Mortgage Guarantee Scheme, £380 Billion?!?!?!?!

[HAMISH_MCTAVISH]

MORTGAGE GUARANTEE SCHEME What is it? The Government will guarantee sales of bundled up mortgages and other loans in the hope of kick-starting the lending markets.

This acts on a set of proposals published by former Halifax Bank of Scotland chief Sir James Crosby, under which he said the state should underwrite up to £100billion of so-called 'mortgage backed securities'.

The Government will also extend a guarantee of £250billion of bank debt.

Will it work? With banks approving the fewest new mortgages for a decade, this is seen as a step towards reviving the loans market.

But analysts warn it will only work if the fees charged are not too punitive. And in itself it does not actually force banks to lend more.

NATIONALISED BANKS TO LEND MORE What is it? Northern Rock will stop 'actively encouraging' its customers to quit the bank when their current mortgage deals expire.

In addition, the Government will swap up to £5billion of 'preference shares' in RBS for ordinary shares that pay a less punitive rate. In return, RBS has pledged to bolster lending to firms and individuals.

The twin moves are an attempt to plug the yawning gap in Britain's consumer loans market.

Will it work? Officials have for weeks admitted that the existing policy on Northern Rock was bizarre. It was part of the original nationalisation deal drawn up last year and was aimed at ensuring the bank repaid its Bank of England loan as soon as possible.

But this approach no longer makes sense given the collapse of lending by other banks.

So now the Government wants to force the two banks it controls to be more active and loan up to £30billion.

http://www.dailymail.co.uk/news/article-11...-explained.html

So, first details/speculation now emerging as to hard numbers. This one from the daily mail, but others to follow.

According to the Mail, the key stats are....

Crosby report to be implemented. £100bln of govt guaranteed additional mortgage lending funding through mortgage securitised products.

£250 billion of new bank guarantees.

£30 Billion of new mortgage lending from NR/RBS.

Total = £380 Billion.

Thoughts?

Didn't someone say recently on HPC that the total lending at peak was only £6bln a month? If £380 bln in additional/new/guranteed funds become available, how can this not impact pricing? If even $100bln in ADDITIONAL funding became available over current levels, how can this not impact the market, if it's on top of current lending? Surely that would be enough to revert to 2007 lending levels for 18 months plus?

(with the usual caveat that people want to borrow, which I think they do, and that the rates will be attractive, which I think they will be if Nr/rbs are competing and forcing down rates, so please leave those two arguments for another thread, as they've been done to death)

BTW, the last option is pretty much the "spoiled ballot" category, just for the random anti-poll crowd. Unless you can also post an objective reason why you think the markets and government will mandate that it is so. (ie, not just, "because it should be, because I said so") I'd actually love to hear a proper reasoned objective argument as to "why it will be different this time"...... I've heard a few as to why people think it should, but thats not the same thing at all.

Edited January 20, 2009 by HAMISH_MCTAVISH

[50%deposit]

I voted: No. Prices will drop like a rock and never go back up beyond 3x average income, no matter what - because im like that.

[Injin]

Nominally, prices are probably going to go to the moon.

So is bread.

Tyvm, Gordon and the bankers.

[BXLONDONMAN]

So, first details/speculation now emerging as to hard numbers. This one from the daily mail, but others to follow.

According to the Mail, the key stats are....

Crosby report to be implemented. £100bln of govt guaranteed additional mortgage lending funding through mortgage securitised products.

£250 billion of new bank guarantees.

£30 Billion of new mortgage lending from NR/RBS.

Total = £380 Billion.

Thoughts?

Didn't someone say recently on HPC that the total lending at peak was only £6bln a month? If £380 bln in additional/new/guranteed funds become available, how can this not impact pricing? If even $100bln in ADDITIONAL funding became available over current levels, how can this not impact the market, if it's on top of current lending? Surely that would be enough to revert to 2007 lending levels for 18 months plus?

(with the usual caveat that people want to borrow, which I think they do, and that the rates will be attractive, which I think they will be if Nr/rbs are competing and forcing down rates, so please leave those two arguments for another thread, as they've been done to death)

i reckon their just making all this up,,, QE that's how their going to support all these banking bail out's.that will lead to the pound going to bust !!!

Edited January 20, 2009 by BXLONDONMAN

[Macbeth]

This is excellent news!

I can now do a quick google search for P60 and Payslips online and bag meself some of them in a false name.

I can then get official government backing on my "loan" for a pile of bricks and mortar shite that Gordon Brown is promising to underwrite personally (just with taxpayers cash, none of whom voted the **** in).

Roll on LIAR LOANS! They are now fully backed by the state!

The insanity of the whole thing - I just don't get it! Exasperated!

[BXLONDONMAN]

This is excellent news!

I can now do a quick google search for P60 and Payslips online and bag meself some of them in a false name.

I can then get official government backing on my "loan" for a pile of bricks and mortar shite that Gordon Brown is promising to underwrite personally (just with taxpayers cash, none of whom voted the **** in).

Roll on LIAR LOANS! They are now fully backed by the state!

The insanity of the whole thing - I just don't get it! Exasperated!

bump !!!

yes a goverment for the liar loans ind... :angry:

[HAMISH_MCTAVISH]

I voted: No. Prices will drop like a rock and never go back up beyond 3x average income, no matter what - because im like that.

So a spoiled ballot then......

[yaakov]

So, first details/speculation now emerging as to hard numbers. This one from the daily mail, but others to follow.

According to the Mail, the key stats are....

Crosby report to be implemented. £100bln of govt guaranteed additional mortgage lending funding through mortgage securitised products.

£250 billion of new bank guarantees.

£30 Billion of new mortgage lending from NR/RBS.

Total = £380 Billion.

Thoughts?

Didn't someone say recently on HPC that the total lending at peak was only £6bln a month? If £380 bln in additional/new/guranteed funds become available, how can this not impact pricing? If even $100bln in ADDITIONAL funding became available over current levels, how can this not impact the market, if it's on top of current lending? Surely that would be enough to revert to 2007 lending levels for 18 months plus?

(with the usual caveat that people want to borrow, which I think they do, and that the rates will be attractive, which I think they will be if Nr/rbs are competing and forcing down rates, so please leave those two arguments for another thread, as they've been done to death)

BTW, the last option is pretty much the "spoiled ballot" category, just for the random anti-poll crowd. Unless you can also post an objective reason why you think the markets and government will mandate that it is so. (ie, not just, "because it should be, because I said so") I'd actually love to hear a proper reasoned objective argument as to "why it will be different this time"...... I've heard a few as to why people think it should, but thats not the same thing at all.

another poll with a bunch of loaded questions then.

[HAMISH_MCTAVISH]

another poll with a bunch of loaded questions then.

Feel free to argue why....

[dface]

This is excellent news!

I can now do a quick google search for P60 and Payslips online and bag meself some of them in a false name.

I can then get official government backing on my "loan" for a pile of bricks and mortar shite that Gordon Brown is promising to underwrite personally (just with taxpayers cash, none of whom voted the **** in).

Roll on LIAR LOANS! They are now fully backed by the state!

The insanity of the whole thing - I just don't get it! Exasperated!

lol

[Giordano Bruno]

I think the options in the survey are too detailed or there are too few options. If the options were wider, i.e. allowed more leeway, then there might be enough to suit every voter.

Anyway, trying to patch up the bubble, or pump more gas into it, might slow the bursting process down a bit, but it will only drag out the process for a longer time.

[Bloo Loo]

This is excellent news!

I can now do a quick google search for P60 and Payslips online and bag meself some of them in a false name.

I can then get official government backing on my "loan" for a pile of bricks and mortar shite that Gordon Brown is promising to underwrite personally (just with taxpayers cash, none of whom voted the **** in).

Roll on LIAR LOANS! They are now fully backed by the state!

The insanity of the whole thing - I just don't get it! Exasperated!

No, they are proposing to guarantee investors money on the purchase of a bundle of mortgages.

Not you. Not your fraud.

[HAMISH_MCTAVISH]

No, they are proposing to guarantee investors money on the purchase of a bundle of mortgages.

Not you. Not your fraud.

Indeed.

[Long Way Down]

BTW, the last option is pretty much the "spoiled ballot" category, just for the random anti-poll crowd. Unless you can also post an objective reason why you think the markets and government will mandate that it is so. (ie, not just, "because it should be, because I said so") I'd actually love to hear a proper reasoned objective argument as to "why it will be different this time"...... I've heard a few as to why people think it should, but thats not the same thing at all.

Democracy, dontcha just love it!

[terryturbojr]

another poll with a bunch of loaded questions then.

Aye, there's never seemingly an option that reflects my view.

[Moo]

No, they are proposing to guarantee investors money on the purchase of a bundle of mortgages.

Exactly. It's like taking the dead family pet to the taxidermists, then putting it in the lounge while the missus stands behind the curtains going "woof, woof" in an attempt to convince the kids that Mr. Wuffles is still in fine fettle.

[HAMISH_MCTAVISH]

Democracy, dontcha just love it!

Quite, but the point remains the same. I really would like to hear a valid argument for why people believe it really will be different this time. Even I can come up with some pretty good reasons for why it should..... But that doesn't in any way mean that it will. The poll is posted to guage peoples thoughts about a very specific issue, ie, will that quantity of liquidity have an impact, and if so by how much.

[Selling up]

Prices will drop like a rock and the scheme will have no effect either way on the speed of recovery.

One day in several years, prices will begin to rise again.

[terryturbojr]

I think it will slow the deleveraging, which I don't necessarily think is a bad thing as at the moment things are moving too fast for people to adjust. Ultimately it's a futile gesture though (assuming they really think it will make things better, rather than them knowing all it will do is slow the inevitable) as the bubble must burst without the shadow banking system to fund it and that system no longer exists.

[HAMISH_MCTAVISH]

I think it will slow the deleveraging, which I don't necessarily think is a bad thing as at the moment things are moving too fast for people to adjust. Ultimately it's a futile gesture though (assuming they really think it will make things better, rather than them knowing all it will do is slow the inevitable) as the bubble must burst without the shadow banking system to fund it and that system no longer exists.

Right, but you do understand that this initiative is designed to re-start the "shadow banking system", if by that you mean securitised bank funding instruments?

[terryturbojr]

Of course. I think it's too late though and now the collapse has started trying to replace it (there is nothing to "re-start") will not work, there's too much downward momentum now. This would have been successful (if you consider the ridiculous amounts of leverage that were in the system 2 years back a success) if they'd have supported that system 18 months ago when it started to fail. Alas at the time they didn't have a clue about how the world works and so they let it collapse. Now they've understood it's importance and want it back again it's too late.

Edited January 20, 2009 by terryturbojr

[cht]

Right, but you do understand that this initiative is designed to re-start the "shadow banking system", if by that you mean securitised bank funding instruments?

This scheme is designed to save Gordon's arris. It will fail.

[leveller]

No. Prices will drop like a rock and not go back up beyond 3x average income for approx next ten / twenty years, due to recession / depression, tighter regulation / legislation, change of government, higher taxes to pay national debt.

Then, when it's all forgotten and inflated away over the next decade or so, there will be another generation of bullocks to enslave with debt with the promise of free money from a house.

[ccc]

Quite, but the point remains the same. I really would like to hear a valid argument for why people believe it really will be different this time. Even I can come up with some pretty good reasons for why it should..... But that doesn't in any way mean that it will. The poll is posted to guage peoples thoughts about a very specific issue, ie, will that quantity of liquidity have an impact, and if so by how much.

Hamish you really are confused. You fail to understand the basics.

You will find that the argument of nearly everyone on this site is it WILL NOT be different this time. Every single other credit/asset/housing bubble in history has ended up in a huge bust. No matter what anyone tried to do to prevent it.

The important question is this:

Do you really think Broon and Darling are the men to break this centuries old cycle ? You really think they will manage to do the seemingly impossible ? Something nobody in history has managed to do ?

They may somehow manage to get 'credit flowing again' , although it seems to be flowing just now as far as I can see. However if they do somehow manage to get to 2007 levels again, and I fail to see just how they could, then UKPLC will be essentially bankrupt and everything we have will collapse in value.

Personally I go for Broon and Darling doing what everyone before them has done - FAILING.

[HAMISH_MCTAVISH]

Of course. I think it's too late though and now the collapse has started trying to replace it (there is nothing to "re-start") will not work, there's too much downward momentum now. This would have been successful (if you consider the ridiculous amounts of leverage that were in the system 2 years back a success) if they'd have supported that system 18 months ago when it started to fail. Alas at the time they didn't have a clue about how the world works and so they let it collapse. Now they've understood it's importance and want it back again it's too late.

Perhaps. My old Uni flatmate is now an economist for a large MNC. Had a beer with him the other night. Asked him his perspective on global liquidity with regards to the future direction of assets and commodoties. He gave me a long technical answer, of which I understood very little. When asked for the short answer, he stated that there is currently a giant ocean of money out there sloshing around looking for a home, and earning it's owners nothing. If it isn't put to work soon, it will start to evaporate through inflation, and that has never in the history of finance been allowed to happen without a fight.

Theres also a lot of very empty lake beds and sea floors, sitting around getting parched, with owners willing to pay well to fill them. These thngs always find equilibrium in the end. The only thing stopping it at the moment is risk, ie, lack of government guarantee, but there will come a point, and soon, where the losses incurred by doing nothing with the money exceed the losses incurred by risking it. Once money starts flowing though, and others see government guaranteed returns, it will be almost impossible to stop it. His perspective was that there will always be another bubble. The boom/bust cycle is a fundamental part of human nature, and almost impossible to regulate against effectively.

It might be different this time, but I suspect it won't.