, the money advice and budgeting service for inefficiency in his annual report.  He accused them of only dealing with two cases a week for their €16.2 million annual budget. 


In fact, MABS advisors each take on at least two ‘new’ clients every week in addition to all the active files already on their desks. Last year, 16,600 people sought help from MABS; that figure is already up 30% this year with only 19 more advisors on the payroll of 252, and not all of those new posts are full-time. 


The Auditor General rightly points out that there isn’t sufficient date about how quickly cases are cleared or their outcome, but that’s an administration issue for the Department of Social and Family Affairs to address.   


To suggest that each of the 271 MABS advisors – there are also 500 volunteers - are slacking on the job is a misrepresentation of one public service that has genuinely been paying its way for the past 17 years. 




Does anyone in the credit union movement know exactly how much it cost to send 80 Irish delegates to the World Council of Credit Unions’ annual congress in Barcelona this summer?  I’m just wondering because I’ve just read a report about the event in the latest edition of the League of Credit Union’s magazine ‘Focus’ and it doesn’t mention the cost either.   Assuming that all the accompanying spouses paid their own way, even a bill of €2,000 per delegate, or €160,000 seems a little excessive given the financial difficulties being experienced by so many Irish credit unions. 


According to the 2008 Registrar for the Credit Union’s report, 133 of the 419 CUs had high enough levels of arrears or rescheduled loans to trigger investigations last year, a process that is on-going.  Nearly one in four were instructed to stop advancing any new loans for periods “in excess of five years” until they return to compliance with the limits set out in the [Credit Union] Act.  Only about half of credit unions paid dividends in 2008, a situation I’m told that hasn’t improved this year, and 76 were told to reduce their dividends once their books were examined. 



As the travel expense records of our TDs and pubic servants now show, there’s a propensity in this country for some people in positions of trust to think nothing of spending money that isn’t theirs on foreign junkets that don’t really contribute a whole lot to the betterment of their department, agency or constituents. 


I’m sure all credit union members would love to see a comprehensive list of advancements and good practices that the League members brought home and implemented after last year’s international congress in Hong Kong and the one in Barcelona.   One can only imagine the credit management skills delegates will pick up in 2010 in Las Vegas. 


But perhaps before the travel budgets are agreed for next year, they might want to read another article in the latest Focus magazine by Mandy Johnson, the former government press secretary who is now the League’s new head of communications, management and public relations. She notes that “we still have a significant number of credit unions…who are not yet using e-mail” and continue to conduct all communications with the League “in hard copy”. 


Apart from being very convenient for booking cheap airline tickets, perhaps Ms Johnson will let the members know that joining the internet is also a remarkably cost efficient way to keep in touch with worldwide credit union developments. 



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