 Give credit to the market: The decision not to prohibit 100 per cent loan-to-value mortgagesFitzGerald Cathal
Administration, 2019, vol. 67, issue 2, 25-45 Abstract: A decision not to prohibit or limit high-risk mortgage products in Ireland in 2005 reveals the extent to which three important factors – interests, institutions, ideology – impact on information processing by decision-makers, and reveals irrationality or otherwise in the process. This article summarises the events leading up to the bad decision on 100 per cent loan-to-value (LTV) mortgages in November 2005. This case reveals the nature of the interaction between government departments, regulators and banks at a critical time before the crash, and shows how a department’s interests can interact with institutional factors, and the ideological context, to prompt poor rational and irrational information processing, and lead to a bad decision. In particular, the dominance of a market ideology which raised the threshold for what information was necessary before intervention would be made, combined with the low institutional standing of the department seeking intervention, produced a suboptimal outcome. Finally, the case provides evidence of irrationality (e.g. groupthink, herding) within institutional actors, rather than between them. Keywords: Decision-making; irrationality; mortgages; economic crash (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:vrs:admini:v:67:y:2019:i:2:p:25-45:n:2 Access Statistics for this article Administration is currently edited by Joanna O'Riordan More articles in Administration from Sciendo |
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