Forcing the banks
Can the government force the banks to pass on interest rate cuts and, if so, why won't they? That's the question I put not once but several times to the Chancellor this afternoon.
Alastair Darling's reply was instructive. It's "imperative" that banks pass on the cut he said but the government could not set the price of their financial products.
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Hold on a second, you may cry. Didn't we the taxpayers bail out the banks? Weren't we told that in return the Treasury had demanded strict conditions? The answer is yes, yes and but.
The government helped every bank in the country by guaranteeing lending between banks. It got no promises on lending in return for that.
It fully nationalised two banks - Northern Rock which is obliged to lose customers and shrink its business plus Bradford & Bingley which is effectivley closed to new business.
It took stakes in three banks - RBS, Lloyds/TSB and HBOS - in return for promises that they stood ready to lend on the same scale as last year, that their loans would be "competitively priced" and that they would be properly marketed.
These conditions were designed to ensure that the banks didn't merely pass taxpayers money onto their shareholders. What they did not do is allow ministers to force banks to pass on individual interest rate cuts.
As shareholders the government clearly has huge power. However, as one Treasury insider put it to me, it's the power a Sainsbury shareholder has to raise concerns about pricing policy not the power to set the price of cabbages in Wigan.
But let's get to the nub of the matter. Ministers don't want to set the price of loans (let alone cabbages). They know that the the Bank of England base rate is not the price banks pay to borrow money on wholesale markets.
They are hopeful that that rate - the LIBOR - will come down.They believe that with the help of a bit of added political pressure the rates banks charge small homeowners and small businesses will come down. They accept that that might take a few days.
What if they're wrong and those rates still don't come down? That's one answer I didn't get.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~11~RS~)
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Looks like the Bank of England has decided it can no longer go along with Gordon's "we are best placed" doctine, and has now admitted that we are very much in trouble.
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Amazing..... not one straight answer.
Time for change, time for renewal.
Time to go.
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It's a vicious circle - the LIBOR, being a measure of risk, isn't going to come down until economic conditions allow, whilst our debt-based economy is unlikely to improve with out the LIBOR going down...
There is little the government can do, it's a bed of their own making - Browns refusal to deal with a decade of debt - all we can do is hope something breaks the deadlock.
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Most people will be relieved and happier if they find themselves paying less interest. Yet, why do I worry if people are not happy? According to a government report issued today people here are mostly happy and optimistic. I haven't given the link here, as I was moderated last time I did that, but here is a small cutting;
Nine out of ten people are happy - and seven in ten optimistic about the future - a government survey suggests.
"This is more like it," I can here Hazel Blears mutter with a grin.
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You were right Nick when you said the government had pressed the panic button.
They are now like headless chickens.
No plan! No idea!
We are being kept in the dark again about how bad it really is.
To push the panic button now at the beginning of the recession does not leave enough over to kick start the economy when it will need it most. At the bottom.
All the variables are hicklety picklety and nothing appears to be in any sort of order.
Absolute chaos.
See David Owen's interview with Andrew Neil last weekend.
He has more idea than anyone so far on what is going on.
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At long last, has Nick Robinson finally got around to asking a Cabinet Minister a seaching question? I'm not exactly bouyed by the answer either!!
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I'm sure the government could regulate if it wanted to. Then again, letting the banks flaunt their arrogance and greed so brazenly might help people get a moment of clarity: the banks don't know business nor do they care for you.
Banks were up to their noses in destroying business and ruining communities because they can't look beyond the numbers or have a stake in whether Mrs Jones down the road gets mugged by heroin addicts.
The way the banks are behaving it's like they're begging to be slapped. When you're at the top and your decisions effect many peoples lives you carry a special responsibility. I think, nobody in the entire banking industry should get a fat-cat bonus until this mess has been sorted out.
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Have you ever thought of asking Mr Darling, or Mr Brown, or ... well, just about any politician really, whether he believes the public's willingness to accept "spin", in all its senses, is something that is at a fixed level. In other words, does he believe that the public's willingness to respond to the wishes of politicians is unaffected by the amount of spin they have been given?
The current rationale is of the truth being redundant, because it is always markedly second-rate in comparison with the spin. It seems to me that this could be poisoning the ability of future, possibly more honest politicians, to use the odd white lie, in extremis, when perhaps there's too little time to establish the truth as being the necessary course of action.
But I suppose it doesn't matter very much if the general population is equally capable of being persuaded either by the truth or by non-truth. Nor, indeed, if it makes little difference if politicians are regarded as sagacious mentors or devious snake-oil salesmen.
It would be an interesting subject for debate though, don't you think?
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The banks would be mad to cut lending rates in the present economic climate. They need cash coming in to stay in business not cash going out to prop up failing businesses and negative equity mortgages. If the chancellor is so confident recovery is inevitable, lets have some tax cuts, fuel, income tax or VAT, this would help everyone out, and reduce costs to business; fat chance ! Quote of the week from Jaquie Smirff ; " people have been coming up to me and asking when they can have an ID card " Yeah right !!!
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Trouble is, who can the banks lend to without getting themselves into a deeper hole?
Lending used to be much more of a judgement call, based on personal knowledge of the borrower. Not any more.
Credit scoring works in a commoditised business model until people learn how to work the system, then it breaks down. Now the banks have got rid of the old-fashioned bank manager and they won't get him back in a hurry. They're without a compass and they're understandably scared.
What I suppose the government wants is a return of irresponsible lending to compulsive consumers. Another dose of the same, in fact.
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Which is why, in my view, the base rate cut is too excessive and has the desperate political leanings of Gordon Brown written all over it.
All that will result from keeping policy rates this low is to stoke another boom in asset prices once banks have regained confidence and rebalanced their books.
A big factor in the rate cut being on this scale is simply to provide Brown with something to point to when saying "look I'm doing something" and so he can gloat about historically low interest rates.
The problem is not with the base rate (in relative terms) but with the freezing of the commercial money markets and the overvalued assets of financial institutions.
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Robert Peston on Five Live this evening explained (between giggles and half sentences) that the banks have to pay from 6-9% to borrow from another bank. If they lend to the customer at too low a rate, they will not make the profit that is required and the government will continue to have a stake in a nationalised bank for some time to come.
If I understood him correctly, I can't grasp how the system can work and wonder why this was not all thrashed out at the time of investment by the government.
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It is mind boggling to think about how much "spending power" this is going to put back into the pockets of the UK consumer.
On a typical mortgage of £100k this will save the borrower £1500 per annum. If that same borrower is on an average wage of say £25k per annum, this drop in base rate is equivalent to them receiving a 7.5% pay rise (when adjusted for tax). Incredible really.
Now we all have to hope that:-
1. The Bank's pass this on (and the signs are good on this)
2. We all go out and spend it and kick start the UK economy.
Oh and by the way, don't think this the last rate cut, another 0.5% by January is almost certain.
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They're scared of doing anything that could be construed as socialist :/
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It appears that certain Banks have little interest in their Customer base, nor positive recognition to the Taxpayer (where applicable), for the enormous financial support provided recently.
Apparently some Banks that fail to on-pass the full benefit of recent Interest Rate reductions to their Customers consider that such behaviour is acceptable during this period of financial turmoil, caused primarily by the greed and incompetency of their industry.
Unfortunately the FSA and Politicians, including the Prime Minister and the Chancellor, cannot convince all the Banks of their responsibilities in this current crisis.
It appears that the Banks believe they are negotiating from a position of strength and any loyalty to their benefactors or customers is of little consequence.
(This may be a miscalculation as they rely heavily on their customer base as a source of retail funds.)
I have concerns that the Public, (and Corporate Employers), may demonstrate their disillusionment by withdrawing their funds from those tight-fisted banks who decide to increase their lending margins at this time.
Should this occur then the Government could assist by encouraging Northern Rock to accept any transfer funds and enhancing the role of that institution to provide full banking services.
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Reality dawns for AD. You cannot make demands when there is no effective penalty. The overriding fear is the loss of loaned capital, the interest rate is secondary today. AD is not driving this particular show. The cut in interest rates although good is made too late, it has to be read as reactive not proactive. At least 2 months late. The usual British fear of inflation overriding the risk of recession. What next for AD. We are talking of months not weeks before the fear of compounding failure within the banking sector eases. The cupboard looks a bit bare, in fact the only step available to AD would appear to be borrowing to prop up public spending. This is a somewhat uneasy policy when there is no clear end game in sight - and projections - until there is more evidence - have to be regarded as suspect. What we are seeing is very basic. The government is actually not any good at commercial activities, that is not its job. Its job is regulation, which it has been dismal at, and the commercial sector is not immediately responsive to a regulators instruction on commercial activity. Until the British government clearly understands what its role is and stops pretending to itself that it has influence it does not possess, the game will be a very slow one.
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When the head of a big important organisation gets it very wrong, generally he does the decent thing and resigns - Mr. King please consider your position!
How come the Bank's forward view a month ago did not see this coming - they are either incompetent forecasters or duplicitous ostriches!
Please explain why Mervyn King should not resign?
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northern rock was typical half hearted attempt by this government to look good and placate people.
the bradford was a total failure becouse they gave the profitable section to an overseas bank.
this government is afraid to challenge the banks basicly becouse they dont know how to.
if it was to profit them they would do everything and anything to get the cuts required.
but just to help the people forget it we are of no importance to them.
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Nine out of ten people are happy - and seven in ten optimistic about the future - a government survey suggests.
The only thing this suggests to me is that the government are all so deluded that they are making up their own surveys.
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Are the BoE insane or are they doing what their political masters have told them to do? They risk the economy oscillating wildly and going completely out of control. Didn't we get into this mess because people, companies and the government borrowed too much? Cutting interest rates will encourage even more borrowing by desperate people. Th cut may delay the recession but it will only make it even worse when it comes. Interest rates should have been left unchanged (or even raised) to encourage saving and discourage borrowing. Instead of cutting interest rates, taxes should have been drastically cut, but our Labour government would never agree to this. This panic action shows the falsehood of Brown's claim that Britain is suffering from an economic downturn in common with other countries. Clearly our problems are far worse and the government must resign.
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The one thing that we know for sure
Is that Labour will take more and more:
With their lies and their spin
And their hands stained with sin,
Nu-Lab are rotten to the core!
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The vast, vast majority of the public just want to live in peace, get on with their lives and have an honest government looking out for their best interests. I doubt there is anyone here, left or right who thinks otherwise. Why is this really so hard to achieve?
As much as I hate Labour, if they were to change their ways and become honest I would give them my full support. Let us do unto others as we would have them do unto us. Then we would all be happy, surely?
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Nationalise properly for goodness sake.
Politicians, not bankers, on the Board.
Let's please stop messing about.
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The Government not only wants the banks to pass on the reduction of interest rates to customers, it also wants to see more lending.
But what the government wants, and what is right for the economy do not necessarily run together. I wouldn't trust Brown and Darling to run a whelk stall, let alone a bank.
Too much lending (without properly assessing the borrower's ability to repay) is precisely what got us into this mess in the first place.
Banks now need to look sensibly at the risk - not bombard customers with offers of loans, or extra credit cards.
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The market works in its mysterious ways but without too much Government 'help', would have punished the feckless banks by slowly draining them of customers.
Already, in the market place, some financial institutions are exploiting the fear and loathing that many people feel for some of the 'troublesome' mainstream banks, who, for reasons that are beyond me, are being bailed out with our tax money and/or printed money - whatever, we the people are still being penalised.
So, for example, I see in the Times today, an advertisement for a bank that explicitly comforts its readers by stating that it only lends 'real money'.
That is money deposited by its savers - one for all you Fractional Reserve Banking haters.
I hope that the millions of people out act accordingly there vote with their savings to punish those banks who have been greedy and downright irresponsible.
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It appears that The Government think they are in charge but in reality have their hands tied behind their backs. Wonderful!
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Hi
Its crazy
We save the Banking institution and in return they look after themselves and no one has the courage to stand up to them and think of the normal person who has to survive. If they do not help us-they should not exist just for their own benefits.
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cybervoiceofreason @ 13
I do not think that this rate cut is going to put all that much money back into peoples pockets.
According to the Council of Mortgage Lenders website spreadsheets, roughly three-quarters of all borrowers are currently on a fixed rate mortgage at an average interest rate of 5.70%, on just over one-and-a-half million mortgages.
Even for those on BBR trackers and other variable rate mortgages, I would suggest paying down some debt or saving the savings would be more sensible than hitting the high street.
Because in the current climate .. it could be you .. losing your job next.
Recently I even heard of lawyers and their clerks being laid off locally ... which surely must be a very gloomy sign indeed.
Better days will come but we apparently 'have' to suffer this financial hangover first.
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This comment was removed because the moderators found it broke the House Rules.
Can't come here much - everyone is VERY unhappy
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This comment was removed because the moderators found it broke the House Rules.
Nick,
all you have to do is to look at the history of the former Midland Bank when it took over Crocker Bank in The USA. They let the existing management continue and it left the Midland open to the take-over by HSBC.
It really is that simple, if you put money into an organisation without putting in your own management, then you are seriously stupid. You deserve everything that you get.
This is not rocket science. In the meantime the markets continue to fall, big time. You just don't get it do you. It is the end game, it really is just so over. I wish that I could be more scientific, but it would be very boring, so just understand, Project Griffin, it is over.
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I think the Bank of England have contributed to the problems really hitting home in the housing market and now are being panicked into drastic corrective action. My view is based on the fact that they refused to drop rates sooner as they say they saw inflationary pressures in the economy. My understanding of this issue may be limited but, when demand pressures are dominant then the B.o.E. is probably wise to keep interest rates high, or increase them. However inflation has, for the last 18 months, been driven by supply pressures - domestic energy price hikes, oil and petrol price surges and resulting food price prices. The Governor of the B.o.E. should apologise to the British people for doing too little, too late.
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Correct me if I'm wrong - I mean, I'm not a professional political journalist - but as I understand it, the government hasn't put a penny into RBS, Lloyds/TSB or HBOS yet.
What's a few billion here or there though? What matters isn't how much you give, but how many times you announce it.
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I have to correct an error in an earlier post of mine of a few days ago, where I stated that millions would probably suffer when they come off a discount deal and onto a Standard Variable Rate (SVR) mortgage.
The CML data that I have just come across shows that only 4% of mortgagees are currently on an SVR, which is roughly 75,000 families.
Not the millions of people that I had suggested.
I apologise unreservedly for the misleading information in the earlier post.
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#7 CEH
You make some good points. I understand your concern with the bonus culture. The thing is the high paid attract obscenely high bonuses generating poor publicity. What is often forgotten is the lower paid workers get lower bonuses, and for them it really does make a difference from keeping the wolf from the door.
Now with poorer financial results I would not expect to see many bonuses being paid this year. Incidentally the Financial Services Authority for the year 2007/2008 did pay out performance related bonuses. Now that is cheeky, in the year that Northern Rock failed. The other issue of course is that their performance is entirely subjective with no clear tangible measure to benchmark their activity. A bit like MPs deciding their pay levels.
Whether Civil Servants should in general receive performance related pay I am not sure about. I would like to see some kind of performance pay for MPs - generous when there is low inflation and unemployment, and stringent penalties when they stuff things up. I suspect pigs will fly first.
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I have to say well done Darling, well done Brown. As the song goes, You don't know what your doing....
The banks need a mechanism to create a risk free lending culture, they don't believe the Government and as a result they are making the government into lame ducks.
When political will bullies the bankers and their advice like this one has, don't be suprised to see them bite back. They no longer trust the government, shame it took so long to work it out,bigger shame it still is over a year before we can rid ourselves of them.
These rates can't be passed on, this would cause them to go the way of the rest of the country, on the point of going bust...
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re: 35
I apologise unreservedly for the misleading information
The one thing Nu-Lab will never say to us.
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Nick
AD talks of the interest cuts being passed on as "imperative" and his intention being to 'ensure' it happens. It turns out "imperative" means" he is "extremely anxious" and "ensure" means he "hopes".
So not enforce, more facilitate and exhort. Why couildn't he tell like it is, perhaps adding that the situation will be reviewed if the banks' response is inadequate?
Asking a question of politicians of any colour is like pressing the play button on a tape recorder. All you get is the pre-recorded line, irrespective of the question.
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#35 JohnConstable
An honourable post - what I'd expect from an Englishman.
(The Brits, of course, are a different matter altogether!)
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Coincidence that there's been hardly anything on the Beeb about Glenrothes? I think not.
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23. At 8:25pm on 06 Nov 2008, sagamix wrote:
Nationalise properly for goodness sake.
Politicians, not bankers, on the Board.
Let's please stop messing about.
FANTASTIC idea, politicians are just soooo good at running things arnt they, so organised, such clarity of thought, so little waste, such superb financial management. So progressive.
Last one to leave, turn out the lights.
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Perhaps the Chancellor can introduce an Immoral Earnings Tax - being a tax on the immoral income taken, (not earned), by the Banks in not on-passing the full reduction in Interest Rates to their customers.
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Crooks. The whole lot of them. Should be locked up for fraud.
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Can someone explain why, as a nationalised bank, Northern Rock cannot offer new mortgages at attractive rates?
Surely the Government could take the lead and put our money where their mouth is and get some stimulus back in the housing market by the Rock lending to good bets (i.e. Public sector workers) who may have a 5% deposit but not a 25% one.
Unless banks start lending again we're sunk. People have to move for a number of reasons including getting jobs! So why not use Northern Rock to launch a range of products that would force other greedy lenders to follow suit and bring some competition back. The Rock makes money and the free market and consumers benefit.
At the moment it looks like the banks are in collusion with each other to keep taxpayers money to bail them out but they don't want to play ball with mortgage rates or offer reasonable affordable mortgages 90% of the country would qualify for. I'm not talking about 13% LTV but back to 95% LTV would be a start. There's plenty of people earning enough to get a mortgage based on a 5% deposit but saving a 25% one is nigh on impossible.
Madness.
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22
Hey, pal
I share your sentiments, but old cynic that I am, there is as much chance of me winning the Lottery as a decent government coming along in the foreseeable future. Still, must keep on hoping......
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It seems obvious to me that the banks have dragged us into the mess and brought the economy to its knees. The government are working to get the economy stimulated through no fault of their own. The banks are widening their margins by not passing on these interest rate cuts, so as to make the tax payer pay back the loan from the government of tax payers money..... So I think its time now for the public to show the banks who have the real power at the end of the day and withdraw all the cash they have in the banks and lets see how quickly the banks change their arrogant views of their business environment. They really are milking the people un-fairly! All my friends who've asked me for advice have been told by me to hold tight and keep your money in the pension funds, banks etc.. My advice now is to draw the lot out and put it under the mattress. At he end of the day the government run the UK and if the banks don't start to play ball they will and should be forced to play their part, and as Gordon Brown said "we are in un-chartered water with this "type" of economy retailers and almost all other large business's have adapted their business model to suit the economy..
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Hooray!!!!!!!!!!!!! At last someone has been pushing a government minister hard on their economic management.
Well done Nick.
Please push the government more. Also please push the Conservative more - what are there plans?
No more tittle tattle - the public deserve answers (not that there were any mind..... but it is a start)
At last....................
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I actually believe that with the electronic era coming of age the financial markets become irrelevant and perhaps counterproductive. Why? Because the basic market rules - supply vs demand, etc - apply when there is free competition. Classically, market rules do NOT work when there there is a cartel, or, to put it simply, price fixing. The internet has helped to create conditions in the electronic financial markets when cartel formation, price fixing, synchronised runs, etc. could be instantaneous and extremenly effective (and very damaging to you and me) yet almost undetectable. Imagine that BA and Virgin did not have the infamous phone conversation about the fuel surcharge, but instead arranged some electronic "price monitoring". The result would have probably been the same, but never detected. I am pretty sure that clever programers in the City are busy arranging market actions that have little to do with market rules.
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Allegedly the funding provided by the government is at 12% interest. This si why the banks want to repay it in 2009/10. But it also means that if they lend it to each other, or us at 5%, they take a massive hit on the lending.
Does anyone in Nu Labour understand finance, economics or even maths?
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With inflation at over 5% and interest rates at just 3%, savers are going to lose money. What a miserable reward for being prudent. Those who have borrowed too much are rewarded with cheap loans and the whole economy is being run for the benefit of the profligate, whose foolishness got us into trouble in the first place.
Those who believe that reducing interest rates will stimulate spending should think again. Many people like me, who rely on our savings nest egg, will be cutting back more than ever. An interest rate of 1% hasn't helped the US, has it?
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How can the Chancellor expect Royal Bank of Scotland, Lloyds TSB or HBOS to pass on the interest rate cut when the government is charging those banks 12% on the preference shares that it bought in them?
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30 Ballyhell
You clearly didn't read the whole article.
"The fieldwork was completed before the intensification of the banking crisis in September and October 2008."
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I would be interested to know the views of all posters, of all political viewpoints, the answer to one simple question:
Who is accountable for UK financial industry?
i have looked at all angles and cannot see anything but sdevere trouble heading the way of every individual in the UK who currently has any borrowing commitments.
prior to labour's 1997 system, the politicians had control of intrest rates, the economy, etc, and although many complained about this (ie, parties in government manipulating it for their own political benefit) this control was accountable, via the electorate.
if they messed up, they were voted out of office.
* the bank of england reduces interest rates - so what? its not being passed onto anyone.
todays variable standard interest rate on a mortgage, is just under 7%, the bank of england have set rates at 3% now. who can hold the banks to account and use the interest rate mechanism to control how much every mortgage holder is paying?
there is nothing under this government's control to protect the very people the government are supposed to be serving.
* the banks have and can only operate under the criteria a government sets in place.
regardless of how heavy or light the regulation, banks will make money.
the banks know that gordon brown and co will not allow them to fall, as within a week brown and co would be out of office.
the banks have overstretched with the full knowledge that whatever happens is they will be bailed out.
* the FSA or any other regulatory body, havent used any controls over the banks, but even after all the financial problems, they and government are still refusing to answer questions about the roll they have played!
they are nothing more than a talking shop, to be used as and when needed as a blame magnet for failings.
i cannot see who if anyone is "in control" which is an extremely dangerous position to be in for all of us!
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"People 'can't wait for ID cards'
Jacqui Smith is phasing in the introduction of the new ID card
Jacqui Smith says public demand means people will be able to pre-register for an ID card within the next few months.
The cards will be available for all from 2012 but she said: "I regularly have people coming up to me and saying they don't want to wait that long."
The home secretary made the claim as she unveiled revised ID scheme plans."
Oh dear!...David Ike's suggestion of 'Problem-Reaction-Solution' i.e.....
1) The government creates or exploits a problem blaming it on others
2) The people react by asking the government for help willing to give up their rights
3) The government offers the solution that was planned long before the crisis
....sounds more plausible by the day!
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The cut shows that the MPC were lent on by Brown and Darling...No longer independent.As for the bansk passing on the cut why should they Barclays and HSBC are not involved in shareholding with HMG they can go their own way.
LIBOR is the rate the bansk operate on not the Bank Rate that went out with the ark.
Brown has been paniced by the IMF report lets see if the BBC mention it.
How about an interview Nick with Brown and ask him in depth about the IMF report.
regards malc
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Oh heck, can we put them in the Haldron Collider?PLEASE!!!
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That's a good observation. Your comment highlights the fantasy psychology that kicks in at the top and the punishment at the bottom. I don't think that's right or fair.
I'm spitting bullets over this but, as Hazel Blears comments, talk like you get from the likes of Guido et al doesn't help. What's important is developing a better focus.
Mostly, I'm interested in seeing business get more of a clue and folks get jobs. If that knocks the crisis or recession off the front pages we'll all be better off for it.
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Unless the government is willing to completely nationalise the banking system as per the Labour 1983 manifesto, there is not a hope that this rate cut will be passed on (and it is debatable whether it should be).
Banking in this country is run as an oligoploy, in the interests of the banks, and the government (of any colour) knows it cannot run the country without the support of the financial sector, so will not rock the boat. This is why the banks have been bailed out on an effectively "no strings" basis.
It is no coincidence that Lloyds TSB has offered the full cut. It represents two of the three clearing banks taking public money, which as has been previously pointed out, has not yet been paid over, (and RBS isn't offering it because fundamentally it is a bankrupt institution and cannot afford to). If they already had the cash, I doubt very much whether they would be so generous.
Why do you think Barclays went to Doha for their cash? They don't want any suggestion that they are susceptible to government pressure on any commercial decisions.
As regards Mervyn King and seven out of eight of his colleagues on the MPC, they should be thoroughly ashamed of themselves, their arrogance is quite breathtaking, and if they do not resign en masse, they should be replaced forthwith.
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Hmm, that decision to switch to a tracker back in July now seems inspired. Just checked my contract and our lender are obliged to pass on the cut within 30 days. Now we might just be able to afford Xmas presents - which, presumably, is the sort of news the Govt was hoping to stimulate....
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#7 .. well done, Charles
... Who are these banking executives who keep posting red herrings about ID cards? Today has shown to all, what I think was obvious a couple of weeks but not necessarily out in the open... that the banks and building societies of the UK dont care a damn about their customers. They are quite happy - of course they are - to take countless billions of the taxpayers money to shore up their share prices and dividends to the shareholders and pay the obscene bonuses to their senior managers. They have no intention of passing anything on to their customers and there's nothing the government can do about it. We, the taxpayers, are being shafted by these unscrupulous idiots who will laugh about it for decades to come. It is, quite simply, the greatest financial scandal ever. So, shall we burn down the banks on our high streets? Shall we march on the HQs of these banks and take out their CEOs and hang them from the nearest lamp standard ? ... of course we wont. We'll blame the government instead.... for Goodness sake, wake up. We're all the victims of the biggest theft in British history.
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#54 - denzil69
"Who is accountable for UK financial industry?"
Nobody.
That's the whole beauty of it. When it's all going well, it's known a deregulation, when it is all screwed up, it's called buck passing.
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Drat! Now looks like SNP have lost...
What a let down for all of us
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I'm really, really, scared now.
I've heard a lot of experts warn us about what will happen if Labour win the Glenrothes by-election, on an earlier thread (Agenda Pressure)
"The whole of the British Isles will perish" if Labour win the Glenrothes by-election.
The Thames will turn to blood, a plague of locusts will descend o'er the land, Gordon will tattoo barcodes on all of our necks and we will forfeit our names, being known instead as Citizen 879578567 etc. We will be watched 24hrs a day by Comrade Jacqui Smith and locked up for 28 days should we fail to obey their every whim. Life will not be worth living...
When will this come to pass, pttp? I'm really worried. Should I leave the country? Take to the hills?
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Gordon Brown has been very clear...
This is a global problem. He told us that he had led the way with his plan to guarantee inter bank lending so as to get the wheels moving again.
It's all very well leading the way but if it is not the right way, in that it does not lead you to the destination that you wish to arrive at, your leadership was worthless.
Of course the leadership came at a price, it has saddled the taxpayer with hundreds of billions of risk. But in return Gordon Brown assured us that he would be clamping down on fat cats.
This was, after all, no time for a novice.
It was therefore with great pride that his Government was able to announce, only this week, advice that would be given to cat owners about obesity - with the threat of fines and imprisonment for those responsible for the fat cats!
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Assuming the savings rates now drop over a period to 3%, why wouldn't a rational person take their cash out to invest in inflation-linked gilts. Inflation is not dead yet, and will be exacerbated by this reckless interest rate reduction!
This action would also have the effect of robbing the banks of retail deposits to lend to small business.
Brilliant policy!
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Nick,
the country has voted, well Glenrothes has anyway, and it is not a victory by the candidate, it is not a victory by the labour party, it is great victory by Gordon Brown, and his wife Sarah. What a couple!
Brown will now have put in his diary May 2009 as the date for his crowning, it is a sure fire thing that he will win. The global economic crisis is good for somebody, even if it is not going to be me.
It is amazing that the Bank of England announces the biggest cut in interest rates for years on the very day that the bye-election is held. What an absolute coincidence.
As for the economy it is such a mess, at this rate we will end up paying the banks to take our money, stranger things have happened, Japan. Of course they've not been nationalised, Darling can't force them to do anything.
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It's frightening how many people on this forum, and even more frightening how many Labour MPs (you know - the people who RUN our country) don't understand how banks lend money!
The banks don't borrow it from the Bank of England at BoE base rates - they borrow it from other banks and financial institutions at LIBOR rates. And right now LIBOR rates are about 3% above BoE base rates.
Yet Labour MPs seem to think we should FORCE banks to lend money to individuals who can't repay it, at rates lower than they borrow it!!
It was EXACTLY that sort of behaviour that got us into this mess in the first place.
I think Robert would spend his time better if he tried educating some ignorant MPs about how the world actually works, which in the long run could be more more beneficial.
Unfortunately too many Labour MPs care not a jot for the problems THEY are responsible for, as long as they can generate a sound bite which the BBC is happy to carry on its news bulletins, no matter how stupid and unthinking that sound bite is.
Surely the solution here is obvious - why doesn't Mr Darling just set up his own mortgage lender and get them to lend at BoE Base+1%?
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57 runskippyrun
'Oh heck, can we put them in the Haldron Collider?PLEASE!!!'
We could do, but I don't think it is working at the moment. On second thoughts, a remarkable similarity...........
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66. It will also make the exchange rate drop like a stone. Bad for holidays, but hopefully good for exports.
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#64 balhamu
"Should I leave the country? Take to the hills? "
As long as it's not the hills I live in!
:-)
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68:
This very point was made to Jack Straw on Question time and he had not a clue!
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Poor Old SNP - what a shame!
It is ironic how a mans utter failure (economic crash) can be the very thing that rides to his rescue.
Gordon used his crash to cynically bash the credibility of Scottish Independence and to belittle Alec Salmond and his arc of prosperity.
Has there ever been a similar parallel in the world? Where one man uses his own failures as a justification to suppress others?
If not - Brown can lend his own name to a new word:
Browned: The cynical exploitation of ones own failures, to undermine others. Especially at a large scale.
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We shouldn't be surprised really... Mugabe won elections too.
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Whenever a Government Minster opens his or her mouth it is to utter the word "global" - "global downturn" "global recession". So does Brown have no share of the blame? Of course he does! It was during the Brown Age of Irresponsibility that the Government borrowed to spend when it should have been running a surplus. It was during the Brown Age of Irresponsibility that the banks were not properly regulated. It was during the Brown Age of Irresponsibility that people could borrow 125% of the value of a property. The UK is worst placed to weather the "global" recession and people need to understand that that is indeed the fault of one Gordon Brown!
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The Banks will find their own rate levels all in their own time. With tax reductions now on the cards from the Treasury, surely the Government's key interest here is to stoke up electoral support before the recession rot seriously sets in.
I expect an early 2009 election on the same day as the Euro poll.
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The pie chart shows that 51% of people have taken the sensible precaution of protecting themselves from rises with a fixed rate mortgage so even if the banks cut their rates it won't help over half of those with mortgages anyway - it is just a gimick to try to get people to take out new borrowing at a time when house prices are falling and jobs are under threat. If this was the cause of the present problems why would anyone think that starting it all again is going to help?
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The government have a massive conflict of interest.
Brown cut rates (yes bank of england, comitee blah blah - we know it was Brown) to boost bank profits, as a further bail out
of the nationalised banks at further cost to the public.
Cutting BoE rates, knowing it wont be passed on is really just another of Gordons 'stealth tax'.
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74 PTTP
Correct me if I'm wrong but didn't your "Hindsight Party" lose their deposit?
Now onto the Pre Budget report for some ete catching announcements on Tax.
Be afraid PttP be very afraid.
Ah well there's still the salt pot for those "New Laboor Slugs" to quote one of your wonderful poems.
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#7 C_E_H
I know I've come into this rather late, but...
Charles: You're saying the banks are acting like they're asking for a slapping. I couldnt agree more, but the plain simple answer is why isnt Brown administering said slapping?? Fear? Lack Of Desire? Doesnt affect me therefore I dont care?
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I'm really, really, scared now.
I've heard a lot of experts warn us about what will happen if Labour win the Glenrothes by-election, on an earlier thread
Well there's no denying it. That is an absolute disaster for the SNP and, by iterations, the entire UK. Let's be honest. It wasn't even close.
A swing of 8%? Big deal. The economy in meltdown, record house price deflation, unemployment starting to soar, banks collapsing. And still only an 8% swing.
I could try and take a crumb of comfort that Gordon Brown is a local man. I could try and cheer myself up by suggesting the timing of the by-election resulting in all reportage being wiped out by the US elections and the errrr 'fortunate' timing of the 'independent' BoE reducing the debt payment of the Glenrothes electorate by 30% was a factor.
It might have been. If the result had been even close. But it wasn't.
This is just terrible news.
Gordon Brown, emboldened, will now simply forge ahead with his agenda of ID cards and his other Big brother initiatives. He'll print money until the cows come home and compound his economic destruction to date with more of the same. After all, he'll argue, the people [of Glenrothes] have vindicated his approach.
I'm really worried.
Join the club.
Should I leave the country?
Probably safest. But inertia is a terrible thing. I'm more cross at myself. I knew we had to get out of Scotland and there was a voice yelling in my ear 'Keep on going - get the hell out of here' but I judged that no, we'll be safe in England. The SNP are in the box seat now. They'll get their indepenence and take this bunch of sociopaths with them.
I judged that the SNP would take Scotland independent (after a Tory victory in the UK elections). Then, ultimately Scotland would revert to type ie Labour and their economy would be destroyed. No point staying there.
Imagine. Having finally got the get up and go to actually go I then failed to go the whole hog. What a blunder eh?
Let that be a lesson to y'all.
Take to the hills?
No point. They'll find you eventually and jail you for not having an ID card.
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Good question!
It is almost amusing to see how hard the Chancellor is trying to fudge the answer.
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Nick,
I am getting really fed up with people who say that why did nobody tell me about the upcoming recession, or downturn as some would prefer to call it.
'May I share with readers what I see happening over the next couple of years in respect of the state of the economy, the reason being that I anticipate a depression the like of which has not been seen for 80 years'.
You may well say that it is easy to have the benefit of hindsight, a large body of people now say what I say in my second paragraph.
That however, is not the full story, you see I used to contribute letters to my local newspaper here in Exeter and the extract I show above was actually printed on the 19th July, 2007, note 2007.
So, Nick, when you interview either a politician, a philosopher or an economist you tell them to just read the local newspapers where there is more hidden talent than anybody can imagine.
In my letter I also suggested that Gordon Brown should hold an election in May 2008, advice which he declined, and we can see the result of that decision, well now I am telling him to go for an election in May 2009, advice which he had better take because people will be very angry when the real problems hit Britain. Go for it Gordon, or there will be a return to Tory boom and bust, rather than labour boom and bust, which is of course totally different.
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With the recent Bank of England cut in interest rates there will be no excuse for mortgage lenders to refuse to renegotiate mortgage rates with those who are in financial difficulties and unable to meet their current mortgage payments in full. It should help to avoid unnecessary repossessions.
Another point is that banks should be able to offer keenly priced first mortgages to new buyers.
If the recent declines in house values are to be trusted (and many lenders used asking prices to indicate house values rather than selling prices) then this should be a good time for first time buyers to find an affordable mortgage to buy a more reasonably priced first house.
It is also likely with lower interest rates that it could be cheaper to buy on a low interest mortgage than to rent.
These ideally should be the result from the latest cut in interest rates. It is, and should be, up to the banks to set their lending rates. It will take time, but the result should be more affordable mortgages available for first time buyers and fewer repossessions. I really don't see why Government interference would be necessary. when lending is still competitive and potential buyers or current mortgagees are still able to negotiate with competing lenders.
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Whenever a Government Minster opens his or her mouth it is to utter the word "global" - "global downturn" "global recession". So does Brown have no share of the blame? Of course he does! It was during the Brown Age of Irresponsibility that the Government borrowed to spend when it should have been running a surplus.
That battle has been lost unfortunately. There was a time when people and the media were seeing through the laughable concept of Teflon Brown and his trolls parrotting 'Global downturn' at every opportunity. Gordon was on the ropes. Hope sprang eternal that we would be rid of his lies.
But I remember the day it all went officially wrong. The day the government had to step in and support the banks. Do you remember how it was reported? I do.
It wasn't a failure of Gordon Brown. It wasn't a failure of the Labour government. It wasn't a failure of his monetary policy. It wasn't a failure of his regulatory policy.
What did we get on the BBC? Yuppies with mobile phones the size of bricks. Girls with big hair and even bigger shoulder pads. The BBC had come home to Labour. It turns out it wasn't the government's fault at all.
After 11 years. A doubling of national debt, record house price falls, soaring redundancies, soaring unemployment and soaring bankrupcies....
..it was a failure of 'Thatcherism'.
Duly reported as such by most of the print media too.
1984 is upon us. Winston Smith would be punching the air with pride. I bed Mandelson and Brown were when they managed to get the whole of the last decade's economic mismanagement reported as 'A failure of Thatcherism'.
If I hadn't seen it with my own eyes I wouldn't have believed it.
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Perfidious Caledonia?
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74 ptppl
Well peeps, ptppl has gone of to have a good cry, but he will be back soon to congratulate Labour on their decisive win,
and to commiserate with the Tories for losing their deposit.
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74 oldnat
#Poor Old SNP - what a shame!
#It is ironic how a mans utter failure (economic crash) can be the very thing that rides to his rescue.
Do they grow sour grapes in Scotland or is it only in your part.
SNP are Dooomed!
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This was a convincing win for Labour. The SNP's troll tactics didn't work and the nasty party lost its deposit. Result.
I'm still calling the General Election as a landslide for Labour. It doesn't look so daft after this by-election.
Man, I am so pleased seeing the forces of disunity and nastiness put back into cold storage.
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I'd have thought that if they want to force banks to reduce interest rates in line with base rate all that would be necessary would be a simple act of parliament. All protestations of we can't force banks .... is utter rubbish.
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If Bank charges and interest went up, rather than down, on the same day as local elections, would the result have been the same?
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Watching BBC breakfast news this morning.... Jim Murphy........... I've never seen him before - but what a souless individual...!!!
I felt like I was watching a Harry Potter 'Dementor' on TV.
What a bundle of laughs he must be to deal with.
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All the banks in the world will eventually come under several super banks run by the World Government anyway.
Maybe not in my lifetime but Big Brother is getting its way. Slowly, softly, catch a trillion monkeys or so.
Glad it won't be on my watch. Watch being the operative word. The end of the freedom we know.
On a lighter note, it is incredible the amount of foreign tourists still flooding in (albeit slightly reduced) to see our wonderful English City of London and Windsor. Many have spoken to me of their admiration for our elegant architecture and our superb Royal Family. The Royal Charles will rule not the virtual game player ROFL
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We are unquestionably now looking at a general election early next year. I had been assuming May, because nobody likes going out to vote in the rain/snow in February if it can possibly be avoided.
However, with Euro elections scheduled for early June, I don't think they'll want two elections in the space of a month, so it will either be April, or brave the inclement weather and go as early as possible.
The advantages to the government of going in February will be maximum momentum from Glenrothes/the 'Brown Bounce' and of course less time for the economy to get materially worse. They might even be able to delay publication of the Q4 growth (!) figures so that we're not even technically in recession when the polls open.
Personally I am extremely disappointed at the Glenrothes result, I thought the people of Fife were made of stearner stuff than to be fooled by this 'Global Financial Superman' nonsense, but actually I suspect it was just a case of 'my grandad was a miner so that must make me a Labour supporter'.
There is no doubt however, that Labour must now be odds on to win a general election in February or April next year and of course that is really a deeply depressing, and frankly quite terrifying prospect.
I wonder what the chances are of being able to emigrate to America. It looks quite exciting at the moment.
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If the recent declines in house values are to be trusted (and many lenders used asking prices to indicate house values rather than selling prices) then this should be a good time for first time buyers to find an affordable mortgage to buy a more reasonably priced first house.
Absolutely not. House price declines have hardly got started. They were insanely priced to begin with. Read the wording of the Halifax Press release from yesterday.
Using round numbers the long-term average wage:house price ratio is 4. It peaked at 6 and is currently at 5. So it has to go down by another 15% just to get to its average of 4. And since it is an average then the house price ratio must have spent an equal amount of time below the average. It could easily go to 3. Ie another 30% drop from here. There is a long way (down) to go from here.
Lets do a worked example with some simple numbers....
Suppose your average house price is 100,000. And on Monday you were paying 4.5% interest ie 4500 a year. Today you're paying 3% ie 3000 a year. Hurray. You've saved 1,500 pounds a year.
Unfortunately, chances are, this time next year your house will be worth 15% less. You have 'save' 1,500 in mortgage payments but lost 15,000 in cash. Your hard-saved deposit. Real money you had to work for, do without nights out, walk to work instead of taking a taxi etc etc. Not the pretendy money that folk were remortgaging out of their house for African Safaris because their house 'went up in value' until last year.
That is why low interest rates should reduce repossessions for those already in a house as long as they can hold onto their job. But it is absolutely not going to stimulate the house market back to 2007 levels of insanity any time soon. The cat is out of the bag. House prices can go down. They are going down and historical precedent suggests they'll be going down for the next year or two before plateauing for another four or five years. The time to buy will be 2010/2011. In the meantime it will be much cheaper to rent. In my opinion. For the reasons I've given.
We've seen this all before. It was only 1990 or so when we had our last house price crash. Followed by massive unemployment. Only this time it'll be worse because house prices were allowed to get even more out of control on even higher multiples of borrowed money. By the man who promised to eliminate boom and bust and housing bubbles.
But it's not his fault. It's a global problem. Its the Americans fault. It's the banks fault. It's a failure of capitalism apparently. Couldn't possibly have seen it coming.
He must have slept through the 1990's recession.
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The tactical votes for the SNP were something of a catalyst but hey, McBrown's shower won on their own turf. So what?
As my grandfather used to say (a wise old working class but Committed Conservative supporter):
"Many win this time that won't win next".....
Rock and Roll.....
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85 and 81 U9461192
I find my self in broad agreement with both your posts.
On a slightly lighter note, I assume this was a typo:
"I bed Mandelson and Brown"
Something to laugh about on a bad day for all our futures ;-)
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My guess is it's taking them a while to absorb the banks gall and some things are probably best dealt with behind closed doors. The risk is hammering the good along with the bad, and making the problems worse.
Competition law isn't working, and that's created a bit of arrogance at the top. Plus, there's other stuff like staff training, greed, and a bunch of other stuff. Getting management to develop a clue and level everyone else up is a bit of a challenge.
It's hard telling folks what to do as they can start kicking off. But, as management have seen the folly of arrogance and more disadvantaged people see the benefits of getting over their insecurities, I see scope for the circle to be squared.
This is my general philosophy:
* Management must go down to the staff if they require assistance, spend more time on the frontline, and eat their own dogfood.
* Staff must aspire, develop a proper service mentality, and accept the customer knows more about what they want for themselves than they do.
* Capital growth is a function of these two things. Worrrying about it is just a distraction and doesn't increase profitability or growth by a single penny.
There's plenty of books and real world examples kicking around and, I'm sure, people can relate to some of what I've suggested from their own experience.
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88 Grandantidote
I noticed that many of the McCain supporters were positive about Obama following the Republican defeat.
I would like to say well done and go forth to Labour............
......but I can't help but feel that this result signals the countries malaise and that we may well soon find ourselves voting for the UK equivalent of "4 more years of George W Bush"
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Nick,
when will people understand the difference between a bank and a building society.
A bank will lend you money for your business, at a commercial rate and then share in the profitability of that business.
A building society would lend you money to buy a home, a place to live and bring up your family, and depositers would get a return on their savings but it had an element of altruism about it.
When building societies started to be banks then the rules changed, the building societies went to the wholesale markets and people were given money to make money, which they did by treating their home as an investment rather than a place to live and raise a family.
Banks are not altruistic, they are are money makers, it is not the business of a real bank to be altruistic, just as building societies should not be banks then neither should banks be building societies, they are not charitable institutes. Trust me, they should not pass on the interest rate cuts, if they stop acting as banks then we really all ought to take to the hills.
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88., grandantidote wrote:
74 oldnat
#Poor Old SNP - what a shame!
#It is ironic how a mans utter failure (economic crash) can be the very thing that rides to his rescue.
Do they grow sour grapes in Scotland or is it only in your part.
Good Morning, grandantidote
I see you've returned to the fold.
"Dour and sour"
Potential there for a poem - except I am hopeless at verse.
The sun is really shining for the first time in days, so no blogging, but out in the open air.
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#89
Good morning C E H GRANDANTIDOTE.
Common sense! good will! and a shared value of unity in strength has won the day
for labour in Glenrothes.
O' the tories lost their deposit! need I say any more.
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It was a triumph for Brown (one cannot deny it - although with a greatly reduced majority, etc. etc.)
But it won't play like this nationwide. As economically things are going to get worse before they slowly get better, I guess that now is Brown's 'last best change' to call a General Election. Luckily for us all he is a bottler.
BTW: After seven electioneering visits to Glenrothes, is Sarah Brown (aka the prop) now fair game?
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94. My grandad was a miner in the Pensnet area of Shropshire.
He rose up to be an instructor and onwards and we have a picture of him shaking hands with Gaitskill when the latter visited the pits in Kent where my grandfather eventually came to live. He was fair, my grandfather, and didn't mind the jibes!
Staunch working class, salt of the earth. The people who built , shaped and fought for this country.
Nevertheless he and his ilk were strong Conservatives. He always said "Britain does not work under Labour" and, in the many ways you can interpret that, he was right.
He was proud, respectable, law abiding and loyal to his wife and family. Not a lot of them in the Labour party. Lot of Champagne Socialists like Prescott though, doo gooders, liberalists and benefit hangers on. Ugggggh.
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#103 MaxSceptic
After several appearances on David Cameron's YouTube channel (to 'demonstrate' that the Conservative leader is just like the rest of us, and accusations of distant toffery are wide of the mark), are his children now fair game?
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Nick,
we are deliberately devaluing the pound for one good reason. We need the money from the Middle East oil states and the Chinese.
We devalue the pound because we won't give investors a fair interest rate. So, we will offer them capital gains. The pound has fallen hugely against the dollar, 22%, now it will recover in due course, in which case any foreign investor will make money when measuring their investment against US dollars. I wish that people were better informed.
Just as foreign onvestors bought into the UK stock market, they may have made money on the shares bought, but they lost out on their total return because the exchange rate went against them.
This appalling government is desperately going to be seeking investors in the country, to fund our spending, on borrowed money. I do not want my children and grandchildren saddled with debt, a view I think shared by many others.
I want us in the Euro and the sooner the better.
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For all those who have said "How can the banks lend at 3% if the government Divi on the the money they gave them is 12%."
Its easy Fractional reserve banking
They lend the funds that the government gave them 12 times over to turn profit on that they need only charge 1.1%
Thats the con we have lived under for all these years
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balhamu @105,
Probably not - for the simple reason that DC's children did not choose to get involved with their father's political activities.
Sarah Brown, on the other hand, has been deploying all her PR 'skills' to forward her husbands flagging career.
You do see the difference, don't you?
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@81
Take heart an 8% swing across the country is plenty enough to see Labour out of Government
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@ 85
it was a failure of 'Thatcherism'
There are 3 reasons why the UK will suffer more than most in the global downturn.
Those 3 reasons are:
1. We are overweight Financial Services
2. We are overweight Property
3. A spivvy approach to both of the above
All 3 of these stem from the "revolution" orchestrated by Margaret Thatcher in the Eighties. So, yes, a failure of Thatcherism is spot on.
Impeccable logic, actually.
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There are 3 reasons why the UK will suffer more than most in the global downturn.
Those 3 reasons are:
1. We are overweight Financial Services
2. We are overweight Property
3. A spivvy approach to both of the above
Ahh my young Padawan. You forget the main reason we are ill-placed.
We were running structural deficits of 3% of GDP before we entered a depression. Gordon Brown is simply 'lucky' that the rest of the world went into recession too. But fear not, we had a nailed on recession coming anyway with the insane price of houses. It was nly a matter of time. Just like Ireland. And Spain.
The difference is that Ireland made its mistakes. Spain made its mistakes. And we, in the UK, made our mistakes. And the guy who is 100% responsible for those errors of fiscal policy, monetary policy and regulatory policy is Gordon Brown. I thought we'd already settled that.
I can see why Gordon Brown and Mandelson and the rest of the disingenuous cabal of economic beserkers would seek to deflect the blame. After all, who wants to be 'outed' as the single-handed destroyer of the worlds fourth largest economy. But after a decade in power, doubling of national debt, presiding over rampant house price boom and bust, the first run on a bank since the days of Charles Dickens and to then sit there with a straight face and blame the Americans. Or Margaret Thatcher?
It's just all a big joke to some people. See what you can get away with. The political equivalent of selling memory foam mattresses to old people and charging them 10,000 quid. Then justifying it with the rationale that, well, if they didn't want it they wouldn't buy it!
Same with this government. Pull any old stroke. Tell any old tale. Just keep your feet under the desk and loot, plunder and pillage. It's becoming like Nigeria.
That gob of phlegm running down your face? That's not rain. That's Gordon Brown spitting in it.
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All 3 of these stem from the "revolution" orchestrated by Margaret Thatcher in the Eighties. So, yes, a failure of Thatcherism is spot on.
Impeccable logic, actually.
I'd get my 'logic' looked at if I were you. You didn't buy your 'logic' from Tony Blair did you? He's not to be trusted you know.
It is a failure of the present government. At every conceivable level.
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Good comment.
It's odd the Tories won't accept this when they claim they've changed. If they had changed as they claim they'd have a different and more honest view.
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It's odd the Tories won't accept this when they claim they've changed.
I guess it would be easier to accept if every budget and pre-budget for the past 11 years Gordon Brown had got up and said. 'Thanks to Margaret Thatcher's prudent policies we have enjoyed 63 quarters of continuous growth. Let's have a big round of applause for Lady Thatcher and Ken Clarke.'
Credit where it's due and all that.
But no. He inherited an economy in the best health in a century, immediately claimed all responsibility for its robust good health and then set about slowly poisoning it. Then, when last month it's at death's door he claims credit for 'fixing' it. Manchaussen by proxy with the UK economy.
If anybody was placed to fix it then Gordon Brown was. He was the one who poisoned it. And it still took him months to administer the antidote. More cynical observers would claim he delibrately withheld the medicine on purpose. It's not like he wasn't being pleaded with to help out earlier. It's not as if he hadn't been told what he needed to do months prior.
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#88 grandantidote
"74 oldnat
Do they grow sour grapes in Scotland or is it only in your part."
I think you are a little confused - none of those comments were mine.
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A £2.7 billion "fix" to the 10p tax fiasco just before a scottish by-election.
A huge interest rate drop just before a scottish by-election.
Probably just a coincidence, I know. But it's difficult not to be cynical with this spin-obsessed government.
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It will be interesting to see the long term effect of the new company UK Financial Investmets Ltd, the FSA's tighter srutiny of banks and the Bank of England's 'discount window facility', where the banks illiquide asstes can be swapped for the liquide government debt.
All these initiatives show that the government is at least taking a good active approach on the matter, but how much difference will this really make?
The 'discount window facility' sounds like an effective way of reducing high LIBOR rates, which is a core reason for the reluctance of banks to folow official interest rates; but Im not sure how the central bank will set a price for these illiquid assets as the nature of their components and risk will make them hard to rate.
The FSA moving into areas including current accounts, personal loans and savings is annother new initiative, but these areas are already enforced by the Banking Code Standards Board. Im not sure how that arrangement will accomplish a great deal with the potential for conflicting interests.
Finally, the UKFI Ltd has the main objective of ensuring fair lending deals for small businesses and mortgage holders. The £37bn recapitalisation has left the government believing that it has some control in making the banks change their lending habits. It doesnt. This has been shown by the 20 lenders withdrawing their tracker mortgages, Abbey passing on a full rate cut on their standard variable mortgage... but raising the price of their tracker before the expected rate cut; and Lloyds TSB announcing that they will pay off all their preference shares and resume dividend payments within a year.
With a lack of monetary influence in the economy at the moment (at least under the LIBOR falls), the government needs to pair this with expansionary fiscal policy (cutting taxes and increasing government spending) if it really wishes to have an immediate influence on the British people.
There is the argument that this should not occur, due to the government already breaking their golden rule and stable investment rule (even though the PM strongly denied this on Prime Minister's questions yesterday, I thought that fact was a given!) But this point should be noted, as our automatic stabilisers have not kicked in yet, so a greater deficit is yet to come.
However, I think that expansionary fiscal policy is justifiable in this case, as the higher interest rates as a result of a larger national debt is unlikely to cause much crowding out of the private sector, as investors are too busy holding onto thier safe government bonds to invest in capital ventures.
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@ 111
Ahh my young Padawan. You forget the main reason we are ill-placed. We were running structural deficits of 3% of GDP before we entered a depression.
I'm afraid not, oh wise one. The main 3 reasons are as I stated. Government debt is on the margins of the problem.
Furthermore, the boom in house prices (which seems to be your biggest bugbear) was created by banks mispricing risk in their rush to make what they considered easy money and people doing just the same. It wasn't that official interest rates were too low, it was that the spread of mortgage rates to base rate was too low. It wasn't the principle of self cert or BTL either, it was the fraud perpetrated in both sectors.
Plus a failure of regulation, sure, but on the whole we're talking private sector excess - too much competition, too much greed.
U blame Gordon Brown if U want to (I can sense how angry U are and it's important to get it out, I know) - any case, I enjoy reading your stuff but it doesn't change the fundamentals of what's happening.
Your economic analysis is noddy level and your political analysis is wrong. Sorry mate.
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Your economic analysis is noddy level
No need to be rude my Padawan. The economic analysis is simple to be sure but then the reasons we find ourself in such a catastrophic economic bind are simple.
Low interest rates, massive government and private debt, massive deficits, regulators reduced to punters at a pole-dancing club - look but don't touch.
and your political analysis is wrong.
All on Gordon Brown's watch.
You might not like it. It may not sit well with your pre-conceptions of the high moral ground of this government but them's the facts.
This government borrowed money to the hilt, flooded the economy with money, denied there were any risks, turned a blind eye to the housing bubble despite overwhelming evidence of its existence, rigged the independent BoE's remit to further pump up the bubble when the borrowers stopped for a breather just before the 2005 election...
And then, when the whole thing inevitably went 'pop'... blame the Americans. Blame the banks. Blame the 'age of irresponsibility' (Neatly wedged in there between the 'Age of Change I' and the 'Age of Change II'. Blame Margaret Thatcher.
Who? Me guv? It wasnae me.
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Stop messing about with the economy. Nationalise all banks immediately without compensation. Make them lend properly and end this artificial recession.
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It did not go unnoticed, Mr Robinson, that you adopted the old hack's trick of asking the one question you KNEW your interviewee could not and WOULD not answer publicly and by repeating it again and again giving the allusion of an intrepid reporter.
Naughty, naughty.
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Labour inherited an economy with a broken infrastructure and systemic failure waiting to happen. The infrastructure has been fixed under Labour and the systemic failure the CBI and Tories opposed fixing all the way has exploded in our faces. A Labour landslide at the next General Election will give Gordon Brown the mandate to take on these forces of failure and corrosion.
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What great haste the banks were expected to act with. I expect that even before the staff had emerged from the traffic jams, half the media and a few dozen politicians were camped on their doorsteps demanding a rebate on Octobers mortgage payments. There is time to carefully consider actions of this nature The loan from us (taxpayers) to the banks will take longer to pay back if the interest rates are cut too much too soon and more irresponsible borrowing could be encouraged. Lets not continue applying pressure in this way and give banks time to sort themselves out. A far more urgent task for banks is to rid themselves of the high ranking staff who placed pressure on their assistants to lend irresponsibly. BBC radio recently interviewed one of these people who feared for her job if she did not meet her lending targets.
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@ 122 - charles
"Labour inherited an economy (1997) with a broken infrastructure and systemic failure waiting to happen."
- acknowledged across the financial world that the UK economy was the strongest ever inherited by an incoming government, combined with one of the strongest pension provisions for its people in the world.
This is before the already announced windfall of £27 billion for mobile phone licenses was paid into the UK coffers.
"The infrastructure has been fixed under Labour and the systemic failure the CBI and Tories opposed fixing all the way has exploded in our faces."
Infrastucture has been fixed?
- pensions raided and destroyed, forcing all people currently under 40 to work years longer before they can fully retire
- highest level of personal debt the people of the UK have ever had
- UK banking system "2 weeks from total collapse" to quote the bank of england
- banking regulation (brought in by labour) that failed completely to spot the huge problems coming, that financial experts around the world warned about
- discrimination on all fronts, from insurances to mortgages, from energy supply to council tax bills, from cancer drugs to dentistry, etc. despite record amounts of taxpayers money being spent to "end discrimination"
- £400 billion (approx £8000 for ever voter) being borrowed to prop up the UK financial system
hardly fixing the infrastructure is it!
"A Labour landslide at the next General Election will give Gordon Brown the mandate to take on these forces of failure and corrosion"
you are not viewing things through rose tinted glasses, you are politically blind!
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Instead of giving the monies to the banks to help out people who are facing repossession the money should have been given to Housing Associations so they could repay what was owing on the property to the financial institution and be given the leasehold/freehold. The families would then become tenants of the HA and pay rent. This would more halve the people on waiting lists who are threatened with eviction. It would also mean that no one would come out a winner of this crisis crunch when it finishes in a few years time, the system they have used means every "home owner" who has been helped will be able to sell and make a profit. What does the tax payers get from it? after all, everyone will have paid in but very few will see a penny back!
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denzil @ 124:
I suspect that Charles may well be Gordon Brown in diguise. They share a number of worrying characteristics.
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You might want to enquire why the Treasury's mortgage division Northern Rock has withdrawn all its tracker mortgages....
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"plus Bradford & Bingley which is effectivley closed to new business."
Since, during last week, it was still possible to put tens of thousands into a new fixed-rate 6.5% bond in B&B on the high street, I guess you must be talking about the non-savings bit that didn't head into the arms of Abbey/Banco Santander?
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"plus Bradford and Bingley which is effectivley closed to new business."
Since, during last week, it was still possible to put tens of thousands into a new fixed-rate 6.5% bond in B. and B. on the high street, I guess you must be talking about the non-savings bit that didn't head into the arms of Abbey/Banco Santander?
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#118 : sagamix
"Furthermore, the boom in house prices (which seems to be your biggest bugbear) was created by banks mispricing risk in their rush to make what they considered easy money and people doing just the same. It wasn't that official interest rates were too low, it was that the spread of mortgage rates to base rate was too low. It wasn't the principle of self cert or BTL either, it was the fraud perpetrated in both sectors.
Plus a failure of regulation, sure, but on the whole we're talking private sector excess - too much competition, too much greed.
U blame Gordon Brown if U want to (I can sense how angry U are and it's important to get it out, I know) - any case, I enjoy reading your stuff but it doesn't change the fundamentals of what's happening.
I'm sorry, sagamix, but your explanation doesn't work at all, for me.
I'd suggest that Gordon Brown had/has a duty of care, and that by failing to appreciate the, perhaps, perverse reaction of people and banks to the circumstances that he engineered, he's been negligent.
He's been elected on a platform of outcome-responsibility, and it really isn't possible for he and his apologists to say now that, really, this wasn't the case, and that he should only be judged on the quality of the good intentions surrounding his policies.
Of course, you can argue that the poor-quality outcomes of his policies could not have been foreseen, and that he is therefore not negligent. But this, I think, is different from the thread of your assertion that he should not be held responsible for outcomes at all.
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I don't think I would be feeling very happy if I was part of a nationalised bank - we only need to look at what happened to all the nationalised industries that were once British owned - being nationalised is the first step towards destruction or ownership from abroad. I hope the bankers enjoy their final fling at our expense.
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Still no real rate for the consumer, unless you are a saver and the rate is cut immediately!!
Also in bailing out Lloyds TSB, does this mean the largest Olympic Sponsor is now the British Public?
Surely this should be also looked at, Lloyds asking for the money from the bank of england, so how can they sponsor the olympics??
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The government owns Northern Rock, yes? I have a mortgage with Northern Rock. Does anyone who maybe in the same situation as myself think that we will receive the full one and a half percent mortgage rate cut? There is a worrying silence from the chancellor and the prime minister over this subject. They are pressurising other high street banks to do this so why not the one that they own? Maybe it would be a good precedent to set for the others to follow??? Is there anyone else on the blog in the same "boat" or thinking along the same lines? Or have any answers??
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It would be a fantastic idea.What good are banks who do not lend.(a car which won't go is useless so get rid of it,and replace it with somthing that works) .So if the exsisting banks dont work get rid of them and replace them with one thatdoes.
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