Saturday, Apr 19, 2008
Level headed editorial comment (dated 18th April)
FT: Banks ask for help
Whatever his troubles, Mr Brown can have little desire to go down in history as the author of what might well prove the biggest misselling scandal in UK history.
The government should take no action to sustain either the housing market or any particular level of lending. But it does make sense to help make the market for existing asset-backed securities less illiquid. A proposed scheme to swap such securities for government bonds needs to be brought to early fruition, provided the credit risk remains with their current holders.
Yet the government should also tell bankers it believes in the market economy. Prices, it should explain, can go down as well as up, just as terms of lending can tighten as well as ease. It has no interest in rigging the housing market. It would probably fail .
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