2. str 2007 said...

Yes that's right, Gordon Brown who let house prices get out of control.

It seems they were just as bad if not worse in the US with regard to the people they were lending money to.

However here in the UK, it was quite apparent that huge loans were being made and that proof of income wasn't being asked for. Also before that started it was also quite apparent that the advent of Interest Only mortgages had come about, mainly in the BTL sector.

This practice of borrowing money and not repaying the capital was clearly over inflating the housing market.

Gordon Brown could easily have introduced legislation to ban this practice and kept prices under control.

Further to this when the 5hit did hit the fan, instead of dropping interest rates through the floor Gordon Brown could have introduced the facility for all mortgage borrowers to drop to interest only payments for say a 3-5 year period if they felt it necessary for their own personal circumstances. But keeping the legislation that fresh borrowing must be on a repayment basis for at least the 1st 18 months of the mortgage before they qualified for a repayment holiday.

That we savers would still have retained some income (for spending) and we would still have the tool of lower interst rates at our disposal.

So yes IMO Brown was to blame. He had 13 years as Chancellor and then PM, the perfect position to have done something about it. Afterall the words ''I won't let house prices get out of control'' came from his lips.

That man has cost the country and it's population and future generations an awful lot of money and grief.

4. dbc reed said...

Of course Gordon Brown said "I will not allow house prices to get out of control and put at risk the sustainability of the recovery"during the Budget speech of 1997.But the American housing market collapsed independently and all the CDO's incorporating sub-prime mortgaes became worthless when foreclosures started and interbank lending froze shafting Northern Rock which was unusually dependent on wholesale money.Are you seriously suggesting Gordon Brown collapsed the American housing market? The word bigot comes to mind.

6. d'oh said...

dbc reed - Just because the Americans jumped off a cliff, it doesn't mean the UK had to follow...at least not without a parachute...but we did. Certainly, the UK could not prevent the US lowering interest rates to 1% after the internet boom collapsed, so there was always going to be a global boom and concomitant recession, but instead of preparing the UK economy for this, Gordon rode the wave and spent, spent, spent, putting the UK in a very weak position when the shtf. As another poster mentioned above, he also could have helped rein in the housing market rather than throwing fuel onto the fire (e.g. key worker part ownership initiatives etc.). Remember also it was Labour who tasked the BoE to control inflation in the CPI, rather than RPI, effectively making house price rises invisible to the BoE's remit. This, I believe was deliberate.

It has also been argued that it was banking practices in the city of London that "forced" the repeal of the Glass-Steagall act in the US a decade ago. So, it is even possible to argue (though I do not agree) that America was Gordon's fault to some small degree.

Gordon may not be responsible for the recession per se; If I was to finger anyone, it would be Alan Greenspan for lowering rates as much as he did in the early part of this century. Gordon is, however, completely and utterly responsible for the appaling state of the UK economy as it entered the recession.

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