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Treasury Select Committee - New Parliament

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Today sees the first meetings of the House of Commons Treasury Select Committee of this new parliament.

Four members remain from the TSC in the previous parliament:

Andrew Tyrie (Cons) Chairman
Steve Baker (Cons)
Mark Garnier (Cons)
John Mann (Lab)

There are seven new members:

Bill Esterson (Lab)
Helen Goodman (Lab)
Stephen Hammond (Cons)
George Kerevan (SNP)
Chris Philp (Cons)
Jacob Rees-Mogg (Cons)
Wes Streeting (Lab)

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Declared property related interests of members are as follows:

Bill Esterson, Labour, Sefton Central

Land and property: (i) value over £100,000 (ii) rental income over £10,000 p.a.
Two flats in Brompton, Kent (i) and (ii)
House in Chatham (i) and (ii)

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Chris Philp, Conservative, Croydon South

Shareholdings: over 15% of issued share capital

Pluto Capital Management LLP; property finance and investment
Millgap Ltd; consulting, advisory and investment
Pluto Partners LLP; property finance and investment
Pluto Silverstone Co Invest LLP; property finance and investment
Pluto Monza Co Invest LLP; property finance and investment
Pluto Development Partners LLP; property finance and investment
Explore Montenegro Ltd; travel and tourism

Other shareholdings: over 15% of issued share capital
BP Balkans Pluto (Cyprus) ; property development and investment in E Europe

---------------

Jacob Rees-Mogg, Conservative, North East Somerset

Land and property: (i) value over £100,000 (ii) rental income over £10,000 p.a.
Farmhouse, land and related buildings in Somerset (i) and (ii)
Residential property in London (i) and (ii)

Shareholdings: over 15% of issued share capital
Somerset Capital Management LLP; investment management
Saliston Ltd, holding company

[saliston Ltd is company no. 03114488. It has the following SIC codes:
68 - Real estate activities (682: Renting and operating of own leased real estate)
82 - Office administrative, office support and other business support activities]

---------------

The first session is about to start:

Subject: Bank of England May 2015 Inflation Report

Witnesses: Dr Mark Carney, Governor, Sir Jon Cunliffe, Deputy Governor, Financial Stability, Professor David Miles, and Ian McCafferty, members, Monetary Policy Committee, Bank of England

http://parliamentlive.tv/Event/Index/661283da-7d27-43ed-8601-57efa76e5234

Edited by FreeTrader

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Second session.

Subject: Bank of England July 2015 Financial Stability Report

Witnesses: Dr Mark Carney, Governor, Sir Jon Cunliffe, Deputy Governor, Financial Stability, Richard Sharp, and Dr Donald Kohn, external members, Financial Policy Committee, Bank of England

Tyrie starting with housing.

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Philps says he fully supports FPC having macro pru powers over BTL market.

Yes i thought that was interesting especially his concerns about unequal comparisons between btl finance repayments and owner occupier. If he is the face of modern conservatism then I am fairly comfortable

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Carney's basic position is that the FPC is not pre-judging action if they get macropru powers - they're waiting for the outcome of the Bank's analysis of the sector.

Hammond moves questioning on to cyber risk.

Maybe we'll return to BTL later. I'd like to hear whether Carney has any immediate reaction to budget changes,

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Yes i thought that was interesting especially his concerns about unequal comparisons between btl finance repayments and owner occupier. If he is the face of modern conservatism then I am fairly comfortable

And Carney noting that wider macro impact more important than any paricular creditworthiness/equity cushion characteristics.

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Carney argues that debt to income ratio for households will likely rise even if house prices are flat, as older owners with no debt are replaced by younger owners who take on debt to purchase.

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Tyrie highlighting OBR forecast of 34.1% rise in HPs over next five years.

Thank the universe the living wage is set to be £9 by 2020. Otherwise people really would be struggling to house themselves.

Loving the prospect of a 3 bed semi in a half-decent spot in the SE being £496k.

Let's just hope that, as forecasts can only be created from what went before, this forecast is way off due to the unseen.

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Goodman: Are national policy levers too crude for the housing market? Durham is totally different from London.

Carney: It may be much cheaper to buy in Durham, but it's local income levels that count, so general macro tools can be appropriate.

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Streeting: How risky is London housing market?

Carney: UK financial institutions have limited risk in prime central London. Not a material threat to financial stability.

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Streeting: MMR and FPC-driven interest rate test having unintended consequences. Causing remortgage trap.

Carney: cautions over cheapness of 2-year fixes. Unlikely to persist, so while unfortunate that some people can't take advantage of them, FPC wouldn't want to change affordability tests.

Edited by FreeTrader

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Thank the universe the living wage is set to be £9 by 2020. Otherwise people really would be struggling to house themselves.

Isn't the BoE watching wage inflation like a 'hawk', ready to hike rates up as soon as it gathers momentum?

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Carney doesn't believe participants in asset markets have fully priced liquidity risk. Been comforted by central bank policy. Normalisation of monetary policy will increase the liquidity premium.

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Streeting: MMR and FPC-driven interest rate test having unintended consequences. Causing remortgage trap.

Carney: cautions over cheapness of 2-year fixes. Unlikely to persist, so while unfortunate that some people can't take advantage of them, FPC wouldn't want to change affordability tests.

While I'm happy with the gist of the response, I think the correct (albeit not in a political sense) response is along these lines: While it is unfortunate for these borrowers that they are unable to access lower rates of interest, if they fall into the category of "too high risk to lend this amount to" by today's lending standards, then from a financial stability point of view, it is fortunate that they are paying a higher rate of interest as this mitigates the risk to the lenders balance sheet in the event of a default.

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Baker pushes Carney hard on stress test. Criticises single scenario test and asks why multiple tests not being made.

Carney defends by saying FPC are currently developing new stress test which assumes slowdown in Asia that leads to deflationary shock.

Baker quotes Andy Haldane's quip that CBs had blown the biggest bond bubble in history. Where's the stress test for that?

Carney: How many years ago did Andy say that? Hasn't happened has it?

Baker: Yes, but we haven't seen QE unwound yet. Interest rates still on the floor.

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Carney: How many years ago did Andy say that? Hasn't happened has it?

Baker: Yes, but we haven't seen QE unwound yet. Interest rates still on the floor.

I'm only going on your text here as I haven't been watching, but little jabs like this, and some others I have read about, suggest to me that Carney is a man who doesn't like his rock star genius central banker image to be challenged. Not saying it will happen, but the ingredients are there for a big ego clash at some point in the future, potentially with some pretty major consequences.

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Mann: Should we be worried about China?

Carney: China slowing from very fast rates of growth. Some considerable financial stability risks playing out in China. UK economic exposure is less than many other economies, but some UK institutions have high financial exposure so it's something we're monitoring closely.

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Same old John Mann. What he's doing on the TSC is a complete mystery.

Keeping his toe in for the idiots.

But they have got that Rees-Mogg to take up some slack.

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I'm only going on your text here as I haven't been watching, but little jabs like this, and some others I have read about, suggest to me that Carney is a man who doesn't like his rock star genius central banker image to be challenged. Not saying it will happen, but the ingredients are there for a big ego clash at some point in the future, potentially with some pretty major consequences.

Mervyn King was much the same whenever he was pushed. They don't like people who they view as amateurs questioning their professional expertise.

Baker did touch a nerve though, but I suspect that was because of the Haldane reference. Remember that Haldane and Carney haven't seen eye-to-eye in the past.

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