Tuesday, Nov 25, 2008
'Normal' - definition required
Telegraph: Outright nationalisation of banks 'may be necessary'
Gordon Brown has injected £37billion into Lloyds-TSB, HBOS and RBS, and extended billions more in support to other banks.
Yet business groups say banks are still refusing to lend to some firms and demanding punitive rates of interest from existing borrowers.
Restoring bank lending to "normal" levels is "the single most pressing challenge to domestic economic policy", Mr King said.
Posted by gardeniadotnet @ 10:15 PM (597 views) Add Comment
13 Comments
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1. it_is_going_with_a_bang said...
Is not Mr King rather missing the point?
Normal lending involves lending money responsibly and effectively for both the borrower AND the lender.
The last 5 years at least has been anything but 'normal' - it has been excess, greed and totally abnormal.
I guess normal is Mr King's eyes means lending money to anyone who asks for it.
2. enuii said...
RISK - The businesses that are having trouble are the ones with RISKY business models and after years of careless lending that ramped asset prices to ridiculous levels sanity has returned. The government is trying desperately to generate scapegoats to hang the blame on. The BBC news at 10 tonight was particularly cringeworthy especially the ridiculous bit about banks being potentially forced to lend money.
3. alan said...
"Normal" levels of lending 15 months ago were influenced by Paragon, Bradford & Bingley, Northern Rock and Alliance & Leicester trying to out-do each other in offering big mortgages to anyone who asked for one.
Do we want a repeat of that?
Well, I don't and I know a few others on HPC disliked the 6x salary offers and 125% mortgages. But....
There are a growing number of worried Labour politicians that think their re-election could be jeopardised if lots of houses suddenly go under water...you know...negative equity.
Therefore, they want to restore house prices to their recent high levels before all those nasty reposessions take place. If a house has equity, it can be sold on. However, with negative equity its a repossession - and thats what they want to avoid.
Not for Britain's sake, not for the sake of the house owners, but so they can get re-elected.
Therefore, they will do their best to get money flowing again through the remaining part-nationalised banks and building societies.
4. gardeniadotnet said...
3. alan said.. so they can get re-elected...
The time will come when national and global interest will HAVE to take precedence over political games.
Soon, I think.
5. planning4acrash said...
If government nationalize to avoid bank bankruptcy. Government will go bankrupt. The Soviet Union only sustained this via food imports from the free world. Socialism doesn't feed people, so it falls, or the free humanity DIES OF STARVATION AND TYRANNY.
6. drewster said...
Nationalisation worked in Sweden in the 1990s. It's not the end of the world. Read more here: New York Times: How Sweden Solved Its Bank Crisis
7. phdinbubbles said...
@alan
I tend to think the government are desperate to get house prices to bounce (or even just stop falling for a short while) and hold an election spring/summer next year. Haven't done any in-depth reseach on this but I suspect there is a link between governments making tax-cuts and calling elections soon afterwards (seem to remember Ken Clarke doing such things) - hence the VAT cut (and hence forcing interest rate cuts). Do these measures have the long term economic performance of the Country at heart or are they to do with short-term political opportunity? I've never seen an elephant bounce though.
8. shipbuilder said...
This seems pretty simple - if anyone is to be commanded to do anything, then EAs should be commanded to screw down house prices. Then the banks will start lending. They seem to be deluded that there is a massive tide of people wanting to borrow if only they could - rubbish.
9. phdinbubbles said...
Quite. The government trying to maintain the illusion (delusion) that there is a demand for and a shortage of housing to keep the prices up. The banks know prices still have a long way to fall and won't drop the high deposits until prices are cheaper. Surely even EAs know this by now and would prefer to do some business rather than going bust. The only deluded fool of the gang left is the government.
10. phdinbubbles said...
...and the Daily Express and......
11. I Want A House said...
I knew it... Socialism will eventually lead to communism... All Hail Comrade Brown.
12. Eternal Sceptic said...
the single most pressing challenge to domestic economic policy is crash gordon and his cohort doing everything to make life rosy for a snap election. Onceupon a time in days of yore we had statesmen- now we have career politicians all conniving for another term in the public trough.
13. Urban Bear said...
The government should do what some American commentators have suggested: force the bailed out banks to value their total assets at market rates, then buy them at market value less the money already give to them, then fire all the negligent executives and other useless people, without any Golden parachutes, close the bonus pool to all employees who have not recently made profits for the bank!