The Anglo Tapes provide a devastating insight into why banks should not be left to their own devices. They expose how banks can act to protect themselves, regardless of the costs to society. And yet in the same week, the Government has supported changes to the Code of Conduct on Mortgage Arrears, making it easier for financial institutions to intimidate and evict families. Instead of insisting that banks use solutions which solve the mortgage crisis, the Government is actually giving them even greater freedom to do as they please. It seems Fine Gael/Labour are determined to learn nothing from the mistakes of Fianna Fail. And yet again, the country is paying a very high price.

We now know Anglo asked the Government for €7bn to pull the Government in. So that when Anglo came back for more, it would get it. This was not just deception, it was entrapment. The tapes are the smoking gun for a €30bn con job. Rather than give Anglo that €30bn, we could have paid no income tax for two years – imagine what that would do for job creation. We could have built 60 national children’s hospitals, 4,400 schools or eradicated poverty.

The Anglo Tapes have sparked outrage across the country. But nobody who has worked in or around international finance will have been surprised by what they heard. There are responsible banks and many honest, civic-minded bankers. But there are other banks, where the culture suggested in the Anglo Tapes is the norm. The behaviours of some are so extreme that the Journal of Business Ethics carried a paper in 2011 called The Corporate Psychopaths Theory of the Global Financial Crisis. It posits that “psychopaths working in corporations and in financial corporations, in particular, have had a major part in causing the crisis”.

I’m not suggesting that those in the tapes are psychopaths, that they have a diminished capacity for remorse, or poor behavioural controls. We don’t know who the saints and the psychos are in the banking world. But we do know that banks will go to great lengths to protect themselves. And we know this sometimes comes at enormous cost to the rest of us.

Which is why, when it comes to solving the mortgage crisis, the Government should be taking a hands-on approach. It should be insisting that particular solutions are used. A debt-for-equity product, for example, would protect the balance sheets of the banks while helping large numbers of people lift themselves out of debt traps. The banks won’t favour this approach – it’s inconvenient, and won’t make as much money as other options available to them.

The option the banks seem to favour is playing for time. And for nearly five years now, the Fianna Fail and the Fine Gael/Labour governments, have stood idly by as the banks let the mortgage crisis grow.

Last week it was reported that 95,000 residential mortgages are in arrears of over three months. But it’s much worse than that. When you add arrears of less than three months, and mortgages ‘restructured but not in arrears’ (read ‘interest only, yet to be sorted out’), the figure is 185,000. Add the buy-to-lets, and it’s 240,000. That’s one in four residential and one in three buy-to-let mortgages. About 650,000 men, women and children live in these properties. And these figures don’t include the many more who are paying unsustainable portions of their incomes to avoid going into arrears.

This is the real scale of the mortgage crisis. It’s sucking out the money that’s meant to flow up and down our high streets. It’s stopping potential entrepreneurs from starting companies. It’s choking the capital which existing entrepreneurs need to expand. It’s one of the root causes of unemployment and emigration. Is it any wonder last week’s CSO figures confirmed that Ireland is officially back in recession?

But the Anglo Tapes didn’t jump-start the Government into meaningful, hands-on leadership on the mortgage crisis. Instead, we got revisions to the Code of Conduct on Mortgage Arrears, CCMA, which give the same banks that caused the crisis even more freedom to do as they please.

Two changes in particular are worth noting. The first is that the limit has been removed of three successful contacts by a bank per month. Now, they can contact borrowers in arrears as often as they like. In December last, a constituent came to me because her bank was using an autodial system to phone her up to 16 times a day – imagine what they’ll be able to do now.

The second important change is the reduction in the repossession moratorium, from 12 months to three. So once the legislation is passed allowing banks to repossess houses, they will now be able to do so more quickly.

The revised CCMA leaves it to each bank to decide what level of contact with borrowers is ‘proportionate and not excessive’. Banks can use auto-dial systems. They can, for the first time, take people off their tracker mortgages. They decide what standard of living borrowers should be left with. They can classify borrowers as ‘non-cooperating’, which may preclude them from using the new personal insolvency legislation. And if a borrower in mortgage arrears feels they are being treated poorly, or intimidated by their bank, they can only appeal to … the same bank. There is no independent appeals process.

The Central Bank of Ireland, CBI, has been roundly criticised for making these changes to the CCMA. But those criticisms are largely misdirected. The CBI doesn’t actually have the power to insist banks restructure mortgages in particular ways. The Government recently set targets for the number of mortgages to be taken out of arrears, and so the CBI is making it easier for banks to do so. Even if it means giving them greater powers to harass borrowers.

Unfortunately, the Government has tasked the Central Bank with fixing the wrong problem. The huge number of mortgages in arrears is merely the symptom. The underlying cause is the fact that households simply have too much debt relative to their incomes. That’s what needs to be addressed in order to stimulate economic growth, boost jobs and stem emigration.

Only the Government has the power to alleviate that problem, but it steadfastly refuses to use it. Legislation could be passed, instructing banks to restructure mortgages and other debts in ways that allow people get out from under their debts. But whenever I and others propose this in the Dail, they declare solemnly that they can’t get involved in the day-to-day operations of the banks.

Maybe the Anglo Tapes are a blessing nonetheless. For the first time, most people have been able to really understand what some banks are capable of. And so now, maybe they will begin to insist that their public representatives react, not by giving banks greater powers, but by directing them to do what’s necessary for the recovery of the country.

This article originally appeared in the Sunday Independent on June 30, 2013. You can read the original here.