Thursday, Jun 17, 2010
Brace for the backlash - I don't recall this in the election manifestos
Guardian: Mansion House speech: George Osborne to hand Bank of England new powers
"The Bank of England is to be handed sweeping new powers over Britain's financial system, including responsibility to avoid another housing bubble. As part of a major shakeup of financial regulation in the UK, George Osborne will announce tonight that the Bank of England is to be given a new "toolkit" to help it manage risk in the UK economy. This will include the power to restrict bank lending, potentially allowing the Bank to block consumers from borrowing too much. The chancellor of the exchequer, in his first Mansion House speech, is expected to argue that this will help avoid another unsustainable housing boom." :D
Posted by quiet guy @ 01:04 AM (1069 views) Add Comment
10 Comments
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1. little professor said...
quiet guy - Brace for the backlash - I don't recall this in the election manifestos
Really? It was one of their major policies. Here's the section in the Tory election manifesto:
Reform regulation of the system.
We will create a strong and powerful Bank of England with authority to ensure financial stability.
We will make the Bank of England responsible for macro-prudential regulation, judging and controlling risks to the financial system as a whole.
We will create a powerful new Financial Policy Committee within the Bank, working alongside the Monetary Policy Committee, which will monitor systemic risks, operate new macro-prudential regulatory tools and execute the special resolution regime for failing banks.
We will empower the Bank of England to impose higher capital requirements on high risk activities, such as large-scale proprietary trading carried out by banks that also take retail deposits.
The failed Financial Services Authority will be abolished.
2. Javelin said...
This is my first time commenting on this site. As background I'm an IT contractor who looked after Credit Derivatives for a number of years at the one very large bank which didn't lose much money during the crunch. I now look after risk reporting in the middle office - call it a promotion if you want to.
Just wanted to say I predict house prices pretty much during the past 5 years. I now expect them to fall considerably. The reason is this. The BofE have been told to manage house prices as part of their inflationary targets. House prices are 10% off their peak and we are coming out of recession. House prices will be allowed to deflate until first time buyers can afford a 25% deposit. I also think banks will be told privately that if they don't limit lending to three times income they will have a figure imposed on them.
So my prediction is that house prices will fall back below the current long term average from the present levels by about 25%.
I think the BofE intends to manage house prices down for the next few years rather than destabalise the economy.
3. tenyearstogetmymoneyback said...
The predictions were correct
http://news.bbc.co.uk/1/hi/business/10326027.stm
Watching the news last night the only surprise was that Osbourne had gone ahead with all the proposed changes.
They also interviewed Alistair Darling who came out with the tired "There was nothing wrong with the system.
The problems were all the Americans fault".
Makes you wonder if the American attitude to BP is due to the faact that certain British have been trying to blame all the worlds
financial problems on the Americans for the last three years.
4. paul said...
Wonder if it will ever resemble Gordon Brown's infamous Mansion House Speech in June 2007, containing some crackers such as:
... London has enjoyed one of its most successful years ever, for which I congratulate all of you here on your leadership skills and entrepreneurship ...
Financial services are now 7 per cent of our economy. Financial and business services as much as 10 per cent. A larger share of our economy than they are in any other major economy, contributing £19 billion of net exports to our balance of payments, a success all the more remarkable because while New York and Tokyo rely for business on their large domestic base, London's international ranking is founded on a large and expanding global market.
London now the home and natural location for 20 per cent of all cross border lending: 30 per cent of world foreign exchange turnover, 40 per cent of over-the-counter derivatives trades, 70 per cent of the global secondary bond market.
London is the favoured location of choice for more international business than ever before, the world's leading banking centre with more foreign banks than in any other city, the location for 200 foreign law firms - including home for six of the worlds largest ten
I kid you not
5. quiet guy said...
@Little Professor
I was thinking specifically of yesterday's pledge to muzzle house price inflation. Of course you could argue that is implicit in the pledge to regulate the finncial system but it would have been political poison to say it our loud before voting day. My personal day-to-day experience is that most people like high house prices, nomatter what the consequences because most people I know own property.
6. simon68 said...
ANOTHER LABOUR’S MESS
MP's Blame Greedy NHS GP's for Expense Claims Abuse
Politics / UK Politics
May 18, 2009 - 04:14 AM
By: Nadeem_Walayat
Humiliated MP's across all parties that have been drowned out by the public chorus of outrage and indignation of the abuse of the MP expenses system have repeatedly stated how MP pay has failed to keep pace with that of NHS GP's which is one of the key reasons as to why they have resorted to what amounts to legalised theft from the electorate.
MP - NHS GP Pay Comparison
When Labour came to power in 1997 average MP pay was £43,722 against average NHS GP pay of £44,000, so both were inline with one another at that time. However as the above graph clearly illustrates in 2003 something started to go seriously wrong with GP Pay which took off into the stratosphere as GP's decided to award themselves pay hikes of more than 30% per annum at tax payers expense that has lifted average GP pay to £126,000 per annum against £64,000 for MP's.
How could this happen, unfortunately this was as a consequence of the now infamous GP contracts where basically devious greedy GP's hoodwinked gullible incompetent Labour government health ministers into signing upto contracts which were meant to deliver greater value for money for the tax payer but were designed to do the opposite and resulted in GP's pay doubling whilst at the same time cutting back on hours worked. This was not only a total fiasco for the nations health and finances but also ignited jealousy amongst MP's that directly led to the adoption of the policy of claiming expenses to the maximum so as to fill the ever widening gap between MP's and NHS GP's, as MP's could NOT get away with awarding themselves pay hikes of 30% per annum without losing their seats at the next general election in response to voter outcry, therefore across the board systematic abuse of expenses started to take place which basically means real average MP pay is currently approx £98,000 per annum.
http://img99.imageshack.us/img99/9383/nhs.gif
7. Rental John said...
My concern on the break-up (if that is the right word.....more like 're-arranging the deck chairs on the Titanic') of the FSA...is what will happen about current investigations, ongoing claims, and miss-selling of endownment policies. I still have endownmant policies runn ing until 2013....which I expect will give me far less than I put in......should have put the money under my mattress all these years - or gone to spec-savers before I read the small print!
8. simon68 said...
Health is the second largest slice of the expenditures pie.
http://img697.imageshack.us/img697/4963/health.gif
9. stillthinking said...
The government must feel that they have contained a crash in nominal values by devaluing sterling, with a future plan to hold rates down by reductions in state sector employment, tax increases etc. otherwise why would the gov. be talking about preventing another housing bubble... while we are still in one!
"allowing the Bank to block consumers from borrowing too much" actually means, blocking the consumers from borrowing -in addition to- existing government borrowing, normally achieved by raising rates, in this case by simply passing laws to stop consumer debt.
So the use of higher interest rates to contain inflation and stop borrowing, quite reasonable you might think, look to be replaced by taxation (to keep RPI inflation down by making us all too poor to bid), state sector unemployment (to keep wage inflation down), and stop credit expansion of the money supply by making loans illegal...
Whats to stop me from borrowing sterling abroad if I see something that can be profitably debt funded? Nothing.
This ignores the fact that we either grow government debt amidst a background of possibly stepping in with 300 billion when thebanks can't roll over funding in a couple of years, to soak up the private sector surpluses or start deflating. And if we start deflating, where will be the case to deny the population the ability to borrow at low rates at any amount they want!?
Nobody votes for the BoE, looks like a case of central government taking powers away from the people to me (although admittedly the voters aren't capable of looking after themselves democracy wise).
10. mr g said...
I would have thought this was a popular move with certain HPC'ers after the way they've criticised the banks for their lax lending policies.