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Realistbear

Merv ( Bo E) To "throw Lenders A Lifeline" (print Money)

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http://www.telegraph.co.uk/money/main.jhtm...21/cnboe121.xml

BoE set to throw lenders a lifeline

By Philip Baldrick, Banking Editor

Last Updated: 12:32am GMT 21/03/2008

The Bank of England is considering extensive new measures to ease the effect of the credit crunch on UK lenders.
Comment: Bank's patronising attitude to consumers is insulting
The latest news and analysis from the banking and financial services sector
The Bank is expected to accept a wider range of collateral and inject more money into the markets
Governor Mervyn King is expected to throw the banks a funding lifeline by widening the collateral the central bank will accept and by injecting more medium-term money into the markets. The moves, expected shortly, are likely to take some of the pressure off inter-bank lending rates and help cut the cost of mortgages.
Britain's lenders have been calling for the measures since the money markets dried up in August last year. Royal Bank of Scotland, indicating that progress was made at a key meeting yesterday bet­ween the chief executives of Britain's five biggest banks and Mr King, called the talks "very reassuring"..../
Mr King yesterday demonstrated his commitment to funding by renewing the
Bank's £5bn offer of three-day money
until the monthly financing period ends in April. Separately, the
ECB offered €15bn (£11.7bn) to see banks through the Easter weekend.
Brian Hilliard, an economist at Société Générale, said: "The issue is how long [the Bank] can go on tolerating these distortions in the money market. "
:o

Gordon to Merv: You dish it out and I will get the printing presses running 24/7. I will not allow house prices to drop.

Edited by Realistbear

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The problem is the UK has very little else to fall back on, therefore Merv as weak and as inconsistent as ever will bend to any peer pressure that is forced upon him.

They still need to recognise that a correction is required in order to move forward.

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Bailout.

Where were the meetings with banks warning them that they were loaning out dangerous sums of money on insanely loose terms (terms which could not and would not continue ad infinitum).

And now those insanely loose terms are required to prop the pig. The whole economy has been reduced to a one trick economic pony.

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Bailout.

Where were the meetings with banks warning them that they were loaning out dangerous sums of money on insanely loose terms (terms which could not and would not continue ad infinitum).

And now those insanely loose terms are required to prop the pig. The whole economy has been reduced to a one trick economic pony.

That was the plan though, take away the Bank of England's powers and setup the FSA. Principle based regulation. Rogue traders running around, mortgage fraud, and bank runs.

http://www.fsa.gov.uk/Pages/About/Aims/index.shtml

http://www.fsa.gov.uk/Pages/About/Aims/Pri...les/index.shtml

Edited by Ash4781

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It is a sad sad day when the realisation is that the banks are there as commercial businesses and the Bank of England is about to protect these businesses. The BoE should be serving the interests of the public. Not some muppet bankers who got it all wrong.

Do you think these banks will help out the UK economy in 3 years time when the deficit is even larger? Nope they will move to a more profitable financial center.

Adios England you just sold out.

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It is a sad sad day when the realisation is that the banks are there as commercial businesses and the Bank of England is about to protect these businesses. The BoE should be serving the interests of the public. Not some muppet bankers who got it all wrong.

Do you think these banks will help out the UK economy in 3 years time when the deficit is even larger? Nope they will move to a more profitable financial center.

Adios England you just sold out.

The CEO's of the banks should now hand back their massive pay cheques to the taxpayer as they were fraudulently obtained.

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It is a sad sad day when the realisation is that the banks are there as commercial businesses and the Bank of England is about to protect these businesses. The BoE should be serving the interests of the public. Not some muppet bankers who got it all wrong.

Do you think these banks will help out the UK economy in 3 years time when the deficit is even larger? Nope they will move to a more profitable financial center.

Adios England you just sold out.

Brown's vision for a miraculous Britain included a hands-off approach to the City and its dealings. The FSA were kept in the background and turned a blind eye to the policies and actions that allowed Brown's bubble to develop. Irrational exuberance in house prices was nurtured by Brown as it was a way to give people "wealth" that could be turned into spending power through MEW to keep jobs and growth going.

It all went wrong, of course. Merv at first said no to bailouts arguing that he would not support policies that amounted to a "moral hazard." If the banks engaged in shady and irresponsible deals then they will have to pay the price for it. However, Merv was forced to change his tune because the size of the problem threatens to take the entire economy down.

Brown will follow Ben's every move and bailout anyone who is in trouble--even the parasitic banks such as NR.

Brown will then see that his lack of fiscal oversight and regulation was unwise. The playground was allowed to run amock too long without a monitor. Business will flee the City because of the lack of trust and confusion that will be the aftermath of Gordon's bursting housing bubble. The money came here because of the "freer" environment to make money miraculously and now we are about to pay the price for such folly.

How much longer before the finger points at the chief architect of it all? One, Gordon Hamish Brown.

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The UK however can't just print money without dropping the pound and quickly pushing up import prices. In the US there is a much larger industrial base to replace imports. There is no way out for Merv - the money men don't give a toss about the UK economy. They just want to shift their problems onto the rest of us via inflation. Banks aren't ever just private businesses - when they fail they require bailout. They should face tough regulation with a regulator that is fit for purpose. That isn't the FSA.

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Public general enquiries enquiries@bankofengland.co.uk

Public statistical enquiries See Public statistical and Interactive Database enquiries

Journalist/Media enquiries press@bankofengland.co.uk

Access problems and feedback webmaster@bankofengland.co.uk

(for CCBS event applications and password enquiries contact

ccbsinfo@bankofengland.co.uk)

Fraudulent Emails, Identity Theft and Financial Fraud

The BoE's new remit!

:D

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Strange how they are meeting before a 3 day bank holiday (3 days right?)

I'm withdrawing my cash from my current account tonight just in case they are planning something else oppsoed to a lifeline.

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Gordon to Merv: You dish it out and I will get the printing presses running 24/7. I will not allow house prices to drop.

Realistbear,

There are some interesting things happening going on inside the bank of england, and while agreeing with your point that public policy will be directed towards keeping house prices high, Mervyn does not have the printing prices running at a particularly rapid speed right now. There is, however, a significant bail-out underway, and all the action is on the asset side of the Bank of England's balance sheet.

I've uploaded the most recent consolidated BoE balance sheet. On the ssets side, we can easily see the Northern Rock bail out. It is found in the Other assets category. That number has exploded since mid-2006. Based on the changes in this item, it would seem reasonable to conclude that the Bank of England has pumped in about ₤32 billion since the bank sank into insolvency.

The other interesting lines are sterling long term reverse repos, and fine tuning reverse repos. Both are positive, therefore, Here is where the Bank of England is accumulating assets through by providing liquidity. In other words, the bank has taken assets from commercial banks and given out "something". What that "something" is not immediately obvious.

As you can see from the balance sheet, cash has not increased significantly.. If you look on the liabilities side; sterling notes has actually fallen ₤4 billion since the beginning of the year.

The liquidity support for the banks is coming from the asset side of the balance sheet and it seems to be coming from two items: a) the ways and means account, which I think comprises of government securities; and B) short term market operations with BoE counterparties. This latter component sounds like it might government paper taken in by the central bank as part of normal open market operations. In the past, the BoE would have accepted government securities when the banks needed cash. Now, the banks are getting them back through reserve repos. However, I am far from confident in these conclusions and would be happy to be corrected.

One thing is clear, however. The Bank of England's operations have not expanded high powered money. These liquidity operations are very similar to those currently being undertaken by the Federal Reserve. Rather than providing cash, the central bank is providing high quality assets in return for weaker ones.

As you can see, a far proportion of the Bank's assets are now tied up with bailing out the UK banking system. I estimate that around ₤54 billion out of total assets of ₤97 billion are now being used to prop up the banking system.

One other thing, although the BoE isn't pushing out a lot of money, broad money (M4) is still growing rapidly. As of February, it had increased over 12 percent year-on-year. This measure of monetary growth is largely driven by banking lending. It is on my to-do list, but I would like to see why it is still growing so fast. Without actually looking at the monthly data, I reckon it could be that much of the monetary growth happened in the before August last year and that the credit crunch might be pushing down on monetary growth. I have uploaded a chart for M4 that illustrates the recent rapid growth

Alice

Visit My Website

balance_sheet_of_the_bank_o.gif

UK_m4_monetary_growth.gif

post-11224-1206094761_thumb.png

post-11224-1206095017_thumb.png

Edited by Alice Cook

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That's good work there Alice Cook.

Did you know that the accounts of the Federal Reserve (a privately owned bank) have never been audited?

Edited by nmarks

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One other thing, although the BoE isn't pushing out a lot of money, broad money (M4) is still growing rapidly. As of February, it had increased over 12 percent year-on-year. This measure of monetary growth is largely driven by banking lending. It is on my to-do list, but I would like to see why it is still growing so fast. Without actually looking at the monthly data, I reckon it could be that much of the monetary growth happened in the before August last year and that the credit crunch might be pushing down on monetary growth. I have uploaded a chart for M4 that illustrates the recent rapid growth

The recent rapid growth in M4 I still find absolutely baffling. I am almost certain that something subtle is going on.

If we interpret M4 as "Banknotes & Bank balances" (I know it's a simplification, but - bear with me - this is the popular perception) then the only explanation for M4 expansion is printing new currency (which I don't see happening on a scale to explain a 12% rise in broad money... everyone would be walking around with bulging wallets... which means that we should consider bank loans. Well - I could easily imagine an explosion in credit card debt... because that can be well hidden... but credit card debt doesn't expand M4... Mortgages and personal loans do... but the adverts for personal loans have all but disappeared - and my anecdotal experience with mortgage lenders is that they've done a huge U-turn in recent months... from doing everything they can to force a mortgage onto their customers... to, now, dismissively suggesting that it's a no-go... no matter how great your income or how large your deposit might be or for what great deal on a property. The Bank of England statistics bear this out... so it's not just that my haircut makes me look feckless - or a local effect.

I suspect that there must be something different happening now. From 1995->2007 (approx) the graphs of M4 roughly correlated with the house price indices... which is exactly what I expect. When a house is bought, someone's bank account balance suddenly explodes... so M4 will almost certainly expand. But why would M4 expand if houses are not being sold? On here, there has been an argument that this was a technicality about "bringing SIVs back on balance sheet... but, on reflection - while I entertained the idea at the time - it doesn't wash - IMHO.

So... I'm left with no reason, from the man-in-the-street perspective that retail borrowing explains M4 growth. I wonder if the opposite of borrowing is happening? I'll try to explain. Back in October 2007, I anticipated that the stock market would fall - substantially... and, while I've no stock market investments, I talked to those close to me - and a "bond" was surrendered. The bond had been invested for 7 years and was "mixed" - a bit of Western stocks and shares; A bit of Japanese stocks and Shares; A bit of emerging markets and a bit of cash; a bit of "housing" (and I never did work out quite what that was). The returns over 7 years had roughly tracked the FTSE - including a nominal loss back in 2001... and had returned about 4% on average over 7 years - after fees. It was surrendered - and now, a sum which was considered "money" previously - but likely didn't contribute to M4 - now does. There are rumours here, there and everywhere about people who became nervous in late 2007 and dumped investments they thought risky. Add to this that the "baby boomers" (who the population pyramid proves to be relevant) are approaching retirement - and it is common practice to move pension investments from speculative and into low-risk investments in the final years. I've heard from many individuals that they've "assigned their pensions to cash" too... as well as having chatted informally to a couple of managers of private company pensions - and the common comment seems to be that they've moved "exclusively" into "bonds" - though I was never sure if they meant CDOs or Gilts... :ph34r: Anyhow... my point is this: Is it possible that the expansion of M4 might be owning to the "flight to quality"? Might the borrowing be the borrowing of investment banks buying up the "cheap" equities and bonds that everyone else is dumping?

As M4 expands, I think it is helpful to have an idea whose bank accounts are expanding... and, maybe, this explains it? The bank accounts that are expanding are those of people (or pension funds) who are selling stocks and bonds... and the borrowers are investment banks? I'd love to be able to prove this - though I've no idea where to start... there's lots of anecdotal evidence - for example the rumours that commercial property funds may close for redemptions... but I'd only be convinced by something more concrete. Maybe the balance sheet of a large PLC pension company? Maybe hedge funds are involved - not sure there... not sure how to find out one way or the other on that score.

Edited by A.steve

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This situation is like when someone in drowning and someone jumps in to save them, they have to be very careful

that the person drowning in their panic doesn't grab hold of the lifesaver and take them down with them.

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Cheers RB. I hadn't realised Broon's initials were GHB. Isn't that the date-rape drug?

They aren't - GB's full name is James Gordon Brown. There's been a sharp fall to the downside in the factual content of RB's posts.

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I don’t think Merv will just lay down in the way that some think. I think we could be overplaying the prospects of a mass UK bail out.

I’ve just spent a few minutes on the Northern Rock site, and I’ve got to say it’s just like going back in time 10 years, 95%ltv, 3.7x income at 7% (this is the government subsidised bank, who we feared would prop up the market - but they aren‘t)

there’s no doubt that Merv will have agreed to support the banks - but I bet he wanted a pound of flesh in return.

Only time will tell.

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I don’t think Merv will just lay down in the way that some think. I think we could be overplaying the prospects of a mass UK bail out.

I’ve just spent a few minutes on the Northern Rock site, and I’ve got to say it’s just like going back in time 10 years, 95%ltv, 3.7x income at 7% (this is the government subsidised bank, who we feared would prop up the market - but they aren‘t)

there’s no doubt that Merv will have agreed to support the banks - but I bet he wanted a pound of flesh in return.

Only time will tell.

I'm with you on this one. I see Merv in the role of headmaster and the CEOs of the big 5 banks as errant schoolboys. "I am not going to call your parents and expel you - but, in return, you are now going to things my way."

What could they have said to him? I imagine it would along the lines of 'Look headmaster, we're all in the brown stuff. The reputation of the school is at stake. We know we've done wrong. We promise to behave better but please, please, please don't let us go bankrupt. It will hurt the people more than it will hurt us.'

And, of course, smiling down from a big poster on the wall - who other than our former iron chancellor. 'We don't want anything to rock the boat of stability do we Mervyn?'

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I don’t think Merv will just lay down in the way that some think. I think we could be overplaying the prospects of a mass UK bail out.

I’ve just spent a few minutes on the Northern Rock site, and I’ve got to say it’s just like going back in time 10 years, 95%ltv, 3.7x income at 7% (this is the government subsidised bank, who we feared would prop up the market - but they aren‘t)

there’s no doubt that Merv will have agreed to support the banks - but I bet he wanted a pound of flesh in return.

Only time will tell.

Mervyn instils in me the most confidence of any public figure... but... the rest I find terrifying... Gordon Brown, Alistair Darling, Ian McFall, Dawn Primarolo, Tessa Jowell et. al. - are these characters lazy clinical retards - or are they fundamentally corrupt? Either way - they're not the sort I want to make decisions of any importance.

I'm also keeping an eye on Northern Rock - as a good indicator of whom is in control... and it seems to me that - on nationalisation - at least some common sense has been taken to the board room. This I see as being a positive step.

I'm also encouraged by the increased public interest in finance - I'm sure that dubious activity has been hidden by virtue of the fact that, for years, it was considered a topic too dull to be discussed.

I'd like to think the banks are being forced to pay for their intransigences - the only thing that leaves me feeling nervous still on that score is M4. I'd love to see a good analysis - that would, likely, help put my mind at ease on the subject.

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  • 294 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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