Sunday, July 5, 2009
Lending must shrink
Existing lending needs to shrink by 500 billion due to the failure of residential property securites, according to a BoE report. This is at odds with the government's policies of expanding lending. Not really, though, if you split lending into categories. We need additional lending to business and reduced lending for asset purchases. The only way to square this circle will be to introduces caps, and to regulate loans by type. Mortgage restrictions have been mooted in the past by the FSA amongst others. I am sure we will hear more of this in the future.