Monday, Apr 21, 2008
Extra funding will not re-inflate the housing bubble
MoneyWeek: Can Alistair Darling save the housing market?
Alistair Darling, who clearly missed his true calling as a plumber, wants to 'unbung' the British banking system. I suppose you could call it money down the drain…
Posted by damien @ 12:12 PM (1879 views) Add Comment
37 Comments
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1. taffee said...
only down about 4%....perhaps at 20% the government will be do hari-cari!
Personally think there should be an enquiry and full disclosure of boe committee and government property dealings.
Is this a possible scandal?????
2. Onyerhike said...
Here here, taffee. What the hell are they playing at ??? This smells to me like corruption on a HUGGGE scale! Why aren't people on the streets protesting? They are using taxpayers money to maintain a system that is completely out of balance. It is a scandal.
3. bystander said...
“the Treasury can’t force the banks to use the extra funding to support new mortgage lending… there will rightly be no return to the cheap introductory deals, 100%-plus loans and self-certified ‘liar loans’ available during the boom.”
..............Especially when the government, I mean the taxpayer, holds all the toxic stuff. Why then would the banks give a damn, what happens to the housing market, especially as they can use all this cheap new capital from the BoE to finance overseas and emerging market strategies, ensuring the shareholders get their dividends and the top boys and girls get their bonuses. Expect to see record bonuses paid next year, "just to keep the talent" (talented crooks), and for mortgage levels to remain very high and uncompetitive, while the BoE drop rates, continue to bung their mates more taxpayers money, devalue the pound and bankrupt the country even more..
4. mrmickey said...
In a word "no" all it will do is crash Sterling and create massive inflation forcing interest rates up to 20% followed by crashing deflation.
5. mark wadsworth said...
I find the use of the 'save' in the headline to be downright offensive (to our intelligence if nothing else). What he's trying to do (and in which he will fail miserably - as ably outlined in comments 2 and 3) is to prop up prices. The only thing he's trying to 'save' is his own incompentent, lying skin.
6. str 2007 said...
Taffee
Fully agree that we should see exactly where MP's have their money invested - A large BTL portfolio would certainly influence an MP's decision making process.
7. taffee said...
I call for full disclosure of fsa senior management and boe committee property dealings
fsa 'forgot' to visit northern rock would you believe for 18 months prior to their bank run.
Lets push for some answaers
8. hpwatcher said...
The only thing he's trying to 'save' is his own incompentent, lying skin.
Actually, he is trying to save Gordon Brown's incompetent, lying skin......................and you can add ignorant & arrogant to the list as well!
9. plato said...
I reason that AD and the rest accept HPC as a certainty ---- not admitting it is an entirely diplomatic matter. The real concern is to avoid the Banks going down with this sinking ship and stoke an epidemic.
However the price to 'save' could turn out to be too high even for the wealthy. Interest rates have to rise proportionately in any event.
The Markets will soon come into this scenario -- they are waiting and watching.
10. dbnazz1 said...
The banks will use the money to bolster their balance sheets. The bailout to the banks will be seen by them as just that, a life line to avoid going under, not as a source of funding to engage in another round of un-sound lending. The banks have realised that they have got there fingers burnt and the shock of the credit crunch has/will make them return to sensible banking ie people will have to prove their income levels for mortgages and most importantly only sensible multiples of proven income will be available as mortgages. And it is this that will cause the crash. Inflated prices have been caused by high ratios of loaned funds to income.
11. uncle tom said...
Can he save it - of course not.
He's a lawyer, not an accountant, and it's patently obvious from every interview he does that he has no empathy with numbers, business or anything to do with finance.
He's about as suited to the job of chancellor as a bricklayer being hired to work as a brain surgeon...
12. A Saver said...
Tafee@1, everyone-agree re need for govt/BoE/MPC to disclose conflicts of interest. I could always visualise MPC members getting harassed over their morning cornflakes on IR voting days to vote for a cut, on behalf of various over-mortgaged friends and rellies...
But should the (technically insolvent) banks be issuing mortgages at all at this point? Surely they should be restricting loans to businesses that actually generate wealth for the country, it's already been pointed out that selling overpriced houses to each other doesn't do that. At the very least, banks should be applying EXTREME restrictions on mortgage lending - the time for normal prudence is well past. Mortgage deals are still way too cheap and that's what got us into this mess in the first place.
13. paul said...
"The bailout to the banks will be seen by them as just that, a life line to avoid going under, not as a source of funding to engage in another round of un-sound lending."
Yes! I think you've hit the nail there dbnazz - the devil is in the detail. While the nation sees this is an attempt to save the housing market, the banks see it as a life line to prevent a Northern Rock.
They are working at complete cross purposes.
14. hpwatcher said...
@plato I reason that AD and the rest accept HPC as a certainty
I think they see it as a risk, but will do everything they can to avoid it. GB's whole reputation is definitely now at stake. I think they are optimistic, and are able to gently steer their way through it.
15. Orwell said...
Interest rates have to rise proportionately in any event.
The Markets will soon come into this scenario -- they are waiting and watching.
Plato, explain. Why will rates rise?
16. plato said...
hpw
Yes but hypothetically:
If they are forced to admit HPC, they'll have a nice little 'thankyou' and cuddly little bank job waiting for them. Unless that is,they can perform this optimistc miraculum.
17. Ijjhall said...
Robert Peston on BBC news basically delivered the views summarised by posts 9 and 11. The present inflated housing market is beyond help...
18. stu_b said...
It's interesting that the tone of comments have noticeably changed on this site probably since last Spring onwards...in a trend much the same as my own feelings, uncertainty/nervousness has slowly been replaced by an increasing conviction that we are right on the matter of house price inflation. I don't mean the hard core of bloggers here who I have read with interest for 18 months plus, but the 'fringe' (to which I suppose I've just joined) of occasional bloggers who expressed various levels of doubt. The doubters seem to have gone; their doubts resolved by events/economic indications - much as I myself and now convinced. I'd like to thank everyone on this site for their unwitting moral support to myself.
I may be in a minority but I believe the housing market 'turned' before the 'credit crisis' and I don't believe even a resolution to the credit issue will have any effect on it. Last Summer, FTBs capitulated IMHO (supported by 'thin' anecdotal evidence!) and with a HPC ongoing they will sit on their hands. I no longer hope I'm right, I know we're right!!
19. doomwatch said...
You can't polish a turd Alistair.
Give it up.
Instead of trying in vain to save an over burdened housing market, why don't Labour
focus on the things that will get votes; limiting immigration & exposing Eaton Dave
for the chinless no mark he clearly is.
20. Refusetobuy said...
The problem is that the government cannot just save British banks. The BoE can't control who the offers are made to.
If they offer to swap gilts for CDO's etc. the American banks are just going to hoover them all up.
21. letthemfall said...
doomwatch:
It all depends on whether the fundamentals are sound.
May your polished turds be as sound as a camel's, as they say in Egypt.
22. tyrellcorporation said...
Doomwatch why do you (like most of the media) love having a stab at David Cameron because he went to Eton? What do you think about Tony Blair and Gordon Brown both going to extremely expensive private schools in their run-up to power? I personally do not begrudge someone being in power if they happened to have the best education going - you could argue they are best placed to do the job. And before you ask, I went to a comprehensive in Somerset.
I'm just trying to work out whether you are on some kind of 1970's class war?
23. hpwatcher said...
@ doomwatch exposing Eaton Dave for the chinless no mark he clearly is.
What makes you so sure there is something to expose, more than say, Gordon Brown? Now, GB really could do with some ''exposing''...or ''unmasking'' for the imposter that he is.
So are you a big fan of Labour then? ;-)
24. mark wadsworth said...
@ TC, comment 21. Agreed on Tony Bliar, but The Goblin King, as much as I hate him, went to a perfectly ornery grammar school in Scotland, didn't he?
25. doomwatch said...
tyrell, are you suggesting that, regardless of ability, as long as you're parents can afford an Eton education,
that somehow validates an individuals access to the country's power structure ? Fook me, what next, a return to votes for
land owners only.
FYI I still blame Maggie.
26. tyrellcorporation said...
Mark, you may well be right there, my mistake. I did notice he was fast-tracked though and attended a Grammar school which, unless I'm mistaken, Labour are trying desperately to abolish (GB massively benefited from an education system he now deems unsuitable as it promotes elitism through selection - you couldn't make this stuff up). The gist of my comment remains though about why do people even mention where he (DC) was educated (the BBC do this ad-nauseam). No-one seems to worry or comment on the fact that most political leaders and high-end politicians seem to be lawyers. This I find is far more sinister.
27. tyrellcorporation said...
No I wasn't suggesting that at all. My comment was aimed at trying to understand why you think that if you are educated at Eton this should in some way make you not fit for office? It smacks of class war envy TBH.
I guess you blame Maggie for destroying the Unions that were destroying the UK - so do I, what a gal!
28. letthemfall said...
We're all egalitarian here, but I think doomwatch believes that going to Eton confers an advantage, an advantage not necessarily matched by the Etonian's political, economic and leadership acumen. Cyril Connolly wrote about the distinct advantages of an Eton education, pointing out that ministers often came from College (the scholarships), while Pop (the Eton oligarchy, of whom Boris Johnson was a member - don't know about Cameron) produced members of the cabinet. I'd say Eton confers a considerable advantage; and belonging to a certain milieu, not to say having wealth, helps you get there. Not invariably, but the general point is true.
Good job we live in a meritocracy, eh.
29. tyrellcorporation said...
'Good job we live in a meritocracy, eh.' ...If only.
http://www.guardian.co.uk/society/2005/apr/25/socialexclusion.accesstouniversity
Social mobility in the UK has dramatically widened under Labour and the abolition of Grammar schools and educational streaming will only make things worse.
Sorry for the deviation from HPC everyone, I'll shut up now!
30. Jackas said...
Back on topic:
Mervyn said today:
"There needs to be some adjustment to the housing market," he added: "This scheme is designed not to impede that."
Keep it up Merv, you know you're doing the right thing!
31. harold said...
At some point the penny must drop: the banks run the politicians - why else would the politicians be prepared to sacrifice the public purse?
Now where was it Blair p*ssed off to after he finished as PM, ah yes...
32. doomwatch said...
Tyrell, you seem to have started an argument with yourself, and lost.
Maggie out, Maggie out, Maggie out, Maggie out, Maggie out.
33. tyrellcorporation said...
Um, she's been out for quite a while now Doomster.
relic.
34. mark said...
maybe he should concentrate on his eyebrows...lol
35. plato said...
orwell@15
Sorry been away......... Yes, I feel that pumping these huge sums of money into debt (on promises) is doing nothing but causing the prices of real commodities and real business to increase. (It's being wasted) Higher taxation will also be a factor. Cost of living is moving rapidly upwards. I can see no other way but for interest rates to go upwards once the clearer picture emerges and is accepted. Also we have had our downward curve of low rates long enough, which is universally being blamed for the present situation.
36. geed said...
Didn't GB study history?
37. wiltshire said...
The thing that gets me is are there really enough mugs out there at the moment who are prepared to pile into the housing market en masse and keep it going? Even if the banks actually poured the money into cheap-ish mortgages. Of course there will be a few still prepared to buy but sentiment must have turned by now and that 'it'll be worth a hundred grand more in 12 months - guaranteed' exuberance won't be returning for years.