| Sub-prime backlash would be negative |
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| Despite the word sub-prime being continually linked with the credit and liquidity crisis, a leading US expert on the sub-prime market, Professor Robert Van Order, has said that a backlash against the industry in Ireland would be a bad thing. |
Professor Robert Van Order, a leading US economist and expert on the sub-prime market, has warned that a negative reaction against the sub-prime market in Ireland would have an adverse impact on the economy.
Instead of proposing the elimination or regulating the market out of existence, Van Order would prefer to see the banking industry not discourage sub-prime markets but instead manage them better.
‘Its not easy expanding loan markets to riskier borrowers. You can’t expect to do it without mistakes and lots of defaults,’ said Van Order when addressing the seminar, Property: the shape of things to come, hosted by the UCD Michael Smurfit Graduate Business School.
Van Order went on to say that overreaction to the much discussed sub-prime crisis is a possibility, and that such a reaction would be dangerous, pointing out that the majority of sub-prime loans in the US offer lenders value.
According to Van Order, Ireland’s sub-prime market is not big enough to do any damage to the economy as a whole, but advised that Ireland should express concern if the sub-prime market grows too rapidly, as rapid expansion can be dangerous considering that the ‘Irish property market is more volatile than the US market’.
Speaking on the Irish property market, Van Order claimed that while Ireland remained a ‘housing bubble candidate’ the underlying strengths of the Irish economy that led to high housing prices are still in place and that is a ‘real power’.
While in agreement that some of the financial models that have brought about the current crisis were unwise, Van Order said that the key is that the financial system be solid enough to keep any risky financial instruments from bringing down the banking system, adding ‘If consenting adults want to do stupid things then sometimes you have to let them.’ |
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| Article appeared in the November 2007 issue.
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