Ulster Bank Loan Sale is Easy Option; by selling to Cerberus they have abandoned customers to their fate.
Ulster Bank's decision to sell off a portion of its loan book to private equity firm Cerberus is a sign that it does not care about the best interests of its customers. Not wishing to deal with distressed mortgage holders on an individual basis, this sale relieves the bank of their duty of care towards long-standing customers. It allows Ulster Bank to walk away by presenting its distressed loan book, the result of the bank's own lending mistakes, at a knock-down price to an entity that will seek to cash in on the loans however they can. This probably means we will soon see forced evictions of people in arrears who have no repayments schedule worked out. Such a scenario might have hurt Ulster Bank's public image if they decided to put on the squeeze themselves, but the company who have bought the loans are not expected to act with empathy or sympathy. They already have the reputation they want, which is for ruthlessness and the uncanny ability to make money where others failed.
Cerberus was named after the Greek mythological three-headed dog who guards the gates of the underworld Hades, not from intruders, but to prevent the dead from leaving. This dog had a serpent's tail and various snakes protruding from different parts of his body, an altogether frightening image. In naming the company after him Stephen Feinberg, co-founder of Cerberus Capital Management, was not seeking to endear himself to the general public, rather to intimidate rivals by using a symbolic representation that would fit with the dirty business of loans disposal. He has been described as secretive by the New York Times and was quoted in Rolling Stone as telling shareholders in 2007, "If anyone at Cerberus has his picture in the paper and a picture of his apartment, we will do more than fire that person. We will kill him. The jail sentence will be worth it." Feinberg is a long-time Republican Party donor and an advisor to Donald Trump. Cerberus holds over $40 billion worth of investment portfolios worldwide and in the aftermath of the European banking crisis it acquired loan books from many European banks, as well as real estate including over 97 Spanish bank branches formerly of Caja Madrid.
Around 200 farmers are thought to be affected by this sale and the ICSA is worried that they won't receive fair play when it comes to striking deals for repayment. Seamus Sherlock has been a strong supporter of indebted farmers: “We have spoken to the Financial Ombudsman on this issue and have been assured that such transactions do not affect the legal rights of the farmers involved. However, our concern is centred on the small print contained within the financial agreements which farmers may have originally signed up to. Vulture fund investors have no allegiance to Irish agriculture. In most cases they are only interested in making a quick profit from the distressed loan books they acquire. Our staff will be available to discuss the details of individual cases with the farmers involved.”
The Ulster Farmers Union also expressed its disappointment with the decision. Barclay Bell, UFU president said: “It is disappointing agri-loans have been included in this debt package sale. We understand that only a small number of farmers are involved, but I can imagine the impact this will have on those businesses and families. If anyone affected is a UFU member, I would encourage them to contact the Union for advice and support.” This is not the first controversial sale from Ulster Bank's troubled loan books. Earlier this year it disposed of the Jury's Inn Group for £680 million, which was bought by another private equity group Lone Star.
Banks overextended themselves during the boom years and having been bailed out by the people, they are now free to sell their loan books to vulture capitalists without losing out. Ulster Bank was given almost £10 billion by the British Taxpayers, paid through the Royal Bank of Scotland. This was because, like other Irish banks, it got caught up in the hysteria of the boom years and went on a spree of aggressive lending, using strategies to attract borrowers rather than vetting them properly. People were told that the bubble could never burst. Then they were locked into a debt cycle from which under Irish law, not even bankruptcy can free them. Thanks to the bail-out, Ulster can function as a profitable entity once more and is seeking to dispose of troublesome distressed loans. Instead of making the effort to work out repayment schedules with individual customers, allowing ordinary people to benefit from the bank's inevitable losses, they prefer to sell the debts to a third party. Private equity firms like Cerberus are a dream come true because they offer cash up front for loans. So between the bail-out and the loans sale, Ulster Bank lose nothing, in fact they might even make a profit, while the poor customers are left to deal with the bailiffs. It is a scandal.