Sunday, Mar 23, 2008
Banks Want Anything Except a Free Market Correction
The Times: Mervyn King bows to Fed-style rescue deal
BRITAIN’s banks believe they have secured a deal under which the Bank of England will provide the kind of support America’s Federal Reserve has given to its beleaguered financial institutions in recent months.
Posted by quiet guy @ 01:07 PM (469 views) Add Comment
6 Comments
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1. The Haunted said...
Brilliant... I have made a few financial erros too, perhaps the BOE can bail me out as well?
2. quiet guy said...
Apologies for commenting on my own post first but there are some gems in this article I want to highlight:
"Senior bankers have been openly critical of the Bank governor, though a truce has been agreed. They believe that while America’s banks have made all the mistakes, British banks are being penalised for the huge financial losses that have been racked up on Wall Street."
Got that? The UK banks haven't been involved in risky lending at all! It's all the fault of America.
The next paragraph is even better:
“It may have escaped King’s attention that the big retail banks made huge profits in the reporting season that has just ended, said one. “This should be a time when we are taking advantage of the opportunity, but the Bank of England does not seem to understand that. It is essential that we are given an equal footing to that enjoyed by American banks and by continental banks that have been supported by the European Central Bank.”
So highly profitable banks need more cheap cash. Can anybody explain that to me?
And finally:
"It has also emerged that central banks in America and Europe, including the Bank of England, are studying the possibility of bulk purchases of mortgage-backed securities."
Guess who's going to end up holding all those mortgage-based securities? It appears to me that we are about to be rather neatly stitched up.
3. eyeoftheweasel said...
All I can say is that the whole thing stinks.
4. Icarus said...
Mervyn - Don't fall for it. You are dealing with spivs. The American banks aren't stimulating the economy, they're merely using cheap Fed money to turn a profit. A Market Oracle report, posted earlier today on this site, explains: "The banks are using the money to bet against the dollar. They are borrowing from the Fed at a low interest rate and buying foreign, euro-denominated bonds yielding a higher interest rate - and in the process making a currency gain as the euro rises against dollar-denominated assets. The Fed thus is subsidizing capital flight and exacerbating inflation by making imports...more expensive.
Also - "The Fed's strategy has failed to lower mortgage rates, which are pinned to 30-year Treasury (Bonds), which have actually gone up since Bernanke started slashing rates. (This) ensures that the housing meltdown will continue unabated...".
5. Ijjhall said...
Think we need to remember who the author of this article is...sounds like wishful thinking to me as it contradicts other reports saying King had ruled out such an arrangement.
6. wiltshire said...
I read today there are more savers in this country than those in debt. If someone could organise the savers (or a lot of them at least) into a cohesive group the government and banks would have to think twice about stitching the country up. Does anyone have the ear of Martin Lewis???