Sunday, Apr 20, 2008
Why ?
Sunday Times: Alistair Darling plans unprecedented £50bn bank bailout
Alistair Darling is preparing to announce an unprecedented £50bn bailout of Britain's banking system in an effort to save the housing market from collapse.
Posted by doomwatch @ 03:06 PM (2240 views) Add Comment
38 Comments
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1. mken said...
Why indeed? (When were you last rescued from debt?)
The real news in the corridors must be very bad indeed.
Either AD really believes the banks and his own "food poison" theory
or more cynically it is an agreed attempt for certain sectors
(e.g. banking friends and a number of MPs with large property portfolios)
to prop-up the market until they have sold on all of their exposure.
It can't be true, it's just food poison. The Chinese will lend again soon.
2. enuii said...
Love the simpleton food poisoning analogy; 'The Chancellor compared the situation to a dose of food poisoning, where “some aspects of it just have to work their way through the system”.
This is bigger than a bad kebab on a friday night, most people cannot afford any extra debt as they are all loaned out, a bit like being full after the kebab and not having enough money for the taxi home.
Even Vince Cable is slightly off the plot in response but still came up with the obvious danger of the glubberment proposal '“However, we cannot have a situation where the banks are able to privatise their profits and nationalise their losses.'
Anyway the quickest way to deal with a bad kebab is either to throw up in the gutter or artex the porcelain, relieving the symptoms with non-prescription medicines merely delays the inevitable. Let the market bottom itself, quickly then we can all have a fresh start and politicians can acknowledge the errors of theirs sociopathic ways otherwise this whole episode will repeat itself next friday.
Anyway the sun has just breached the drizzly gloom so I'm off out.
3. waitingfor hpc said...
moving all my money out the pound .. been a bit slow but intend not to come back. i have decided that i vote with my money.
4. quiet guy said...
I'd love to be able to listen in to Brown and Darling discussing the banking system liquidity problems. Do they really believe that they can puff some life back into the market before the election? The banks need to recapitalise or risk being exposed as insolvent so they will not be interested in loaning enough money to kick off another boom. Perhaps a deal will be reached: the banks will relax their lending standards for a few months before the election in return for even more liquidity from the BoE in exchange for more dodgy assets.
Can we allow another bank to fail?
5. Bearback said...
£50bn equates to £4.5K per mortgaged home in the UK.
6. Vinrouge said...
Botulism is food poisoning, it often kills though.
7. plato said...
I just can't see this working. I can't see the Banks gaining enough confidence to repeat this mortgage crisis all over again. They will more likely use the bailout to shore up defences like the US Banks and protect their own positions. Any voluntary rate cuts will be obscure and cosmetic while the majority of those in debt are more likely to see increases.
People just cannot afford it, straight and simple. This is a crazy remedy caused by greedy actions based on debt culture.
8. Cheekie Charlie said...
If this is the last chance saloon then this money should be slowly released over the next 2 -3 years! What if this doesn't work? Well it doesn't matter what they do it will not save the housing market now the sheeple are moving in the over direction.
9. Tipping Point said...
All banks should be made to pass on the rate cut, but only to properties with a loan to value ratio of 70%. If Darling and Brown think banks should lend at risk free rates to properties where the LTV is greater then they clearly have no understanding about banking.
We all know the score. There's a 30%+ adjustment required. This can be done in one of two ways. Inflation or a HPC. If Darling or Brown use the inflation tool then the will go down in history as the two politicians responsible for turning Britain into the poor man of Europe. Its not a legacy anyone in their right mind wants to carry. I therefore believe that at least a 20% reduction in house prices has to occur and the banks know it as well.
PS At the end of the day, none of today's politicians have Thatcher or Blair's charisma and the two rival parties are fronted by silver spoon educated chattering class populists, so a Brown victory at the next election is still the most likely outcome, even if 5 million households end up in negative equity and unemployment jumps to 2 million.
10. it_is_going_with_a_bang said...
Analogy my ar5e.
The only thing he's trying to do is save his and Flash Gordon's ar5e. It is simple for anyone to see.
All the prudence talk goes straight out the window when saving your own behind.
They can delay the inevitable as much as they like. Infact I would suggest that is all they are doing and they know it. They are probably hoping to keep things afloat until the next election, hoping to get an extra 5 years. Then they will probably give in to it all and hope they have 5 years to recover things for the next election.
It's all about savings votes and saving political skins. Has nothing whatsoever to do with 'helping' people.
Corrrupt and selfish. Thats what the Labour party has turned into. Power hungry dictators.
11. whiteknight said...
terminal cancer a better analogy?
12. Micasasucasa said...
Does this mean the pound will rally again tomorrow?
13. eyeoftheweasel said...
I think the Labour plan is do everything possible just to delay the inevitable crash long enough to get through the next election, let the Conservatives win and hope the public blame them for the problems that Brown and Darling have caused. Maybe that's why Osbourne wanted this hair-brained scheme implemented sooner; more chance of the crash happening before the election.
14. magnifico said...
I liked the analogy. Shame that he identifies the "poison" solely in bad debt and not in his and his government's tacit encouragement of enormous property portfolios being created in the past few years ( most of which on 100% mortgages).
He should have followed the analogy completely by recognising the the gastro-intestinal intoxication needs to fully run its course until action in the shape of medicinal remedies can take place.
15. japanese uncle said...
Daniel come to Downing 11, yea Daniel indeed!
16. justwatching said...
How about spending the 50 billion on social housing instead. Somewhere for people to live. Low rents, but the taxpayer gets a return on their investments.
Banks, well, the best analogy I can think of is the Monty Python sketch in a restaurant. We are all gorged on debt, 'Just a waffer thin mint please'
17. Adrian Allen said...
All they are in fact doing is fuelling inflation.
The interest rate cuts, the bailouts, etc.. are their to protect and help the financials, not the individuals who they don't care about. They use the housing market as an excuse to justify their actions.
18. Ok Enough Now said...
only my wages are left in Sterling now. the majority is in RMB with the rest in Euro and Swiss. this months wages are going to buy £5k of gold coins. i've tried my hardest to be sensible with my cash by saving and been a good boy by paying my taxes and waiting until i could afford a property before i bought one. it turns out that this the stupid option. my money is now going out of the country and i am going to do everything i can to avoid paying tax from now on.
19. renting2 said...
I await the bail out of those who can't afford their council tax bills, those who can't afford to eat, those that can't afford dental treatment with no NHS dentists around, those who have a choice between heat or cook. The latest tax change (10p/20p rates) has also not helped.
You cannot tell me that GB did not know these changes would adversely affect the worst off. It was almost like it was engineered so as to put more people in hock to the government and banks.
Overall non-affordability of modern life is what is triggering not only a HPC but a UKPC.
20. Sortofsilver said...
Privatise Profits and Nationalise Debt. This is the perfect business model. Any bad debts are passed on to the tax payers and profits all kept with the shareholders.
I had to laugh at one comment of darlings earlier. He said "We....i mean the Bank of England will.........." Thats the independent BOE.
21. Fed Up said...
What the government is doing should be illegal. Full Stop.
22. paul said...
I don't really get how Alistair Darling and Brown can have the legal authority to use the Bank of England like a cashpoint in this way.
23. planning4acrash said...
Is it treasonous? Is it against the constitution to debase the currency like this?
24. doomwatch said...
Sounds more like Polonium to me. Oops mustn't upset the Russians, they now are only ones keeping up prices in London.
25. Tom101 said...
Time to leave.
26. This comment has been removed as it was found to be in breach of our Blog Policies.
27. plato said...
planning4acrash said....: "Is it treasonous? Is it against the constitution to debase the currency like this?"
Historically > Yes ------------- Presently > What time's Eastenders on?
28. mark wadsworth said...
That £50 billion seems like a reasonable estimate.
IF Goblin King and Badger had any sense (big 'IF') then they would tell the banks to do a five-for-one rights issue or else go to the wall. NB - the market capitalisation of the big UK banks at the moment is about £250 billion.
More detailed workings here.
That's that fixed. Next problem, please.
29. Ijjhall said...
I think there is an overreaction going on here. First a loan is not neccesarily a bail out and even St Vincent Cable (so admired on this site) has called for some intervention.. Who really believes on this site that the taxpayer will get clobbered here in the final reckoning ? If so, Brown is finished. If the BOE had bought this toxic stuff I could understand the venom. (of course it might yet) Second, does anyone here seriously believe that the banks are going to do anything else but rebuild there balance sheets with this new capital ? They will not go back to the lending needed to support current prices so the game is up in any event.
30. denzil said...
Why is this needed? Brown said no more "boom & bust". Ah yes, I forgot it's all the problem of those pesky Bankers, and Brown knew nothing of the debt mountain that was building up through high-risk, whoops I meant subprime lending practises.
31. This comment has been removed as it was found to be in breach of our Blog Policies.
32. Fallin-offa-kliff said...
Last one out turn the lights off please, and don't forget to put the cat out too!
33. shipbuilder said...
Of course, unless we see dropping mortgage rates as a direct result of this (i.e. passing the money straight to the market as intended) then we'll know it's been passed straight to the bottom line and the shareholders.
Seeing as this is public money and that spending of public money is subject to supposedly controls and audits, perhaps the banks should be compelled to tell the public exactly where these funds are going?
34. shipbuilder said...
Anyone know if there is an online petition to demand the publication of the use of these public funds?
35. Soothsayer said...
Agree with shipbuilder, we should do an online petition !!
36. it_is_going_with_a_bang said...
“He’s not holding a pistol to their heads but he wants to do everything he can to help people get on the property ladder,” a Treasury source said."
Absolute bollo**s.
The best way to help people get on the property ladder is let the property get cheaper on its own and leave it alone. Stop using it a vote bargaining tool.
Stop using it to prop up New Labour. Stop the outright corruption in the property market/industry.
Direct more taxation at BTL to make it less attractive. Prevent largescale BTL from affecting property prices.
People don't want cheaper loans they want cheaper homes. Dam idiot.
You don't do it by propping up the property market with Taxpayers money. Many of whom are FTB's that want to get on the property ladder.
37. wiltshire said...
I still can't see people dashing to sign up for huge mortgages for a few years after the negative press housing has had these past few weeks. Surely there can't be enough idiots left who would get a mortgage now with prices as rocky as they are. Secondly, if the market were to stabilise I think many would see that as their cue to cash in while the going is good and you'd end up with a flood of properties which in turn would lead to lowering prices.
I honestly cannot see how those incompetants in Labour will be capable of saving the housing market or the wider economy now after 10 years of allowing it to run out of control.
38. planning4acrash said...
Shipbuilder. I guess that you can set one up on the government's web(s)hite. If you do, post it and I'll sign.
http://petitions.pm.gov.uk/
More to the point. Use your right to lodge an application via freedom of information act. Get your local MP involved in the info request, post the result here.
http://www.whatdotheyknow.com/?gclid=CIel5dHt6pICFQOc1AodIzMZ4w
(I got this from google, maybe some other?)
- At the end of the day, don't ask others to do things for you, go fire yourself up and feed it back to us. We all need to take responsibility in these dark but interesting times.