Tuesday, September 9, 2008

The great mortgage robbery

The great mortgage bail-out

"Pressure is already growing for the US's unprecedented rescue of the mortgage market to be replicated in the UK, despite some concerns about its long-term effectiveness." Only days after the US nationalises Fannie Mae and Freddie Mac, our bankers and politicians are thinking about doing the same with our tax money.

Posted by quiet guy @ 10:46 PM (796 views)
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9 thoughts on “The great mortgage robbery

  • It’s a very interesting problem for the governments. On the one hand they simply cannot allow their friends the bankers to suffer too greatly. On the other hand, helping the bankers means also helping those amongst the public who are financially reckless whilst shafting the financially prudent. Additionally, doing what the US have done bascially means a government has no other strategy than trying to hose ANY amount of money at the problem and hope, just pray to god, that it all comes right in time for November (USA) or sometime in 2010, probably (UK).

    I think we’re all drinking in the last chance saloon now. The Tories are on the verge of a 1997 style landslide at the next election, without having to try too hard. Labour are going to get increasingly desperate to try ANY measure that might just be the miracle that’ll change their fortunes. The money will be hosed across the UK, the bankers and their shareholders will be laughing all the way to the ahh, bank, the miracle won’t occur and this country will end up all but bankrupt.

    I can’t believe there is no-one in the government prepared to stand up and make it clear that hosing money at this problem is not going to make it go away. Have they no principles? Silly question. Can they not see that irrespective of the measures the US take they’re not having much impact. God knows what dominoes will go when Lehman Bros (or whichever bank is next) goes under but it’s simply not going to be possible for useless, spendthrift, war-mongering governments like the ones on either side of the Atlantic to stop what is occurring. The sooner they stop meddling the sooner we can take the pain and move on.

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  • tyrellcorporation says:

    Apart from the war-mongering bit, I fully agree…

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  • Lehman is going tits-up as we speak 23:46 09.09.08. The Fannie/Fredie rescue at the weekend was an act of last resort. There is nothing… NOTHING… for the Uk government to emulate here except NOT doing exactly the same. The US is enacting a slo-mo financial train crash ffs.

    Confusus says ‘pity the man who lives in intresting times’ …therefore pity us all, we’re all freakin’ doomed!

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  • TC, I think “war-mongering” is appropriate but what I was really getting at (but was too lazy to write at this time of night, so I’m ending up writing it anyway!) was the fact both countries are embroiled in wars which they could really do without at this point in economic history.

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  • They say that if you owe the bank some money you have problem; but if you owe the bank a lot of money the bank has a problem. It’s just this thinking, I feel, that has gotten us into this state. I personally think the powers that be are very well aware of the current state of the market and how we got here, and that we have all been cynically manipulated into this state, albeit according to our own wishes and the weaknesses inherent in the current political system.

    On the one hand the common man on the street doesn’t have enough education about economics to truly understand. On the other; businesses have been chasing ‘the money’. Which we can hardly blame them for. Over the last few decades the UK has restructured its economy in order to profit on the spending of credit. Now we no longer have excess credit available to us; those businesses that rely on a ‘spending culture’ will start to fail, to the detriment of us all. Which exacerbates the problem further, as equity disappears, and unemployment rises.

    What happens in the future will be a balance of two extremes;

    The first is we print loads of money; those businesses that continue to service the spend culture continue. Inflation rises. People get more in debt, but inflation wipes out their debts. The pound becomes worthless. Gradually, more of our debt is serviced by overseas banks. Eventually they own our water, power, banking establishments etc. In a few decades we might find that the UK is a financially captive nation. Some of the best minds are educated and live here, but they will be profiting foreign interests. The British Empire will finally reach its nadir.

    The other extreme, is that we don’t start printing money. The spend culture ends. Unemployment goes up in the short term. Businesses that profit on the spending culture die. The value of equity is preserved. The pound stays strong. Businesses start up that profit on a different culture; perhaps businesses that actually contribute value to something rather than the glut of estate agents and similar enterprises that exist today. Because equity is preserved, companies and individuals choose to remain in this country. Because unemployment goes up, labour costs decrease and the cost of producing stadiums, roads and hospitals decrease. The cost of homes decrease. Investment in the economy increases to the profit of all. The issue of moral hazard is avoided, as those that invest in the future choose to do so with greater wisdom than the current generation; because those that have been unwise are punished. A massive amount of negative equity exists. A whole generation of people spend the rest of their lives paying the banks.

    I shouldn’t feel that sorry for the Negative Equity crowd. They chose to pay a lot of money for a house today, that was much cheaper even a few years ago. If we protect them, then the housing market stays as it is. The average age for FTBs will remain 33 or so. If we don’t, then housing values drop and the risk of a housing crash disappears so investors start building again. The average FTB age drops to what it was a while ago.

    Doesn’t the current generation of FTBs have a right to the same advantages as the previous generation?

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  • I noticed today that the government are selling off their remaining share in Qinetic – looks to me that they are emptying all their piggy banks and looking down the back of the sofa to scrape together enough to keep going for another week (what was that Gordon, gold??? no, you sold all that at bargain basement prices years ago, remember). They’re skint, so how can they inject much more into the financial system?!

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  • it_is_going_with_a_bang says:

    The government knew very well all the while this was building up that it would probably end in a mess. But the truth is the popularity they crave from making people feel good means they will always let it happen.
    The bottom line is short to medium term policies is what gets votes. What is happening now is the result of 10 years of ‘using’ property inflation to run an economy, because very 4 years there is an election and governments are always afraid to prevent profit from housing markets. The bottom line is that it is money for doing nothing. Thats an easy policy to keep going until the consequences catch up with you.

    Like having to pay for it all!

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  • The UK government wants to seize the UKs largest two mortgage providers? Why?

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  • For all his faults I would point those concerned about this to Robert Peston’s latest blog on the BBC site – he points out why even IF the govt opts for a radical entry into the mortgage market for it won’t work.

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