Friday, September 12, 2008

Mervyn King refuses the mortgage lenders

Bank of England cannot save mortgage market, warns Mervyn King

"The Governor provided the market with the first details of the structure of its much-anticipated new funding system, but warned that the Bank was powerless to rescue the mortgage market." ... "He said central banks should not be regarded as a "magical piggy bank" for mortgage lenders, and that guaranteeing the mortgage market would have profound economic and fiscal consequences for decades."

Posted by quiet guy @ 01:02 AM (1565 views)
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7 thoughts on “Mervyn King refuses the mortgage lenders

  • Well indeed, however it would not be the first time that the governor has said one thing publically but done the complete opposite policy-wise. A soundbite statement for the press to take to the hoi polloi, but a backhanded reassurance for their chums in finance.

    The Special Liquidity Scheme has basically made the BoE into a magical piggy bank for mortgage lenders already anyway. Will we ever get to see the extent to which that facility has been gouged by UK banks? Unlikely, even though unregulated lending from the public purse to private companies is technically illegal, and is specifically described under the Freedom Of Information Act 2000 as of considerable public interest (and therefore not subject to exemptions).

    Mervyn’s actions have so often proven to be at odds with his words, especially when it comes to supporting the UK housing bubble, that I’ll only believe the BoE won’t be lending cheaply to prop-up mortgage when I see him letting some of the banks take responsibility for their risk-laden gambles, and going to the wall.

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  • We can moan and cuss all we like about liquidity injections and bail-outs for billionaires – do you think they care ? King loves to state the bleeding obvious yet his words increasingly lack any creditably – not that they really need to.

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  • Don’t forget when the SLS was originally put into place in April many VIs and others were predicting it would loosen up lending and some on this site were appalled claiming it was a reckless bail out to re inflate the bubble (re read the April blogs for examples) – yet lending is down 71 per cent YOY so that clearly hasn’t happened as King predicted at the time. The facility and now its successor is clearly there to prevent another NR not kick start a return to 1999…personally I am relieved that Mervyn King (for all his past faults) is presently there as some kind of restraint, as left to their own devices Brown and Darling will throw literally anything at the the market to get it going.

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  • “CREDIBILITY” :O)

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  • @Ijjhall

    You must appreciate though that the SLS is designed to transfer some liability to the taxpayer – if it wasn’t then there would be no need for it because the market would stomach the risk – the market didn’t want the risk so the BoE had to eat it as lender of last resort.

    It should also be remembered that HBOS is technically bankrupt – their liabilities outstrip their assets at present and if they were lets say .. a car manufacturer in Solihull, they’d have been left to go to the wall by now. The only thing keeping them on life support (and still issuing fresh loans) is the SLS.

    So to the extent that it has allowed HBOS off the hook from its past recklessness is true, because it has not been allowed to fail.

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  • Fair enough Paul though allowing a bank like HBOS go to the wall – I will take your word on their parlous financial state – seems to be pushing the boat out if that is criteria for criticisng the BOE. Personally I am not after the financial meltdown that would surely follow if what your appearing to advocate happens, though I would be very concerned if the SLS was being used to prop up x6 salary 125 per cent mortgages etc…the point is that the lending figures/details suggest this is not happening and the crash is coming along nicely…

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