Tuesday, Jul 29, 2008
Bailing out the banks - why?
BBC: Treasury's mortgage rescue plan
The Treasury may give a taxpayer guarantee to billions of pounds of bonds known as mortgage-backed securities created by banks out of high quality mortgages, in a radical attempt to revive Britain's rapidly shrinking mortgage market.
Officials from the Treasury are examining such an ambitious and controversial scheme in response to a dire assessment of the outlook for mortgage finance to be published at 10am today by Sir James Crosby.
This would be pretty controversial, as it would be seen as taxpayers underwriting a huge slug of the mortgage market.
Some would argue that our entire mortgage industry would be nationalised, although that would probably be overstating it.
Posted by little professor @ 08:41 AM (1330 views) Add Comment
16 Comments
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1. Ijjhall said...
When Alistair Darling announced the original £50 billion liquidity scheme earlier in the year it was spun as helping out the mortgage industry/lending faithfully reported by mainstream news as such. In reality as Robert Peston among others reported within hours of that launch the reality was it was to try and shore up the banks balance sheets to prevent another NR from happening....When the small print of this latest reported scheme is examined (if it ever sees the light of day) there will be so many caveats and conditions attached that it won't amount to much other than allowing New Labour to claim they are 'on the side of hard working families' with maximum BBC led publicity in support. The country is skint. The idea that the taxpayer in the current climate can rescue the current housing market is plain mad...
2. whiteknight said...
Please correct me if I am wrong however Sir James Crosby has a recent CV that runs something like this?
From wiki: "Crosby joined the Halifax bank in 1994 as Managing Director of Halifax Life.[2] Five years later, he became the chief executive of Halifax plc, and in 2001 Crosby became the first chief executive of the newly-formed HBOS Group after overseeing the merger between Halifax plc and the Bank of Scotland.[3] Crosby left this position in July 2006,[4] leaving HBOS as the fourth largest bank in the United Kingdom in terms of market capitalisation."
Then went on to do a stint as deputy chairman of the FSA.
So 2001 - 2006 HBOS
Then the FSA...
3. whiteknight said...
It's one rule for you. Whatever they want the rules to be for them.
4. waitingfor hpc said...
i can not see this happening. more hot air form labour. it would be insanity to pour more money after bad. this scheme may be a good idea when housing has bottomed out and is affordable on a normal scale, and only if the market had not freed up on their own by then.
5. waitingfor hpc said...
comments on bbc site seen to echo those of most on here - let prices fall back to normal levels and stop meddling.
6. Eyes_wide_open said...
So much for the "Free Market".
It's only a "Free Market" when it goes up it seems, when it's coming down it's the Tax Payers problem.
This Country is becoming more of a joke as each day passes.
7. Luckyjim said...
The trouble is the Conservatives and Lib Dems are both likely to support this. Without any opposition this is likely to go through.
There will not be a revolt from the public - most people see house price inlation as a good thing and will support tax payers money being used to prop up the market.
8. letthemfall said...
Good old Vince Cable is once again the lone voice (on Today this morning) pointing out the absurdity of taking such action. Of course the senior bankers who moot these ideas do so as wise heads offering their advice for the stability of the economy to the advantage of all. What many of us suspect is they are trying to organise the Govt to maintain the conditions which most benefit themselves. The longer this goes on the more blatant appears the whole securitisation business as a device, not for creating wealth or oiling finance, but for transferring enormous wealth from the many to the (not so) few that we now call the super-rich. How else can one explain the disparity of wealth that has grown in recent years? I don't believe for a minute that their work has created the extra money that has found it's way into their pockets.
9. it_is_going_with_a_bang said...
As scheme to encourage bad quality lending? Because that is what it is. People who can afford to pay back a loan are still getting them.
10. uncle tom said...
The City were hoping for much more meat on this.
Check out Barclays share price...
11. d'oh said...
The British are a crop that are periodically harvested by the elite. The power only ever seems to swings back towards the average citizen after a serious crop failure, such as the plague or a world war. I wonder which one it will be this time.
As iigwab @ 9 said, this is a scheme to encourage bad quality lending underwritten by the taxpayer, with the profits going into private hands. I despair. I truly despair. This is no less than government support of highway robbery.
12. Fingerbob69 said...
@10:30am Barclays shares trading at 310p down 28.25p or -8.34%
To be fair all the bank shares are taking a collective bath today... it's about morgage lending levels rather than the creation of British suedo Fannie/Fredie type institution.
13. little professor said...
Capitalism is dead. Or dying, at least. Collapsed under the overpowering weight of its own greed, and now there is a wave of nationalization of banks and mortgage debts.
14. Ijjhall said...
Just read the Crosby report in full and it is more muted that the headlines suggest. For example, Crosby suggests when the report is finalised he might even argue for no government intervention at all ''on the grounds that such intervention would create more problems than it would solve".
The report concludes: "The persistence of current market conditions could have significant implications for the economy. Even less desirable, however, would be interventions that distorted these markets and prolonged any recovery process''.
15. Davip said...
Whether or not this is likely to happen, that it is being mooted at all is madness / sheer idiocy on the part of Govt. and should be stamped on fast (the Banks interest in this is plain).
The REASON the mortgage market is shrinking is becuase mortgage providers are no longer keen to lend 100s of thousands of pounds to people who will probably never pay it back.
The SOLUTION is to let house prices fall to normalcy: If the average house could still be bought for £70k (rather than £270k), you would only need a £7k deposit (10%) and the banks would be happy to lend you the other £63k.
This is serious leave the country sh1t if it comes to pass...
16. Boss said...
do you really think this will happen?
it wouldn't suprise me the government are desperate to put life back into the housing market even if it props it up for another few years to get them through the next elecetion and then f*#s up in an even bigger way with a massive cost to th tax payer. I'm sure they would stoop this low.