Brown's cautious bank reforms
"They are the servants now".
That's the nub of Gordon Brown's vision for our banks, as outlined in an article he's written for the Observer newspaper.
Which in a sense is a statement of the obvious, since almost no British bank would be alive today if it weren't for the support of British taxpayers in the form of loans, guarantees and investment from us.
But what's striking is that although he has extraordinary and perhaps unprecedented power over the banks, the prime minister's programme of change for the banking system is strikingly conservative (small "c").
And much of what he's suggesting will be seen as closing a stable door that was left wide open during his many years as chancellor.
Even his eye-catching reflection that perhaps "we should control new mortgages for more than 100 per cent of house value" isn't a formal pledge to outlaw those homeloans that have been shown to be particularly risky by the losses experienced on them by Northern Rock.
What's perhaps more significant is that the prime minister explicitly rules out a formal separation of retail deposit-taking and investment banking.
Under this prime minister, banks that look after the savings of households and businesses will not be banned from engaging in speculative trading in securities, even though such trading and investment has caused so much of the losses that have hobbled the banking system.
He is saying no to a British version of the 1933 Glass-Steagall Act, or the kind of sweeping reconstruction of the banking system that was prompted by America's Great Depression (arguably, an important contributor to our current woes was the abolition in 1999 of the prohibition on US commercial banks engaging in investment banking - which allowed the creation of the modern, horrifically loss-making Citigroup).
This is how Brown puts it: "We do not envisage, as some have advocated, a rigid divide in future between 'narrow banking' - retail and corporate deposit taking - and investment banking and trading conducted at an international level".
Much flows from this, including that we as taxpayers will continue to provide a guarantee to banks, even those engaged in what many would see as high-risk international speculation, that we won't let them collapse..
Why is the prime minister keen to maintain this pact between taxpayers and institutions that underwrite and sell equities and loans transformed into tradable securities? Well he remains persuaded that "global financial flows and liquid capital markets have brought massive benefits to our economy".
So Brown is keeping the faith with financial globalisation: "there is no room for parochialism or protectionism in our model of the future", he says.
But note that he says global banking can only be made safe if there is effective global regulation, not "a patchwork of national regulators."
So it's worth pointing out that there is a bit of a rupture here between the traditional notion that where taxpayers' money is at stake, decisions should be taken by national governments (that there should be no taxation without representation).
Or to put it another way, the sanitisation of financial globalisation explicitly requires us to be happy as taxpayers to underwrite global banks that call themselves British, even though we as taxpayers would have only modest influence on the rules constraining the behaviour of those British global banks.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~32~RS~)
Comments
Sign in or register to comment.
In Browns first and second budgets he made massive points that boom and bust was offten driven by uncontrolled price house inflation and the his policies would explicity prevent a run on house prices.
A few years later he was hailing the boom in buy to let and remortaging as the resion that the UK was beating downturns. In fact he was ridicalling other countries for not relaxing their banks lending rules.
Even last year he was still boasting about how well we were doing and that house price inflaction was a refelection on his skills.
Now its the USA's and the banks fault, and he had nothing to do with it and anyway it was the Tories in the early 90's that de-muturalized the building societies and relaxed all controll on lending that has cause the mess.
So can I ask just one quiestion:
Exactaly what did G.Brown do during the 11 years as chancoller to kerb a run on house prices thus preventing the boom and bust that one would cause he predicted in his 1997 budget?
Complain about this comment
So essentially, the banks can behave pretty much as before but now they are underpinned by tax-payer guarantee, That doesn't seem right now, does it?
Complain about this comment
I find it appalling the man who for years has said that British banking benefited from the light touch of regulation is still making decisions in this country....
It is after all the light touch that has caused all this recession and if we dont stop him shortly we will have a full grown depression on our hands....
All the correspondents are letting him away far too easily.
Complain about this comment
Just a second thourt, does his descision that 100% mortages are a really bad thing and should be banned, mean that the goverment is going to lead by example and stop 100% mortaging ever expenditure capital project thru expensive PFI.
After all the Goverment can borrow at 2-3% off the money markets but Mr Prudent insists that we borrow off book at 10-15% via PFI.
Also if we inject X Million to help out a bank that is currently lending us Y Million under an expensive PFI debt it would of been prudent to insist that a large percentage of Y was paid off as a contition for the injection.
Complain about this comment
The grand vision according to Brown
Do we have to wait for the markets to decide on Monday what they think of this "blue sky thinking"?
I think we need much further clarification of this, where is the detail.
If you, Robert, are already sceptical of its effect then is that the same view as your "insider"
Hope that you had a nice break,
Complain about this comment
"we should control new mortgages for more than 100 per cent of house value"
Really? Hmm now one would have thought the time to do that was when house prices were obviously running out of control. Say 5 years ago. Gordon may have noticed that number of 100% mortgage products currently available.
1 from Coventry Building society for existing members in Negative Equity.
10% mortgages allied to high salary multiples were the problem. Gordon's oft touted "affordability" arguments kind of relied on full employment didn't they? a 6 * Salary loan kind of becomes an issue if you haven't got a job a 3 * Salary loan is probably an issue too but obviously only half as big.
In order for Gordon to achieve what he wants house prices will need to fall by another 25%. It's probably what is required but since people have assumed that house prices only ever go up and have planned their futures accordingly this correction will mean that Labour are unelectable for the next 25 years.
Complain about this comment
I'm sure this interview will produce endless whining.
The truth is that despite all the problems it causes, once the current period is done in a year or two there will be enormous money to be made again from financial speculation. Any bank that doesn't do will lose out to international competitors who do, and the names on the high street will reflect this as it does at the moment.
We can bleat all we like about unfairness, risk and 'privatising the profit and nationalising the loss', but everyone here will put their savings where the interest rate is best, and take out mortgages at the lowest rate. If those come from an irresponsible bank, you'll not care, so a) stop pretending that you do, and b) hope that the bank in question is domiciled here or in Europe so you see some of the benefits of taxing its profits.
This is about planning for recovery, where the business model is much the same as before, perhaps with a little tinkering to curb the lunatic fringe. It's not pretty, but it's realistic.
Complain about this comment
All too little far too late. The horse has well and truly bolted. Gordon Brown's desperate attempt to corral what is now a runaway horse with no rider is destined to end in tears both for himself and the owner of the horse.
Complain about this comment
"the PM explicitly rules out a formal separation of retail deposit-taking and investment banking ... we as taxpayers will continue to provide a guarantee to banks, even those engaged in what many would see as high-risk international speculation"
And, presumably, we must continue to accept a cosy, easy-going relationship between the regulators and the regulated that Brown has perpetuated.
Welcome back to the Smoke, Robert !
Complain about this comment
I couldn't believe my eyes when I saw this suggestion. I was astonished at the honest and clear headedness from a government minister.
For the first time he seems to have realised that too much leverage got us into this mess.
For the first time he's not entirely blaming the banks for creating this mess. But almost blaming his lack of regulation.
In many places in America we have seen house prices fall by over 50% over the past 2 years. If this can happen then it means anybody who took out a mortgage where they didn't save more than 50% of the cash themselves is taking advantage of the banks and the banking system. And since we now regularly bail out the banking system it means these people are taking advantage of their more thoughtful neighbours (through inflation or taxes).
Society has known for over 75 years (since 1933) that if you borrow over 50% of the value of a speculative investment and if that speculative investment bursts then the banking system is left holding the bag.
We need to place more blame on the feckless who took out any mortgage over 70% since these people are taking advantage of the banking system and the rest of us.
Merely buying a(/many) property with somebody else's money and letting it out to young people is not contributing to society. It is creating a young generation of people who cannot afford their own homes and should not be rewarded.
Complain about this comment
Gordon Brown seems at very long last to be taking on board the reforms that many commentators suggested to him a decade or so ago - some stable, some horse, some bolt!
Be better late than never - If only these 'reforms' had been implemented a decade ago when I (in letters to the Treasury in 1999) amongst others pleaded for him to do so in the UK housing finance market!
The Observer article, that appears under his name, also suggest a limiting to the maximum multiple of income for any advance.
This whole set of reforms suggests a re-basing of interest rates upwards to levels more normal in the 70's and 80's - but not we hope to the extremes of the levels briefly enforced by Mr Lawson.
I also think that the aims while in general to be welcomed do pose a problem - namely, how from here to we get there without destroying the UK economy? This has always been the problem ever since the crash of 2008. The measures taken by the Government and the Bank of England have been working directly in the opposite direction to those now outlined by the PM. The Bank of England is still desperately trying to re-inflate the burst bubble though insanely low interest rates whereas Gordon Brown speaks of of a policy direction that is trying to continue to continue to deflate the housing bubble.
(I also wonder how he can say these things and still operate the financially illiterate PFI system and not even notice the dichotomy?)
Complain about this comment
The horses have indeed bolted and the PM is closing the stable door. Unfortunately it is the wrong stable!
The only thing that is keeping Gordon Brown in power is his Commons majority, acquired by Tony Blair. In previous governments he would have had to resign.
Complain about this comment
Lessons have been learnt - not.
It was the investment banking practices that brought down the whole banking system.
I thought the clear lesson learnt from all this was the need to separate retail deposit banking from investment banking.
In other words: protect Joe Public, but leave the gambling dens open for those who want to live and die playing the risk game.
Complain about this comment
if i ruled the world i would....
undo all the sophisticated (dodgy) financial instruments
reverse the selling of the loans from debt buyers to the
original credit providers who gave (dodgy) loans without any
proper checks eg to unemployed housewives with no income
the credit card and loan providers should buy these at the
original (dodgy) price they sold it at when they were booming
these loans will be paid back at reasonable interest rates or
via free debt management companies paid by the industry
or insolvency voluntary agreements also know as iva's
apparently the industry including hmg deliberately make
people bankrupt and lose more money eg to kpmg as they
incorrectly deem some as not acting in the interest of the
state
each big fraudulent mbs package is made up of several small loans
which have been secured against properties as a means of theft
Complain about this comment
There is a lot of talk of getting back to banking basics but this appears to be impossible at the moment.
Simplisticly Sensible Bank borrows from it's customers at 5%, lends at 10% and keeps a liquid margin of 20% to cover withdrawals. Everyone is happy.
But Sensible Bank can't do this any more as interest rates are virtually zero. So Sensible Bank can't borrow and therefore can't lend unless it gets its money from the international markets - impossible, or government.
If banks were able to borrow and lend sensibly again, paying investors a reasonable rate of interest, wouldn't this provide urgently needed funding for industry as well as an income on pensioners savings?
Complain about this comment
if there ever was a (proper) global system / economy
without any holes backdoors or inconsistencies etc
i would reinput all the data from y2k back to today say
as a sanity check verification for fraud identification
regarding movements of funny money from here there
everywhere which disappeared up the current systems
backside
Complain about this comment
It looks that there some lights in economical fields so people can start their business again. However the shadow is still hanging and hope that this changes will take a good work immediately.
[Unsuitable/Broken URL removed by Moderator]
Complain about this comment
I don't think the nub of it is 'they are the servants now'.
The message is rather 'We got it wrong for the last ten years. There is far too much debt in the UK, and we have to manage it down. Quantitative easing is a nice piece of wallpaper over this process to make you all think easy credit will return. But, in fact, we will be reducing it.
Complain about this comment
Oh that'll all be fine then!
We have the UN effectively working to keep safe the population in areas such as Darfur, Palestine, Congo, Iraq, Bosnia, Rwanda, and all the other parts of our world...
And now we are having what? Global Financial Regulation - well nothing to worry about.
Behave yourself Gordon! Please!
Complain about this comment
Oh that's just great that is.
First he's used tax money to prop up a failing investment market speculating on house prices and now he's going to stop anyone who doesn't already own a house in the South East from ever buying one.
Let the market collapse, institute a 110% tax on house sale profits above inflation and voila! no more housing bubble.
Complain about this comment
I think I might buy a copy of the Observer when I'm down the Supermarket later, and read it for myself...
The one thing that concerns me in your account Robert, is the lack of separation between retail and investment banking.
I'd have thought there was an excellent case for separation, after what's happened...
Complain about this comment
He is pulling your leg Robert. There will not be enough taxpayers and those that do pay tax will be on minimum wage taking care of the elderly. Everyone else, just about will be unemployed - or part of an expontential growth in the black economy!
Complain about this comment
Rob,
We are entering Depression 2.0, and all our PM has to offer is a wishy-washy, neutered check list of unachievable objectives.
Why do you go so easy on Gordon Brown, the unelected, certainly most underachieving PM we have ever had? Is it because highlighting his failures would throw us, as a nation, naked in front of the trembling Emperor?
Why have you blether like an apologetic house wife trying to justify the mistakes and idiocy of the husband she wished she never married?
Complain about this comment
Gordon the Great rewrites his history. Robert - have you heard of the charity "The National Fund" registered with the Charity Commission No 1046814. Why doesn't Gordon encourage the bankers and his cronies to donate their bonuses. Stanley Baldwin apparently donated a fifth of his wealth. Maybe one day the charity may be able to achieve its aims of paying off the national debt! And as for transparency do you know who the THE NORTHERN TRUST FIDUCIARY SERVICES (UK) LIMITED is. Apparently they are the trustees but the "veil of incorporation" starts there.
Complain about this comment
Some good sense from Gordon at last.
But following years of bank-funded property speculation, which has caused the collapse, we now have the possibility of international debt defaults.
What a dopey lot we are in the west.
We encourage countries like Ukraine to join our club, lend them a fortune to create a stable capitalist economy, and then trash their currency so they have no chance to repay.
We have to RESPECT them and their currency, and not allow currency speculators to wreck the whole thing.
We may need to fix exchange rates at a reasonable level...without this recovery by recapitalisation cannot work.
Property speculation...currency speculation....another disaster.
I have an unshakeable faith in the fact that governments everywhere can be amazingly dumb.
Complain about this comment
The test as to whether Brown's approach is working is what happens to industry.
If there are more manufacturing start-ups, our exports grow and we start building a presence in new tech areas as well as ones we'd previously abandoned then we could say he's succeeded.
He won't of course.
Complain about this comment
Brown's apparent late conversion to proper regulation should not deceive anyone. Indeed even in his words there is already equivocation. Blair and Brown are jointly responsible for the severity of the mess we are enduring and they are still wedded to the Americanisation of our society and economy.
If the labour party wishes to avoid a dozen years as a political eunuch it must rid itself of Brown and so called 'new Labour' urgently. State regulation and planning of a mixed economy a la europe is the only credible alternative.
Globalisation of finance is just another way of saying return to the last 12 years - fabulous wealth for a small elite, inherent instability and periodic impoverishment for millions. Globalisation of manufacturing is cheap goods, produced by low paid workers and cheap energy, that have to be trashed after a few years with unsustainable environmental consequences.
Complain about this comment
The Lending system is broke and corrupted.
The cash poor in society like families(ie the future of humanity) usally pay the highest interest rates and get the smallest houses, while the cash rich usally not families pay the lowest interest rates and get the biggest houses. The mortgage system needs taking over by a goverment to end the madness and move forward (note I said a goverment)
Complain about this comment
Robert, it's shocking that Brown is still clinging to the old ideas and the old 'order'. These 'announcements' amount to nothing. He and his party are totally wedded to the old established way of doing things. New Labour have become corrupted by the financial system they helped establish. Ban 100% mortgages? The banks have effectively done that already. It's about time he got his head around the fact that we want 'real' regulation, not sound- bite speeches that amount to zero. What the hell is wrong with this party? What a shambles. It's sickening to see him parade around the place as some global financial 'fixer' when in fact he and his party are trying as hard as possible to massage events to make it look like they're actually doing something. People are losing their homes and jobs for God's sake and all he can do is make pointless no-content speeches.
Complain about this comment
Robert,
when will people realise that the government has not taken over the banks, the bankers have taken over the government.
Just ask any of those who used to work for the banks what form of mortgage subsidy they got. Just ask them, if you dare.
Complain about this comment
It was big % loans and ridiculously lax lending - i.e. self-cert, 'liar' loans, NINJA loans - that caused all this. The BBC even made documentaries about mortgage introducers lying on forms, yet still cheerleaded the whole grand farce along. This government, particularly Brown as chancellor, should be held to account for it. There not be headlines, as on the BBC, implying Brown is going to save us all from it. There are no 100% loans any more anyway.
Complain about this comment
Soon we will be treated to another bit of grandstanding by Brown when he goes to
meet Obama. He'll probably waffle on about "a special relationship". It's special alright. Especially our relationship with Citizens USA, a subsidiary of a British High Street Bank. Citizens' customers are already receiving substantial benefits in the form of advantageous loans and mortgages of a kind that are history in the UK.
P.S Good to have you back. Keep safe and well.
Complain about this comment
Does anyone here on the blog wonder why Robert won't post on Chantilly?
Robert?? I'm all ears!
Here we are, trying to chew the fat and hopefully come up with some suggestions to help get out of the merde, yet out CEO-in-Text won't at least acknowledge the existence of a stealthy elite who think they are going to call the shots?
Chantilly is in the same state as Langley. Google it.
Complain about this comment
PM: I baked a cake lets eat it!
GB: Have you got insurance?
Complain about this comment
global financial flows and liquid capital markets have brought massive benefits to our economy".
What a load of tosh, just look around can anybody see any benefits? And now the pillock has given even more power to the banks to mess up faster than before.
Are we forever going to be stuck with the monetriast and keynesian view of printing more money and over burden the population. is this a government for the people? NO and it never has been.
"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." - John Maynard Keynes
Come on people even from the man himself, how can they follow this and expect it to work.
All you economists are pathetic and limp wristed and obviously have no idea what you are doing. no wonder the BNP are rising in popularity.
A totaly free market with sound money and limited government is the way forward surely... but alas this government has no guts to stand up and be strong against the euro elite. Death to the empire!!!!
Complain about this comment
I wish someone would sit down and think these things through. OK no more 100% mortgages so that means banks will apply stringent 3x salary or 3 and a half joint salaries for home buyers. That means even in today's depressed market people must be earning in excess of £30,000. So will this aid the property market recovery - I think not. A far better suggestion is to introduce variable interest rates so that homes may be 3%, cars 5% etc. This way any sector can be regulated to avoid over heating, money is a commodity and it's no different from oil or gas.
Complain about this comment
Banks have NEVER been anyones servants! About 2-3 years ago when our son, not at the time very well paid, was negotiating for a mortgage, and having no problems whatsoever, my husband reflected that at the age of 16 & going to work for a firm that paid salaries into bank accounts, he had to go, accompanied by his father, for an interview with the bank manager to see if he was suitable to become a customer!!
That bank has long ceased to exist, as has it's successor, both have been swallowed by a "global" bank.
Complain about this comment
Well done Gordon . Another amazing plan!!!
If buyers are only to be loaned say 3x salary then prices will neeed to fall considerably before anyone will be able to afford on earnings alone.
Add to fact that a meaty deposit will be required then the market will go into hibernation until these deposits can be saved.
It is a pretty depressing thought for an already stagnent and falling market.
And what about re-mortgaging???.
Negative equity will prevent many people getting a remortgage at a more affordable ans better rate, never mind buying another property.
So low interest rates. Who is getting the benefit. The banks who will roll out the SVR to all borrowiers at the earliest oppertunity and pay savers a pittence.
And why save ...to get a deposit of course.
WHAT a VICIOUS CIRCLE.
You couldn't make it up for a comedy sketch.
Captain Mainwaring for chancellor, at least he had some old fashioned banking values.
Complain about this comment
Brown is just a bank lackey. We're not going to see any reform significant enough to make a difference from him.
Complain about this comment
When globalisation of markets in goods and services took hold in the latter decades of the 20th century, the UK suffered in terms of goods' manufacturing, because our labour costs are much higher than most other industrialised nations. Luckily financial services filled the gap. This was enabled by a liberal regulatory regime. The result was that at its peak, financial services represented 45% of the income of UK plc.
As the PM wants to restrict our ability to compete in financial services on the global stage, I hope he has a bright idea to fill the gap. We can't go back to manufacturing, our climate and landscape isn't suitable to enable us to rely on agriculture, and neither tech/biotech nor biotech is large enough.
Perhaps he envisages we'll be a nation of shopkeepers, civil servants and burger flippers?
Complain about this comment
Haven't read the article yet, but on reading your blog I am left thinking 'so what'? What is he actually going to do the right the wrongs? It's like saying 'I know I need to lose lots of weight. I know how to do it' BUT I'm not actually going to take more exercise or eat healthily, I just think it is a good idea and may be it will miraculously happen overnight! If a government can de- regulate at the stroke of a pen, it can re- regulate at the stroke of a pen.
Complain about this comment
If bankers are the new servants, please can I be a servant too ?
Servants get unlimited opportunity to gamble and pocket the massive winnings themselves, but when they lose we the taxpayer give them our money, and even give them a little bonus on top of their big salary too.
Complain about this comment
coral boom you are right the the black economy is is set to soar. we have been shafted for years by a two party political system which has no chance of delivering any semblance of a sustainable economy. at the forthcoming european elections i urge the voters to ignore all the main political parties either voting for a minority party or by spoiling the paper to show the establishment we have had eough before we see serious civil unrest.
Complain about this comment
"there is no room for parochialism or protectionism in our model of the future",
Well you read it here! GB is commiting you and me to the deepest/longest depression that you will ever experience.
Whilst all of our major trading partners talk global but prepare protectionist policies we will continue to be left rudderless in the storm desperately sending Mayday messages - but nobody will be listening.
Complain about this comment
Exactly how many Chance-llors does the UK have? Pity there isn't a conductor capable of ensuring they sing from the same hymnsheet...
Darling suggests they start printing money, Brown calling for responsibility...excuse me, can I lend you a pair of duelling pistols, gentlement, as you clearly have an affire d'honneur between you?
Complain about this comment
Another announcement by Brown to deflect attention away from himself. The man is a snake. For ten years he facilitated the economic "boom", was happy to take credit for the apparent prosperity and to be photographed, smiling, with the very bankers he now vilifies.
The leaks by Downing Street to the press (specifically to you Robert) have illustrated all too well his calculated manipulation of information and sentiment to protect himself. Some of the stuff has been secret, commercially sensitive information in the course of ongoing negotiations (e.g. specific details of the amounts concerned in the recapitalisation of the banks last October).
When will he be scrutinised by the Treasury Select Committee for his part in the crisis?
Respected journalists should expose him and demand he be held to account.
Complain about this comment
So people...
Starting to realise that government is by and for the banks? Has been for 300 years.
Complain about this comment
hi Robert this is a non-story and you know it! presumably placed as filler by PM's office in a Sunday paper in the absence of knowig what to say about the growing list of urgent problems that need real action
pious statements about how we shouldn't have 100% mortgages that no longer exist, redefines the old stable door analogy:
a whole Noah's ark-worth of animals in pairs have left the sinking ship and disappeared over the horizon mate!
he'll soon enough be a NINJA PM though sadly we'll get the useless Tories in his place
Gordy does seem to say one interesting thing when he suggests that retail and investment banking won't be split.
I interpret this as evidence that he is still in the pocket of the City.
He's desperately hoping that the City will be able to return to its pre-eminent position as the world hub of tax evasion and avoidance as well as other dodgy dealings, especially if the US and other markets become more regulated.
Thus, his 'they are our servants now' soundbyte is nothing more than an attempt to throw us off the scent.
Why don't you get on to the GM story, which is huge, not only here but in Sweden, Germany, S Korea and Canada, all now in play as part of a huge multinational negotiation over bail-out money for jobs. The int'l aspects of the GM bailout encapsulates several of the biggest and most interesting issues in the global slump. In Canada GM is demanding $10bn to keep its factories open and 90% of the voters are against it! Here in the UK we are not even meant to talk about it! May I ask why? It's pathetic to say the least.
Complain about this comment
Welcome back, Bob
Complain about this comment
#47
Look a bit deeper than that. HMG got into debt when Eleanor of Acquitaine paid the equivalent of the entire net assets of the kingdom to the Holy Roman Emperor in 1194 for the ranson of Richard the Lionheart, and only got out of hock a couple of years back. There's a reasonable suspicion on behavioural grounds - they won't release the accounts - that this may simply be bank blackmail to keep the UK in the place it's been since forever.
Complain about this comment
Please everyone sign this now to force the issue:
http://petitions.number10.gov.uk/LendingReform/
Complain about this comment
What a wonderful awareness of the real world. You can't get 90% mortgages, let alone 100% ones. And still not a word about real values.
Complain about this comment
People are talking about stable doors: not only is it too late to close it but Brown opened it in the first place. With all these wonderful belated ideas how does Brown think he will be able to fill the Treasury coffers - yes you've guessed it - higher taxes for you and me
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
So If Gordy wants an end to 6x mortgages, the housing market has a way to fall yet because the average house price is still 6x the average wage. Or am I missing something....
Complain about this comment
"15. At 10:55am on 22 Feb 2009, steve4000 wrote:
Simplisticly Sensible Bank borrows from it's customers at 5%, lends at 10% and keeps a liquid margin of 20% to cover withdrawals. Everyone is happy."
Banks do not lend their creditor's money. They create new money to lend to lend to debtors.
Creditor's money is used as the reserve.
Complain about this comment
Robert,
Do you work for Gordon. How much are you paid?
You are never critical of this government yet it is they who have contributed to this mess.
Not closing public sector final salary pension scheme, not stopping id cards, not stopping nhs computer project. Not stopping excessive gp salaries and pensions. The list goes on.......
Complain about this comment
Brown's comments on closing the door on 100% mortgages shows how out of touch he is.
Doesn't he know that even 90% mortgages are hard to come by now? I know a young couple who have been told they will need at least 15% deposit to get their first mortgage and they have tried every bank and building society on the high street.
Where has Mr Brown been?
Complain about this comment
As someone who had his house repossessed in the early nineties following the last debacle in the housing market, I can recall the regulatory body of the time stating that it was the Greed of the banks to "lend out 100% and indeed 110% mortgages to people who could hardly afford it, then offer no help when interest rates ravaged their ability to repay...". "Never again should the banks be allowed to lead ordinary people into such large debt without ensuring their ability to repay."
In the late 90's to mid 00's we've watched the banks turn out mortgage instruments that were even weaker in monitoring peoples ability to afford repayments (note the difference between ability and willingness - most home owners are very willing to pay back their debts). How can Gordon Brown act as though the banks were to blame when he should have been overseeing the regulators? He should have been ensuring that the situation which caused the fall of the Tories was NOT allowed to happen again - instead he sat back and let financial houses finance huge chunks of the UK economy and did not ask 'where is all this money coming from?'
It's GB that let GB get into the present situation and though he's a very clever financial whizz - he's not putting his hand up and saying 'err. Whooops. I seem to have, err, got it all wrong and I'm sorry'...
Take your share of the blame Gordon.
Your a big guy.
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
So in summary,
Brown talked a good game as Chancellor but did little or nothing, so now he's at it again as PM.
There will be no early election, they know the result, and will cling on desperately. The Iron Chancellor, will go down in history as the Iron Pyrites Chancellor
Complain about this comment
"Or to put it another way, the sanitisation of financial globalisation explicitly requires us to be happy as taxpayers to underwrite global banks that call themselves British, even though we as taxpayers would have only modest influence on the rules constraining the behaviour of those British global banks."
Is Brown writing the BNP manifesto for them?
Sprinkle a few negatives and hey presto!
Complain about this comment
So Brown is saying that the main bank problems that need solving are:
1. 100% mortgages
2. Bonuses
3. Boards of Directors
Regarding 100% mortgages, by bringing the mortgage, unsecured loan and credit card "together" or "all-in-one" accounts it actually improves the security of bank lending not reduce it.
Regarding bonuses there is no evidence that the bonus arrangements caused bank credit executives to authorise the poor lending decisions of their collegues.
Regarding bank boards, many bank non executives were higly qualified eg Wanless was non exec at Nothern Rock and had been CEO at Nat West but still did not anticipate that the B of E would refuse liquidity to Northern Rock when the wholesale money markets froze.
Surely the main poblems were:
A. Bank credit executive decisions to allow the purchase of securitised loans and CDOs without proper due diligence, which the FSA should have picked up on, and
B. Central banks being too slow to act as lender of last resort to support bank liquidity - all banks have to lend longer term than they borrow so need the insurance of central bank liquidity.
Perhaps the third member of the tripartite regulators, the Treasury, should have better managed the FSA and B of E.
And perhaps the government should itself have acted more prudedently with its own borrowing so that it would have been in a better position to help now.
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
Sadly I still read comments from people in denial of the truth, the financial system as we have known it is finished, accept this as fact people and move on.
There is no going back, there is no more `housing market,` it`s gone, all the banks are insolvent, the governments (we the taxpayers) are unable to save them and why should we try? There`s not enough money in existence to make any difference to our situation.
Time would be better spent educating the public in, and providing resources for, self sufficiency.
Wake up Britain, your time of stability is short When things start to collapse, in a very few weeks, your cities will become places to avoid.
Provide for yourselves, your state is bankrupt.
Complain about this comment
Reinstitute Glass-Steagall Act
Accepting and managing society’s saving is a sacred responsibility bestowed by the legislator exclusively upon commercial banks. The 1999 repeal of the Glass-Steagall Act in the United States, enacted in 1933, removed the wall that the Act had created between the deposit-taking commercial banks and the other types of financial organizations. Investment, insurance, and brokerage firms are no banks and their managers are no bankers. That investment firms are called “banks” is a misnomer.
The deposit-taking culture of commercial banking contrasts starkly with the culture of investment firms. While commercial banks are the custodians of society's saving and their funding is sourced primarily from people's deposits, investment firms are prohibited from seeking customers' deposits (they fund their operations from the money markets). Different funding sources evolved different cultures. Commercial bankers are typically dedicated to steady long-term banking relationships with depositors and borrowers. Commercial bankers are taught to observe caution in risk management and to view risk control structures with great respect. They earn relatively modest but comfortable compensations in the form of salaries. By contrast, investment managers are aggressive short-term transaction-by-transaction oriented salesmen with performance-bonus driven compensation schemes, high risk-taking tendencies, scant training or interest in risk assessment, along with a commensurate disregard to risk control structures--regarded as impediment to profitable deals. Investment managers describe commercial bankers as "unimaginative" and "boring".
The current banking meltdown is in a great measure the product of deregulation and eight years of a Bush administration contemptuous of regulation. The combination swung the doors wide open to non-bankers from the investment field to dominate the commercial banking industry. They cobbled together many commercial banking institutions with investment, insurance, and brokerage firms; notwithstanding, their disparate cultures, contaminating by that many of once highly respectable deposit-taking institutions. In their pursuit of millions of dollars in ill-earned performance bonuses, an era of go-go banking was ushered into the management of society's saving.
The current debacle is a result of the collective failure of greedy lenders, negligent government supervisors, obsequious internal auditors, submissive external auditors obsessed in lucrative consulting contracts with the companies they audit, as well as those pontificating rating agencies’ “experts” who are always one step behind the events and who get paid by the firms they rate.
To protect national saving, commercial banks must be kept away from investment firms. The Obama administration should restore Glass-Steagall. In the age of globalization, other countries should to enact similar laws.
Strict regulation and governmental control over commercial banks must be restored.
Prudent lending and risk management practices must be vigorously enforced at commercial banks so that sanity may be brought back into the management of society’s saving.
External auditors should perform one function only; namely, auditing. Management consultancies should be separated from audit firms.
The practice that grew in recent years of compensating senior executives with mainly performance related bonuses, instead of the age-old practice of generous salaries, must stop. Performance bonuses can be soul destroying. In their pursuit of self-enrichment, executives are tempted to not only cut corners on professional and ethical standards but also ignore the spirit of the law, and even violate the law (in the hope that they’ll never be caught). The monumental losses that surfaced in 2008 render the billions of bonus dollars paid to executives a travesty. In retrospect, bank shareholders must be wishing that these bonuses should have been deferred, at least partially, until the quality of the profits the executives had claimed would have passed the test of time as genuine real profits. Performance bonuses have also created obscene disparities in employee compensation within even the same bank, between the executives and employees of the investment divisions, on one hand, and the executives and employees of the commercial banking divisions. Such disparities of incomes replaced the old institutional culture of loyalty, commitment, and collegiality by a culture of disloyalty, exploitation, and I-only-work-here syndrome.
Sincerely,
Elie Elhadj
[Unsuitable/Broken URL removed by Moderator]
Complain about this comment
Gordon Brown's stance is obvious, surely? After the 2010 election he will not be PM anymore. He doesn't really give a damn about sorting out the economy - he recognises there is no way he can do it before next June - his priority is to keep his enormous ego inflated, hence the attempts to portray himself as a global financial guru.
Maybe he hopes for some lucrative directorships in the financial sector? If so, that would explain why he won't do the things he ought to do, such as legislating to keep investment banking separate from retail banking.
If you ask me, Gordon Brown is beginning to realise that he won't be PM for long and has his eye on a future career in the financial sector.
Complain about this comment
The STRAW GRABBER PROVES TIME & TIME
AGAIN THAT HE HAS NO CLUE!
GORDY WHEN WILL YOU HAVE THE GRACE
TO RESIGN?
Complain about this comment
Robert, I think the analogy with horses and stables is the wrong one. The present system is like a blocked loo, and you can pour disinfectant down it but it still isn't sanitised!
Complain about this comment
NU LABOUR DEBT MOUNTAIN
SOON TO BE 40K per head
No WONDER the IDIOTS want the B OF E to
PRINT MORE MONEY.
ZIMBABWE ANYBODY? GORDY?
SO MUCH FOR LITTLE MISS PRUDENCE!
Complain about this comment
You really couldn't make it up, could you? Does Gordon the Golem really imagine that we're all as stupid and Harman, Blears, Cooper and Jowell?
Complain about this comment
First of all, we need to see the government stance towards banks as part of Brown's 'blame someone else' strategy - blame Americans, blame foreigners, blame pretty much anyone else, rather than accept responsibility for a decade of incompetence. Banks are an easy target and are Brown's 'blame flavour of the month'.
Yet another non-announcement from Brown. Stopping banks from making 100% mortgages is rather pointless since they stopped doing that a long time ago anyway. And talk of tightening regulation is a bit rich from a man who accused overseas regimes of being too restrictive!
This is a headline-printing, do nothing government. The money that Gordon was going to inject into the banks has not actually reached them yet. Of the five policies for helping embattled mortgage payers, none is yet in place. The help for the car industry has not kicked in yet either. For all the talk of intervention, the only real money that has been disbursed so far has been a small VAT handout to retailers.
The irony is that, despite not actually intervening with real money, the government is presiding over a severe crash in the public finances. This combination points in the same direction that it has pointed all along - print money. Talk up deflation so that printing money seems responsible and non-inflationary. It all fits.
Brown reminds me of a certain type of army officer, of whom it is said that 'his men would follow him anywhere - but only out of a sense of morbid curiosity'.
Complain about this comment
WHEN WILL NUlabour STOP INSULTING THE
ELECTORATE AND RESIGN?
TIME THEY WERE ALL ON JSA OR WILL IT BE
INCAPACITY BENEFIT.
TIME TO EXPERIENCE THE POVERTY THEIR
POLICIES HAVE CONDEMNED 5,900,000
CITIZENS TO.
Complain about this comment
I'm astonished that you're all only discussing this from the financial theory angle. We only need to look at as the recent "foreign labour" strikes and the current situation in Ireland to see that the next massive problem for this pathetic government will be to deal with the social unrest which is surely about to erupt. This will add many years to the resolution of the problems.
Complain about this comment
RE BANKERS BONUS PAYOUTS.
ITS CLEAR THE TILL HAS BEEN EMPTIED
PLENTY OF 2,000,000 PLUS HOUSES GOING
UNDER OFFER/SOLD THE LEAFY LONDON
SUBURBS SINCE THE NEW YEAR.
NO MORTGAGES REQUIRED???
Complain about this comment
It's difficult to imagine a more irrelevant comment from a Priome Minister. Who, exactly, is now offering 100% mortgages?
More populist nonsense. We should expect leadership from our leaders, not this tosh.
Complain about this comment
Seems like only a few weeks ago the government was urging the banks to lend more money. Now it's urging them to be prudent ? Bit surprised by all of this. I thought Gordon would have said to the banks and public :
"Now - I'd really really like to see the return of the 100% mortgage".
That way Gordon can be seen to be sustaining prices, while doing nothing that costs any money and knowing full well there is absolutely no bank in its right mind will offer these mortgages in the current climate.
To anyone that has any illusions about the housing market in this country, it was a vast bubble propped up by the wholesale money markets. Now wholesale money has all but disappeared there are two options. One is to let prices correct (downwards). The other is for someone else to come in to replace the lending provided by the wholesale markets.
Fortunately I think Gordon has finally realised that the government cannot afford to step in to replace the wholesale lending. The amount required is just too big. Thus there is only one alternative, let the market find its own level.
Of course the government can't come out and say that it is in favour of a house price correction. This is political suicide. Expect a batch of noisy legislation and rhetoric which makes it look like the government is trying to sustain house prices but in fact has little effect.
This announcement seems contrary to previous government rhetoric and is a missed opportunity if you ask me.
Or maybe I'm being too cynical...
Complain about this comment
I WOULD HAPPILY FLUSH THE WHOLE LOT
OF THIS ROTTEN GOVERNMENT INTO THE
SEWERS!
THAT IS ALL THEY ARE FIT FOR!
Complain about this comment
There is very little point in talking about rules before we talk about objectives. "If you don't know where you are going you might not get there."
Having settled on objectives we can debate whether or not a given policy will achieve those objectives.
Regulation of the banking system should be designed to make sure that banks behave in a way that allows the real economy to best meet the aspirations of our citizens in a sustainable way.
I am writing this even now I am not British, but Canadian. The experience of the last depression has taught us that beg your neighbor policies will not achieve this aim.
The system of regulation for banking must somehow be international. National regulation is effectively no regulation for international banks. A Balkanized banking system is unlikely to achieve the objective given above.
Complain about this comment
And who is to head up this Global Regulisation
Could it be a role that Gordon fancies for himself?
Does the man have no guilt over the mayhem he has presided over?
Is he a complete meglomaniac?
Complain about this comment
ITS WELL TIME SOME OF THE ANTI TERROR
LEGISLATION WAS USED ON THIS
GOVERNMENT!
THEY NEED HOISTING BY THEIR OWN
PETARD!
Complain about this comment
Can I bring us back to bonuses where our PM has said, quite rightly, that there should be no reward for failure. There seems to be an evolving concensus that 5 years is time enough to determine whether or not there has been failure.
It is lucky we have no bonus system for Prime Ministers or Chancellors. If we did, presumably Crash Gordon would have happily pocketed his for the years 1997 to 2003, years essentially when he was living off the favourable legacy he had inherited. Ought success or failure to be assessed after 15 years?
Complain about this comment
Even his eye-catching reflection that perhaps "we should control new mortgages for more than 100 per cent of house value" isn't a formal pledge to outlaw those homeloans that have been shown to be particularly risky by the losses experienced on them by Northern Rock.
*********************************
Northern Rock found itself in trouble over the lending market, this together with some wanna be in the limelight journalists made the run on the bank. The scarred people in such a sensational way that money was withdrown from the market starting what it is now a recession..... which is media sensationalism to the extreme
Complain about this comment
SO GORDY??
WHOSE IN THE BLAME QUEUE TODAY???
NOT YOU!
WELL YOU NEVER COULD TAKE THE BLAME!
IS IT TONYS FAULT?
HOW MUCH CASH IS HE RAKING IN?
YOUVE BUST THE UK ! FACE IT AND GO!
Complain about this comment
I lived through a BOE Minimum Lending Rate of 17% when all mortgages were variable rate.
With QE and other indebtedness, rates will rise. If you assume rates go to the same level and assume a 3% addition for profit, risk etc you could conclude that mortgage interest rates will rise to 20%. Can anyone expect to buy a house with a mortgage at current house prices?
Maybe this is an indication of how far prices could fall.
Complain about this comment
I agree with Gordon Brown.
The way financial institutions operate need to be adjusted and be more controlled. There is a role for FSA, Government to play here as well, including assessment of risks and imbalances. However, it will be very silly for UK banks to go back to many years ago and do just traditional banking. We would lose markets and many billions of income for the country (taxpayers).
Please let's remember that these banks (who people now enjoy kicking) for years paid many billions of GBP to taxpayers and employed many thousands of people. The problem now is part of the global financial services evolution. Evolutions come with temporary excesses. Financial world will learn and continue developing. We need to actively participate in this development.
Complain about this comment
Direct quotes from Gordon Brown's first budget - 1997 -
"I am determined that as a country we never return to the instability, speculation, and negative equity that characterised the housing market in the 1980s and 1990s.
Volatility is damaging both to the housing market and to the economy as a whole. So stability will be central to our policy to help homeowners. And we must be prepared to take the action necessary to secure it. I will not allow house prices to get out of control and put at risk the sustainability of the recovery."
If only he had done as he originally said - we would not be in this mess now. He had a chance of been the best UK chancellor ever - he will go down in history as the worst.
Complain about this comment
AMUSED TO SEE HSBC NOW NEEDING EXTRA
CASH?
THE WAY THEY TREAT DEPOSITORS IS IT
ANY WONDER!
ANOTHER INSTITUTION WHO TREATS
CUSTOMERS WITH CONTEMPT.
THEN WHEN YOU COMPLAIN:GUESS WHAT?
THE CUSTOMER IS TO BLAME!!
Complain about this comment
I was thinking about lateral thinking recently which makes you see what is not said. Firstly in this whole discussion over what went wrong and who's to blame. Why not look at where it hasn't gone wrong.
When did anyone mention HSBC who seem to be surviving pretty well. Perhaps it is easier to search out the culprits than to look at what works and adapt and learn.
Second what about credit card companies such as MBNA who take advantage and whack up their interest rates while maintaining a fixed minimum repayment. They encourage payment by direct debit and of take that minimum repayment. A law that meant the min repayment be raised to a sensible level ( in most cases 2-3% MBNA interest + £5 ) and link it to interest rate changes would mean that raising interest rates would raise min. payment would deter spending which would make them think twice. But of course GB wants people to borrow and spend ( which won't happen because people are not as stupid s he thinks ). Oh for a change of government!
Wonder what would happen with few months o no gov.........can't be worse surely ?
Complain about this comment
I'm depressed by the majority of comments here. Partisan to the point of stupidity. We have had a conservative government these past 29 years. A rose by any other name would smell as sweet, a turd as foul. If there was any honesty from those who attack Brown they would admit the UK finances would be no different if we'd had a Conservative government for the past 12 years.
Complain about this comment
I can't see that the stable door is going to be shut, and Obama has plenty on his plate so its not certain he will create a perfect resolution.
Brown is still trying to portray himself as a pure victim.
Therefore he cannot suddenly draw attention to the FSA regulatory capabilities and approach as he would then have to explain why, as with HBOS, the risk analysis for banks failed over a period of years.
The bankers did not break any laws. They were creating wealth as they were supposed to.
There is no coherent move to discipline and control the use of derivative instruments like Credit Default Swaps.
There is therefore no reason to suppose that the government(s) won't continue to treat this as a "one in a hundred years" event - as though it were actually a random storm that snuck up on us and not a predictable event.
What we should see are global and national rules and regulation to make sure we harness the benefits of capitalism but don't fall victim to self delusion.
Complain about this comment
HEY THERE GORDY?
OUR DEBT WRITE OFFS IN THE UK FOR 2009
10,782,000 YTD.
19,496,000 FOR 2008.
VAT RECLAIMED/NOT PAID 5,071,565.
FISCAL PRUDENCE? END TO BOOM & BUST??
HA HA WHATEVER!
Complain about this comment
85. OldNick666:
"With QE and other indebtedness, rates will rise. If you assume rates go to the same level and assume a 3% addition for profit, risk etc you could conclude that mortgage interest rates will rise to 20%. Can anyone expect to buy a house with a mortgage at current house prices?"
Right. If you look at other countries whose currencies have cracked (Russia and Iceland, to name just two), you will see the kind of interest rates that you are suggesting.
The UK borrows huge amounts from foreigners, and will, increasingly, be in competition with others for those funds. That points towards higher rates. QE points towards a lower exchange rate, which would in turn push up the cost of the vast quantities of imports on which we are dependent.
This all points towards an eventual need for higher rates, both to attract funds and to shore up sterling.
Complain about this comment
HAS GORDON BROWN FORGOTTEN WHICH
JOB HE WAS DOING BETWEEN 1997/2007?
LETS HAVE AN ANSWER GORDY?
Complain about this comment
The reason the PM and the government cannot stand up to the banks is because the centralised banking system in Europe and America, OWN THE GOVERNMENTS!
If you look at the way money is produced, not from the government, but through the ENDEBTEDNESS of US the public. Every time you take out a MORTGAGE the bank create the finances for it OUT OF THIN AIR!
Such is the way of the FRACTIONAL BANKING SYSTEM that a 10% depostie on a £100,000 can create £900,000 for the BANKING SYSTEM.
This is why we have INFLATION RATES of 7% which as anyone who knows anything about EXPONENTIAL GROWTH CURVES is entirely UNSUSTAINABLE.
The only way the puplic will ever get out of this MESS, is if we understand how MONEY IS CREATED and begin to protest against this LAWLESS system.
Here are some names of people who have tried to get rid of the CENTRALISED BANKING SYSTEM:
A. Lincoln, printed his own money, the 'greenback'. (Assasinated)
Kennedy, Printed his own money, requiring no interest be created. (Assasinated).
Ron Paul - Republican candidate for the 2008 elections - wanted dissolution of centralisd banks (Systematically ignored by media.)
Will BOOM and BUST ever end? Not under this system. The DEBT MONSTER is getting bigger by the day. One day it will eat your HOME too.
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
We need stringent regulation for retail banking. The banks that handle ordinary people's pay, their current accounts, their savings and so on, should not be firmly kept away from the seductive lights of the great global casino. What's more, the bankers have revealed themselves as incompetent once they try to extend their sights beyond the High Street, surburbia and telephone banking.
However, the PM still feels that need to do homage to Maggie ...
Complain about this comment
My MONEY IS ON IMF LOANS BY 2010
INTEREST RATES AT 12 to 15% in 2010/2011
UNEMPLOYMENT/OUT OF WORK BENEFIT
CLAIMANTS AT 7,600,000 plus.
GOD HELP THE HOMELESS!!
Complain about this comment
banks are the "servants of the economy and society and never its master".
SHAME HE DOESN'T APPLY THAT TO HIMSELF AND RESIGN!
Complain about this comment
This is just Brown creating some flak so as to pretend to be doing something.
His government is a busted flush and he should go and go soon.
At least now members of the Parliamentary Labour Party are starting to wake up to the disaster they will have to contemplate in June 2010. It is no longer a case that Labour will lose the election it is whether there will be a Labour Party left after the election.
We need radical banking reform in this country and we need it now. This is not the time for contemplating your navel.
Complain about this comment
As long as we have central banking, fractional reserve lending and fiat currencies we will always be their slaves.
Say no to the New World Order.
Complain about this comment
Robert,
bring back Mortgage Interest Relief at Source, MIRAS.
Many pensioners lving in overpriced homes had the advantage of having their mortgage subsidized by the taxpayer, why not the young as well.
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
I would like to see Gordon Brown apply this principle to his own political behaviour too.
Politicians always used to be the servants of the people as opposed to their masters.
They must lead - yes, but cannot not oppress, impose, control or deceive the people they serve.
I think that the government, and the political class generally, forgot this a long time ago.
What I find so disappointing is that the banks, the regulators and the government all appear to have completely lost sight of their reason for existing.
Complain about this comment
It's a bit late to try and put the finance Genie back in the bottle isn't it?
If Mr.Brown had allowed the Bank of England to do its regulatory duties unhindered then a lot of things would be different now.
He caused the problems and is now in denial, with power comes responsibility and he can't keep claiming it was nothing to do with him when he held the reins of power in the UK finance world.
A weak regulator like Mr.Brown's FSA allowed the Banks to be overly creative.
The Banks legal teams would have checked, double checked and checked again with the FSA before launching into their many schemes. I doubt the FSA could even understand what they were being presented with, what a waste of space that organisation is.
Then Mr.Brown launched a tax raid on peoples pensions which caused the buy to let market to explode, this wasn't driven by greed but by people wanting to provide for their retirements.
By not setting a realistic starting value ie: £250,000 before you get robbed by stamp duty he has also managed to bring the housing market down in a perfect pincer movement of financial incompetence.
It is all of no importance now as we are caught in an almighty contraction which will continue until the money gets flowing again.
The Banks will sit on the taxpayers money as it is in their instinct to hoard it, it makes them happy. In a few more months I predict that 95% of bank staff will lose their jobs, Banks are in business to loan money, no loans, no business ergo no bankers.
Congratulations NuLabour, you've finally managed to bring a once great nation to its knees.
Complain about this comment
Brown is showing his true colours. He wishes to micro-manage every facet of the economy. He wants to say which mortgages can be offered, what people should be paid, what we should wear, how often we can go to the toilet, which light bulbs we can have in each room of our houses, etc.
He tries to cover his maniacal control fetish under the guise of populist notions such as "The banks are servants now". If a bank is to be a servant of the economy then nationalise it and be done with it. Forget these strange notions that banks are independent companies but somehow everything they do has to be vetted by Alistair Darling.
If banks aren't to be part of the civil service, then the government needs to establish a framework where banks are allowed to make money by taking deposits and making loans in a way that they think is competitive with other banks. Companies which speculate and gamble with other people's money need to be kept separate. A framework needs to be found so that institutions which are incompetent can be allowed to fail without dragging down the whole country. Gordon Brown's government will do none of this because he doesn't believe in the free market and never has.
Complain about this comment
If someone wrote a computer program that went horribly wrong and resulted in massive losses would you a) fix/replace it or b) click on it's icon and run it again?
History will certainly repeat itself without a root-cause fix to this problem. Option b) which is what GB seems to be clicking on is IMHO totally insane.
Complain about this comment
#74 downtide.
You're actually very right. There clearly will be social and civil unrest as this poorly managed recession precipitates more and more people into increasing poverty. In some cases, into truly dire and desperate situations.
(You just have to compare any of the job web-sites of today with those of even just a few months ago to get some flavour of what I mean).
Sadly, such civil unrest will probably be as mis-managed as the financial/economic situation.
I,m sure there will be no 'light-touch' from HMG once inner-urban riots start up - it'll be 'send in the army' and 'read them the Riot Act'. (Oh and yes, actually, I do remember the Brixton and Toxteth riots).
And that is kind of my point. The government seems to still be trying to 'solve' this problem in a way that will appease all those who thought a quick-profit and a fast-bonus style of living could be sustained. It doesn't seem to be solving it for those who just want to do a honest days work for a fair days money and to bring their kids up with some type of quality of life and opportunity.
And, that, probably is why HMG is getting it so wrong. It's playing to the wrong audience. We're gettting platitudes about mortgage relief schemes, which sound good to the ears of speculators and investors, but which turn out to be as much use as a chocolate teapot to people actually facing the trauma of repossession.
The people of the UK don't need slogans - they need action.
Complain about this comment
alexandercurzon wrote:
My MONEY IS ON IMF LOANS BY 2010
Na. They will have no money left by then.
Complain about this comment
New rail rolling stock to a Japaneese company and now the Crossrail Contract is going to a US company. I can not imagine that happening in Germany or France. Of course there will be UK jobs but like the car industry it will only be putting together and this is the UK problem. We have lost a very great part of the skill base. In fact we gave it away.
The only way to get it back is to use contracts like the above and public spending to recreate them. A few cost overruns ( perhaps less than the unemployment benefits) will be a small price to pay.
Until Brown & co realise this they can pontificate as much as they want but with no effect. The same applies to finacial commentators.
Complain about this comment
Given that our present dilemmas can be directly related to the gross irresponsibility and incompetence, not to mention personal greed and self-aggrandisement, of banking executives, the meaningless noises now being made by Brown will do absolutely nothing to bring about those desperately required substantial reforms of which our banking systems is in great need.
However, that is hardly surprising because the entire system is controlled by an 'elitist', cosy club, membership of which is carefully controlled from both within and without of the FSA., that being an 'arrangement' with which far too many politicians are complicit.
Furthermore, that body which (theoretically) is actually charged with the responsibility for ensuring we, the public, enjoy the best possible care and attention of our financial services, the government, is hardly likely to bring about measures which may incur the disapproval of its 'city slicker' colleagues. That is not least because many of those having the political influence (now and for the future) to change things, perceive the financial sector as being the most probable and lucrative source of their personally secure futures when their terms of office inevitably expire.
It is an unsavoury diet for us to have to swallow that successive governments have failed in that very basic duty of care, to protect the interests of the majority against the scurrilous, and in many instances criminal, activities of an unscrupulous minority. That is a situation which is unlikely to change, however, because protection of self-interest is a powerful motivator. It always has been and it always will be.
Complain about this comment
Gordon Brown has announced that perhaps we should put an end to 100% mortages ( not that are any anyway ).
Next expected statement.......perhaps it's a bad idea to use hydrogen as a energy source for hot-air balloons or maybe. What a genius -
Complain about this comment
On a related topic: I notice that the EU now wants to be able to exercise tighter control over the financial markets.
How a bunch of hypocrites who cannot even get their own accounts audited has the gall to suggest thay should have a role in regulating any financial institutions is beyond me.
Complain about this comment
One could argue that it was the repeal of the Glass-Steagall in the United States that opened the barn door and let the horse bolt.
I don't see why the PM should be opposed to separating deposit-taking from trading activities and services. After all, the insurance industry is barred from mixing general and life insurance business, except to support policies that are already on the books. Why shouldn't bankers be subject to similar restrictions?
And, after all, isn't the fact that building societes are primarily deposit-takers, rather than traders, that has kept them out of the mire?
I also strongly suspect that if you did a comparison of the capital requirement for a bank that's doing both trading and deposit-taking against what it would need to support only deposit-taking and mortgage lending, the difference in capital ratios would allow it to free up a lot more money to lend to mortgage applicants.
And it shouldn't be any big deal legislatively to impose the separation. The FSA needs only to ask its authorised firms whether they want to be deposit-takers or investment firms and then amend their prudential categories and withdraw their Part 4 Permissions for the relevant activities and financial instruments.
Perhaps the Regulated Activities Order may need to be amended, but I don't see why that should hold delay the FSA's actions unduly.
Savers need some protection. The FS industry has clearly demonstrated that it doesn't deserve to be allowed the flexibility and light touch of the current regulatory regime.
So Messrs Brown and Darling, if you can't take the heat from the potential protestations of the bankers, how about admitting that you haven't got the guts and getting out of the governmental kitchen?
Complain about this comment
What a laugh - I couldn't believe my ears when I heard that the Saviour of the World is now telling us that it's time for Prudence to return...
and for a return to old banking values!!!
He is completely barking. What on earth are his advisors doing allowing him to come out with such patent rubbish - it's not like he wasn't in charge during the whole sorry period.
I'm speechless.
Complain about this comment
Perhaps what we need also is a return to 'prudent government'. Brown was happy to ride on the back of the so called boom '16 years of uninterrupted growth' and encourage the banks in his years as chancellor.
Complain about this comment
Do you think that "Gord the unelected" came up with this cunning plan, to stop 100% mortgages, all on his own, ? If only he had thought of it when he was the Chancellor, as many ordinary people did, we might not be in such a mess now. The words stable, bolted and horse come to mind as they have in some of the other comments.
Complain about this comment
Finally, common sense prevails in Downing Street. The common decency to admit mistake for the past decade remains sorely lacking.
If I understand correctly that Brown suggests 85% mortgages on a reasonable income multipler (shall we say 3.5 times single income) then he indicating support for a further reduction in average house price from 160k down to 80k.
Of course, the lenders have already told him they are not prepared to lend at higher levels, so Brown is trying to take credit for stating the obvious.
Hold on to your seats. Bumpy ride ahead.
Complain about this comment
Talk about shutting the door when the horse has bolted.
Mr Brown the architect of the policies that supposedly put an end to boom and bust has shown himself as a small boy who likes to swim in the tide of public opinion....
Politics is about being informed enough to make the right decision, not the easy decision.
Ten years of believing his own publicity has led to our govt taking their eye off the ball whilst they were busy patting themselves on the back.
Its funny that all the things he criticises the banks for now, her encouraged them to do a few years back...
Lucky the pension review will only take effect after you have got your 150k + index linked pension. Not bad for 3 years in the job..
Perhaps you could chip in to help your home secretary get a proper place to live...
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
#38. Pru-Dense wrote:
"You couldn't make it up for a comedy sketch."
I think history will relate that the previous decade was the joke! This is the punch line - right in the solar plexus!
"prices will need to fall considerably before anyone will be able to afford (a house)" - yes
"what about re-mortgaging" - sorry the party's over.....
The reality is that we could not continue living as we were - the bubble has burst - it now must be let shrink there is simple nothing that can be done about it - and furthermore no political party is proposing doing anything about it- not Labour, ot conservative and not the Liberals.
Complain about this comment
It would be unbelievable if anyone fell for Brown's latest spin!
The 100% mortgages are a moot point since virtually all lenders have stopped them now anyway. Interesting though that NRock continued giving 125% mortgages for almost a year after the government first bailed it out. If would have been far more sensible to put a 90% LTV mortgage cap on NRock back then - but as usual, too little, too late!
I was amazed that Brown does not want a Glass-Steagall type separation of "Investment" and Retail Banking. We could have safe secure well regulated Retail Banks to meet the actual needs of people and business, and completely separate "Investment" banks that did what the hell they liked. Only the Retail Banks would be backed by government insurance. The Investment Banks would be on their own.
As it is, the taxpayer/government is expected to bailout banks that have investment arms dealing in instruments that are not even regulated. If Brown does not realise that he is writing a blank cheque from the British taxpayer by allowing this then really he should not even be running a small corner shop!
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
#113. Glebealyth wrote:
"I notice that the EU now wants to be able to exercise tighter control over the financial markets."
I can't see how the EU can do this without exchange control to ensure that financial transactions are related just to trade and not regulatory avoidance.
"How a bunch of hypocrites who cannot even get their own accounts audited has the gall to suggest they should have a role in regulating any financial institutions is beyond me"
"own accounts audited" - If I recall correctly the reason why the accounts fail to get approved is mainly due to the constituent countries of the EU not following the rules or being able to provide information that they did follow the rules - not the EU's administration itself.
Complain about this comment
It's taken me a while to be sure about this - but now I am. At first I thought that this blog (and others like it) were really focus groups. Maybe just to prepare "devil's advocate" questions prior to a press-conference.
Now I know what it's really for: it's a distraction. A way for the grown-ups to get on with things while the children are kept amused.
It gives people a way to let off steam in a contained environment. It gives people a chance to clarify their opinions and justify their reasons for holding them. They can show off their intellect and perceptions. Later, they will have the satisfaction of knowing that they understood the problems and their causes. They knew what the solutions should have been - but nobody listened!
Who do you all think is listening here? Anyone who can make a difference? Even if they were, would they be under any obligation to pay attention to Mr & Mrs Anonymous?
Seems to work though doesn't it? While we're doing this we aren't pestering them.
Complain about this comment
This is quite simply a target driven conspiracy of meeting growth targets and providing a mirage of success of which Crash Gordon was willing to take the plaudits when the bubble was growing. Now it has burst he wants to be seen to be leading us out of the hole that he helped to dig by borrowing huge amounts we will all get taxed to o the hilts on in 2 years time. As a 30 something who has struggled to get on the housing market for 10 years this was long overdue. There is far too much scaremongering probably fed by the financial institutions and these clever bankers (no pun intended). Ensuring loans are not given to the wrong people and ensuring debts are not "packaged" into something untraceable and potentially "toxic" is not over-regulation, it is just common sense!! However, bankers dont get rich this way do they....?
Another myth is that the banking industry will lose their best people by removing bonuses and regulation, are these the exceptional people that got us all into this mess....or are we not in the middle of an economic storm? Let them go.
Labour's worst fears have come true, the Banks have gone rogue and all those service sector jobs they helped create to reduce unemployment are disappearing faster than ever. The mirage has disappeared. It comes as no surprise to say that Crash Gordon is quite simply a dead man walking. It must be terrible for Brown to be sat their....unelected..... and too afraid to solidify his position by calling a General Election. The next question is, are the Tories ready to govern....
Complain about this comment
I think Gordon Brown should concentrate on the government's debt rather than lecturing the banks and general public.
Tax revenues have collapsed and he is refusing to cut public expenditure.
This is a scorched earth tactic so that when he loses the next election the tories will be left to sort out his debt mountain.
Complain about this comment
Please don't call commercial banks, "retail deposit takers". These are the real banks - they lend money. locally and internationally. They finance the movement of trade goods and without them there is no economy. anywhere.
Please don't call Investment Banks, (Merchant Banks), "banks". They are name lenders. They are deal brokers. They carry out a necessary (indeed vital) function, but they have no more in common with commercial banks than coal mining has with making cheese. The long road to recovery will not begin while these two businesses are allowed to co-mingle. This has implications for bank holding companies.
Placing a percentage of value limit on mortgage lending would have a very restricted effect. Manipulation would be too easy (as it has proved in other markets in the past). What is needed is a prohibition, complete and total, on securing a loan granted to a domestic property purchaser, being secured by a mortgage, unless the terms of the loan make it uncallable if the terms of the loan are met. In other words the lender is in for the twenty or more years that the loan will take to repay. This is not novel, it was the way things were not too many years ago. The building societies would need to come back - it is there funding scenario that permits this sort of lending. The commercial bank is not remotely suitable for this sort of lending.
To make the myriad of changes that are essential to the recovery of confidence, what is needed is not regulation, but legislation. Some very plain and simple legislation, easily understood by a high school boy, that is carefully thought out by people who understand the problems.
Anybody who does not understand the incompatible differences between commercial and investment banks, and building societies, should not be in the engineering mix, nor any who do not palpitate when they hear the euphemism "monetary easing".
Complain about this comment
#7 you still don't understand how profoundly things have changed.
There's no going back now. There are several daunting challenges that we have to face and believing that we can turn back the clock to the largest and most unprecedented and completely credit funded boom in human history is not realistic.
The state is on the hook for trillions of baby-boomer pension liabilities - they don't have the money. Where is it going to come from? Not a booming economy. It means cuts in both pensions and wages.
Peak oil - we probably have hit peak oil now and if the output runs true to hisitorical form then the fall off is sharp, very sharp. Given that only oil gives the kind of energy returns that can keep an economy like ours going then we have to view major change as a real possibility.
Population - the global population is heading for 9 billion. This is unsustainable even with GM foods and without climate change. Where are all these people going to go, and what social unrest will it cause?
Economic crisis - face it, we're supporting banks that are bust to the tune of hundreds of billions if not trillions. They're holding on and hoping that there will be an upturn. But why should there be? There's no one left to lend to, therefore the shrinkage of the money supply is guaranteed. I don't see how quantitative easing can work: it either will be used to try and offset money that is being sucked out of the system, failing as it does so, or it will be 'successful' i.e. the economy has so much stored inflation that we'll be a basket-case very quickly; bond holders will walk, and uk gov will be printing money to meet public spending commitments, and soon enough we'll be in the Euro (or the dollar); causing a massive slash in our standards of living (if the Euro countries will touch us because they'd then take on the DOLLAR liabilities of the UK which would be quite expensive).
Asia - look 1.3 billion in China can mass produce every commodity the world needs. Our manufacturing has gone, the rest will follow as the lack of money at the bottom eats into the above service structure. Asia doesn't need Western markets in ten years and this might accelerate because China will reflate its domestic economy.
I'd be more confident about UK's future if there was a strategy, but there isn't. There's no high-tech strategy, no low tech one, there's just 'getting lending going'. Obama's got a plan. We don't.
I hope I haven't cheered anyone up.
Complain about this comment
Robert, you know only too well my opinion on the government and the banking system as I wrote to you about it at the beginning of last week.
This government WILL NOT listen to experienced people from within the mortgage and finance sector that have new and innovative ideas that will help kick start everything that is currently in the mire, in saying that though, there appears to be people in the media who do not want to take the time to listen either.
Things are not going to change until there is greater collaboration with industry professionals, politicians and the media. I will even go as far as saying that the situation is unlikely to change whilst the current occupants of Whitehall remain in situ!
Complain about this comment
Its interesting to hear Peston talk about responsibility. Perhaps the question that needs to be asked is whether Peston, with the blogs on what should and should not be done and the leaks of information have done any good, and if so, for whom they have done good.
Mr and Mrs X whose savings were held in shares in Northern Rock, are quite understandably unhappy with Peston's coverage. As Peston explains in detail, to them, 'Banking is about confidence': so perhaps Peston should ask 'what has he done to provide confidence in our banks'. Has he added or subtracted from confidence? Therein lies his answer.
On a more general point, we seem to have a financial system, where boom involves ordinary folk putting money in pensions/stocks/bonds and the city boys reaping the rewards from this investment, to be followed by bust when someone in the city decides that its time to sell and go short.
To prevent boom and bust we need a stable financial system which implies a stable investment system, which would surely mean that uproar from the news and postings from Peston have little or no effect on the financial stability of the wider economy.
Maybe this is what Peston means? If so, he should start lobbying and therein he may do some good.
Complain about this comment
The mere fact that we are in this mess - and deeply in - speaks much for Gordon Brown's competance . The politicians and managers of the economy not only failed to anticipate and to prevent the problems , they also seem totally confused in their actions . In one to three months time we are going to hit the point when people's savings run out - what then ? We're six months in to the worst part so far and we are not heading up . Just when the stock market seems to be levelling out it drops heavily . There is supposed to be a credit crisis but there is no action to provide loans of last resort - eg. take HBOS off Lloyds and fully nationalise it and run it as such . Interest rates go down - but how is that supposed to attract money into the banks ?
Complain about this comment
re 52 rahere said
"What a wonderful awareness of the real world. You can't get 90% mortgages, let alone 100% ones. And still not a word about real values."
+
plectic has another theory you should read
(2407. At 10:59am on 21 Feb 2009, plectic)
Complain about this comment
Seems very strange coming from Gordon Brown but at last a sensible suggestion. Should be enshrined in law asap. 85% max mortgage, 3.5 x income max. That would get average house price down in short order to a realistic 80-90k. Al these vendors holding out at unrealistic prices reached over the last 10 years would quickly be forced to drop prices and fist time buyers would be back in no time.
So a few hundred thousand home owners would be in negative equity, in the scheme of things a very small price to pay to get housing back where it should be - a real housing market & not an investment market.
Complain about this comment
#65- dickinfrance:
"Provide for yourselves, your state is bankrupt."
You could well be right about the second bit - and at least you've made a practical suggestion about what an individual could do about it.
#129- GrouchoMarxist1:
A pretty good summary of why dick may be right.
Complain about this comment
How on earth can Gordon Brown preach about service? Im so sorry but the Banks are just taking the lead from a self serving government.
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
Surely all of you eloquent bloggers have...... Spellcheck on the desk top or failing that a dictionary at hand! I would but mention solecisms, an area in which certain members of Auntie are egregious offenders!
Lets opt for the Highest Common Denominator shall we, not as is sometimes witnessed, the Lowest.
Moderaters, sic; Beware
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
Hasn't GB long since demonstrated that he's constantly talking out of the other end of his body.....and should stop interfering in processes where he has serially demonstrated his incompetence. He' really annoying me now.
Complain about this comment
Re 87
Perhaps better read in fuller context.
Wednesday July 2 1997 was an important day for Gordon Brown in his first Budget Speech he was determined to change things for ever. One area he mentioned concerned housing. It is interesting to see what he said, and then reflect on how he can possible blame the global economy for the housing problems in the UK never mind having the cheek to now suggest curbing 100% mortgages.
So were did it all go wrong Gordon?
Here is what he said on housing market measures:
For most people the acquisition of a house is the biggest single investment they will make.
Homeowners rightly expect their investment to be protected by sensible policies pursued by Government. I am determined that as a country we never return to the instability, speculation, and negative equity that characterised the housing market in the 1980s and 1990s.
Volatility is damaging both to the housing market and to the economy as a whole. So stability will be central to our policy to help homeowners. And we must be prepared to take the action necessary to secure it. I will not allow house prices to get out of control and put at risk the sustainability of the recovery.
I have therefore decided it is right to take two measures aimed at stability in the housing market. First I will raise stamp duty from 1 per cent to 1.5 per cent on property sales above £250,000 and to 2 per cent for property sales above £500,000. This will take immediate effect after the Budget resolution has been voted by the House.
Second, continuing the reforms begun by the previous Government which removed mortgage tax relief at the higher rate of 40 per cent in 1991, and cut it to 15 per cent by 1995, I propose to reduce mortgage tax relief by a further 5 per cent from 15 per cent to 10 per cent from April 1998.
The timing of my measure should help to avoid a return to the conditions of the 1980s where the failure to take early action guaranteed worse problems later on. I believe these measures will help to ensure a more balanced recovery.
Complain about this comment
I read in yesterday's Times that the Bonus Payments to Bank staff RBS had not be cancelled but just deferred for a year. Also that they were being offered a loan of up to 1/3 expected bonus to tide them over until then.
Does this mean that they will still get the 2008/09 bonus (but after all this silly fuss has died down)? If so this has been keep very quiet.
I'm trying to remember the EXACT words of ministers but they could have been "Very much reduced bonuses will be paid to RBS staff this year" allowing them to wriggle out and pay most this years bonus in 12 months time...
Complain about this comment
Far from being a brilliant economist ,Gordon Brown is a total charlatan.He has been the architect of the complete failure of more than a decade of New Labour government - many good things were done by Tony Blair and his ministers in the way of social reform but the entire period has been undermined by a weak vacillating Chancellor bullying his colleagues but sheltering in the pocket of the City and the Banks and who simply let a boom rip and then claimed credit for it all with utterly baseless rhetoric.He has been found out - Blair should have kicked Brown out of the Government after the 2001 election.A better Chancellor would have followed the French and German example and controlled lending,forestalled a housing boom,tightly controlled government spending and boosted manufacturing to the maximum to create real,skilled jobs.
Now we shall have Hartz Eins,Zwei,Drei und Vier with knobs on.It will be hell - police recruitment should start now!
Complain about this comment
Robert
Gordon Brown's one liner from July 2 1997 can sum it up really:
The Chancellor is first and foremost the guardian of the people's money.
Complain about this comment
the sheer cheek of gordon brown amazes me!
take away powers from the bank of england to stop banks overstretching, give them to the FSA and tell the public we are protected.
problem is, the FSA was openly encouraged not to use those powers by one gordon brown and the system is bankrupt, now the same gordon brown (on friday) gave the powers back to the bank of england and declares hes changed his attitude to the banks via a bbc correspondant!
have the labour party no moral fibre at all?
how can labour mps support a man who has decimated the system and declared anyone warning of trouble over the past 12 years - wrong - now he wants to return the system to how it used to be, without admitting he was wrong at all?
he got it wrong on such a scale we are facing a depression not seen since before the second world war, yet not one bbc correspondant is asking:
you got it wrong, what makes you the man to get it right now?
its a disgrace!
Complain about this comment
What makes GB think he has got it right this time ? His track record speaks for itself-- abysmal, inconsistent and limp wristed.
Until these mealy mouthed politicians can grasp the nettle and admit that by their "expertise" they have con tributed in no small measure to our current predicament and finally realise that the Bankers don't care about the rest of us so long as they have still got their noses in the trough -- nothing will be done that has any real benefit to anyone (except Bankers and retired politicians of course) did no one read George Orwell's 1984 ? it seems scarily accurate doesn't it ?
The only consolation is the prospect of his (GB's) friends helping him to "retire" --albeit no doubt to a mega salary in some financial cuckoo land.
Complain about this comment
The government intervention into the banking and mortgage industry was intended to prevent people losing their homes.
Every month that goes by we see an increase in the numbers of houses being repossessed.
I can appreciate there are always mistakes and hopeless cases amongst some house purchasers and some repossessions are always inevitable, even in good times and when government do not provide crisis funds.
But why is this hardship continuing to affect decent families that are experiencing a temporary problem ?
The only conclusion that I can draw is both the bankers and the goverment are incompetent or there is some serious deceptions taking place here.
Complain about this comment
@#129
The only thing that'll have changed in three years time is the name above the door and the nationality of the bank we use. And in HSBC's case, neither. There's too much money sitting idle at the moment for it to be any other way. We'll be borrowing from Asian-funded banks in 3 years, and American ones in 5.
Your pessimism is misplaced. Repossessions are now at 1 in 300 mortgaged properties, it was only 1 in 450 at the peak of the boom- we're not defaulting much and majority of mortage lending in this country is sustainable. The CBIs "hideous" unemployment forecast last week takes us to (gasp!) 60% of the per-capita rate in 1979 at the worst. And people are still out in the shopping centres spending money - go and look. We still need housing: we don't have enough, even with the disposable new builds everywhere, and we'll see the effect in a year or two once lending resumes. And don't get me started on 'return to 3x median wage', because that demographic of one household income per mortgage (for better or worse) doesn't exist anymore - hasn't for years. And corporate landlords will fill any gaps.
And just to be a bit blunt:
Peak oil - well, we'll see. Cheap oil, probably not any more.
Overpopulation - where will they all go? They'll die, like they have been doing for generations. It's revolting, but given that in the West we can't agree on not helping them do it, I can't see anyone actually do anything about it any time soon.
Economic crisis - yes, we're supporting insolvent banks. Banking *is* insolvent; it's just that everyone noticed. We all, as bank customers, for years have just ignored the fact that banks owe more money than they have at any one time and carried on using their credit anyway. I don't see why this illusion shouldn't continue, particularly as we don't have any alternative.
Manufacturing and Asia - If we want to manufacture we need raw materials. This country has some limited coal, stone & timber. That's it, apart from some unusual minerals (tin, tungsten) which might help locally. Manufacturing died because some other places can do it all the way through from raw materials to finished product with slave labour. We're better off out of it, to be honest, except at the far end of the product chain (aerospace, electronics, the stuff we actually do anyway). If we don't stop churning out mathematically-illiterate kids from schools soon, mind, we're going to have a serious problem.
And China has all the makings of a country with 1.2 billion serfs and a merchant prince class: you'd have thought they'd have learned. Stability there is by no means guaranteed, even on decadal timescales.
Complain about this comment
@105 lighteningconducter
".... Then Mr.Brown launched a tax raid on peoples pensions which caused the buy to let market to explode, this wasn't driven by greed but by people wanting to provide for their retirements."
spot on there sir, if brown hadnt raided the pensions of everyone currently 40 or under, then they wouldnt have removed their funds and put them into property to safeguard their retirement!
Complain about this comment
As a measure of the mess that the UK is in, take a look at the CIA World Factbook. It lists UK external debt at $10.5 trillion, not far behind the US ($12.3 trillion) and far more indebted than third-placed Germany ($4.5 trillion). Countries that we tend to think of as heavily indebted are nowhere near the UK figure - Italy, for instance, has external debt of just over $1 trillion.
When we bear in mind both existing debt and the likely government borrowing requirement this year - which will be far higher than the PBR fantasy number, of course - is it really likely that foreigners will go on lending to us?
If you were thinking of investing in a company, it would be wise to look at:
- sales (which, in national terms, means exports);
- earnings (how much value do we really generate?)
- the balance sheet (including off-balance-sheet items such as PFI and public sector pensions)
- management, especially the CEO and CFO (in this instance, Brown and Darling).
If the UK were a quoted entity, would anyone seriously consider buying the shares?
Complain about this comment
Ref 138
Is the dreadful punctuation part of the joke?
Complain about this comment
RP says
'is Gordon brown closing the stable door too late?'
Gordon brown built the stable in the first place, put the horse in it and deliberately left the door open for 10 years!
He has no moral right to attempt to take credit for fixing a system he created and oversaw top to bottom.
The only moral thinhg he can do is resign.
Complain about this comment
Creditor's money is used as the reserve.Post 56.
Maybe 10% of it if you are lucky.
Everyone should get wise to the fact that we have a dyed in the wool socialist running the country. Socialists have no choice except to ignore economic facts. Their only intrerest is in getting as much tax money as they can to spend in the public sector-that is why Brown let this all happen in the first place, so that he could create a million or so meaningless public sector jobs, among other wasteful things. He is the proverbial man without pockets, throwing money around to make himself popular, and he wants to keep on doing it.
The banks and the governments more or less conspire to do this as far as I can tell. The inevitable result of so-called boom, is so-called bust, and the burden falls on the public. This is government at it's absolute worst, not really government at all imo..
We will all pay for this either through taxes, inflation or both. Brown is simply hiding from that, or leaving it for the Tories to sort out like Callaghan did.
Complain about this comment
"Or to put it another way, the sanitisation of financial globalisation explicitly requires us to be happy as taxpayers to underwrite global banks that call themselves British, even though we as taxpayers would have only modest influence on the rules constraining the behaviour of those British global banks."
Er Robert, I don't for a start. The British Banks are all PLC's and can go legally go bust. I cannot see any reason why the taxpayers of the UK should be impoverished for the sake of imprudent bankers shareholders of a PLC who fully understand the legal meaning of PLC.
I question whether the companies were financially solvent when they issued the prospectus for their right issue. If they weren't it raises interesting questions as to whether they were trading while insolvent.
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
He didn't seem to care when Northern Rock were giving 125% mortgages at 6x salary did he?
The % loaned should be entirely based on the ability of the mortgagee to pay it back. There are plenty of people in secure industries (like the Civil Service) that thanks to NuLabour's taxes can't "save" anything towards a deposit BUT who could easily afford 100% on £150k at 3-4% or more.
These are the people who can't get credit but who could easily afford repayments. This is NOT sub-prime.
Blanket banning any 100% mortgages will just make the financial sector dream up more "cashback" offers.
You can't stem capitalist money-making ideas Gordon, even though the control freak socialist in you might want to.
Complain about this comment
Me is confused - for 10 years (?) Iron Pants Brown was happy with the status quo - but now it's all gone pear-shaped he tries to come across as saviour of the world. He's now running around trying to dictate to the world on how things should be run.....something about a gargantuan horse & a rotten stable with no doors comes to mind!
Complain about this comment
Came to this blog via a link from an article on 100% mortgages. I would just like to say that there is nothing inherently wrong with 100% mortgages. The problem with ANY mortgage is the multiple.
For reasons beyond my control, I hadn't been able to save a deposit before I bought. When I got onto the property ladder I not only had a 100% mortgage, I had to add my mortgage costs (survey, etc) into the loan. Even taking that into account, my multiple was still under 3 - that's the important point. I've never had a serious problem servicing the repayments, despite a couple of periods of unemployment, because of that.
Cheap headlines cost far less than a mortgage - please display a better attitude to good journalism, BBC!
Complain about this comment
Am I the only one who sees a huge irony here?
Brown says "they should be servants" but HE and his EU cronies need to remember that THEY are supposed to be our servants. Seems to me lately the tail has been wagging the dog. Hopefully they will soon be forced out of government though.
UK now has amongst the highest true debt to GDP ratios, putting us amongst real third world countries, and this government inherited the best ever set of books from the previous government that any government had ever inherited.
All of this mess happened on LABOUR's watch.
Complain about this comment
Hi Robert,
To be blunt, Gordon Brown has proved himself to be the most incompetent Chancellor in the long history of Chancellors and the most arrogant, deceitful Prime Minister in the history of Prime Ministers. (Only Tony Blair runs a very close second.)
His (Gordon Brown's) grasp of matters economic is tenious to say the least. Coupled with his arrogance and inability to admit any mistakes (the crisis we find ourselves in has nothing to do with his reign at no 11 - so he would have us believe) anything he says must be treated with a large deal of caution, taken with a pinch of salt and then filed in file 13.
I only wish there was some way we could obtain a gagging order so we would not be subjected to his useless verbage anymore.
Complain about this comment
when is the media in general and the BBC in particular going to stop giving this present government such an easy ride...this statement by GB is totally meaningless just like all the previous statements, they are purely designed to grab headlines and the media fall for it every time....when are we going to get back to real reporting?
Come on Robert if you really want to make a name for yourself then show up this government for what is is...a total failure that has brought the UK to its knees, the whole cabinet should be impeached.
Complain about this comment
On reading The Observer article today I wondered what adjective exists to express 'beyond hypocrisy'.
Is the PM actually living in the same world as the rest of us? Where was he when these 100% mortgages were being handed out or when 'self cert' mortgages began? Does he actually believe that none of it was anything to do with him?How is it possible to still present himself as the honest son of the manse or indeed as Lord Mandelson described him in the Guardian- Moses?
They must be on something.
Complain about this comment
I have a 100% mortgage. I'm doing very nicely thanks, because although it's 100%, I didn't borrow what I couldn't afford to repay.
The 100% mortgages are not the problem.
The stupid, greedy borrowers and the stupid, greedy lenders are.
Complain about this comment
Gordon sees a bandwagon and leaps aboard. 100% mortgages were dumb when he was chancellor, Self Certs likewise. They served simply to push up prices by pushing money in to a constrained market... supply and demand ring any bells Gordon ?
But rising house prices convinces people they are richer... so they feel happy, spend and governments get re-elected. While everyone ignores the growing debt and pensions funding problem
By jumping on the bandwagon and issuing sagely words he perhaps hopes we won't recall who was in charge while this was going on......
Complain about this comment
Have Gordon Brown and Alastair Darling not read J.K. Galbraith's book - The Great Crash 1929 and seen how easy it is to change their names for some of those at the time and how they are re-iterating the very same statements and mistakes ????
Complain about this comment
How many MPs were able to take 125% motgages on their second homes?
Were banks foolish to advance this much when they knew they would be paid by the treasury?
Complain about this comment
#158, Raedwulf:
"Came to this blog via a link from an article on 100% mortgages. I would just like to say that there is nothing inherently wrong with 100% mortgages. The problem with ANY mortgage is the multiple...
Cheap headlines cost far less than a mortgage - please display a better attitude to good journalism, BBC!"
The BBC is simply reporting what our Prime Minister has said. How do you suggest they improve their attitude?
In any case, there is a lot that is inherently wrong with 100% mortgages, as the current crisis has demonstrated, although I agree that a borrower's ability to repay is as important as the percentage that is being lent.
Complain about this comment
It's amusing (or would be if the situation were not so serious) to see how far behind the curve the government and other politicians are in their thinking. Their imagination is at least six months behind the point of critical analysis and their solutions are therefore shackled by the fatal flaw of missing the point. Quantative easing is a case in point. Hoping that this measure will prompt the banks to start lending is just that - a hope. Reality is that unless they are forced to lend to earn their survival (like any commercial business would have to)then they will just hoard the cash that has been gifted them by the government. At the moment, strange though it may seem, they are in a comfort zone from which they will be reluctant to emerge. Featherbedding is not the answer. It is time to get tough and ring the changes - and yes that means many heads must roll as well. There is clearly much toxicity yet to be revealed. The only way to bring it to the surface is to show an iron fist. Not something that seems to be part of the regulatory and governmental tool box unfortunately.
Complain about this comment
The point in 105 by Lighteningconductor regarding pensions is one that really highlights the ineptitude lying behind all this mess.
They messed up pensions and transferred old age provision to a one roll of the dice gamble on property..... all those prudent and thrifty virtues embedded in people 'making provision for their old age' were precisely the virtues mocked, derided and ultimately broken apart, by the 'light touch regulatory regime' .
Mugs saved in a pension and the smart move was to max out on mortgages.
For the person who not only oversaw this but actually forced it through, to now announce now that we all need to return to more prudent and thrifty ways..... it takes one's breath away.
I say: Raise interest rates and Nationalise the Banks.... It's going to happen anyway and for once we (they...whoever!!) need to get ahead of the curve instead of just doing things to late to have any effect
Complain about this comment
I am a bit lost with all this 100% mortgage business. What does it matter if you borrow 100% or 5%, the problem comes when you can not pay it back.
What banks need to get back to is the multiples they lend in relation to the borrowers ability to make the repayments, as once that is in place what happens to house prices is irrelevant.
Complain about this comment
re my #161 referred to moderators.........
i presume moderators are supposed to moderate not censure.......is criticism of the BBC not allowed or does the truth hurt?
Complain about this comment
#6 "10% mortgages allied to high salary multiples were the problem. Gordon's oft touted "affordability" arguments kind of relied on full employment didn't they? a 6 * Salary loan kind of becomes an issue if you haven't got a job a 3 * Salary loan is probably an issue too but obviously only half as big.
In order for Gordon to achieve what he wants house prices will need to fall by another 25%. It's probably what is required but since people have assumed that house prices only ever go up and have planned their futures accordingly this correction will mean that Labour are unelectable for the next 25 years."
Absolutely. It isn't so much 100% mortgages but the salary multiples allowed. The "old fashioned" system allowed 2.5 to 3.5 times the borrower's salary with the additional condition that mortgage repayment plus other loans did not exceed about 33% of the borrower's outgoings. That was in the days when borrowers had to prove their income and outgoings. Not much chance now when people hold multiple bank accounts and take loans/credit cards with anyone who grabs their attention.
It still gets me that Brown has been talking about "kick-starting" the housing market... when the base rate is just 1%. People borrowing on that base won't be so happy when the base rate reverts to 5.5% or higher - inevitable with quantitative easing.
Anybody who has tried to kick-start anything will know they can break a leg if not careful!
Complain about this comment
The Prime Minister has lost his understanding of or probably never understood how banks work andwhat caused the credit crunch and speculative trades.
Many have already commented on these correctly in the financial press and the man is still oblivious.
Moreover, he hasn't understood public finances and government off balance sheet funding such as PFI and PPP which were also the children of what resulted in the credit crunch. He also doesn't sem to realise that while they took finances off balance sheet, they were done so at a higher cost than would otherwise been incurred.
I am coming to point of getting fed up with even commenting. It is either time for the man to go or get someone who can handle it. But as he can't grasp the crux there is lttle confidence that he will appoint the right person.
Perhaps Flash Gordon is a reflection of this counterpart "the saviour of the universe" in self styling himself as "saviour of the world, if not the banks" but nevertheless both comic.
Complain about this comment
doesnt brown just make you want to throw up, after 12 years of this bloke he suddenly doesnt like 100 per cent mortgages...it beggers belief, how is this man our prime minister? as a labour voter all my life, without doubt.. im not any more, and that pompous jaqui smith where are these people coming from?
Complain about this comment
How many of the banks which have been bailed out are involved in Public Private Partnership financing of various government schemes?
Are we lending these banks money at low interest rates via Bank of England facilities so they can lend it back to us at high interest rates?
The point of the PPP financing was to hide the debts off the public sector balance sheet but now the private sector banks have been put on the public sector balance sheet anyway.
Complain about this comment
#167 rbs_temp
As #163 Mark pointed out, "The 100% mortgages are not the problem.
The stupid, greedy borrowers and the stupid, greedy lenders are."
Dear old aunty Beeb didn't report on high multiple mortgages, she reported on high PERCENTAGE mortgages. High percentage mortgages are not inherently unafforable. If I take a 100% £20k mortgage when I'm earning £100K/year, that is hardly irresponsible. If I take a £100K mortgage on £20K/year, regardless of my deposit, that's pretty stupid.
But it makes for a much better headline, not so? Therefore I complain that the tone of the article that lead me to this blog-post was not of the standard that I would expect to see from the BBC!
Complain about this comment
There really is only one way out of this.... The painful way.
1. Nationalise the banks
2. Identify ALL accountable bankers
3. Fire those accountable and place immediate attachment of earnings on bank accounts to recover bonuses obtained under false pretences for last 5-10yrs.
4. Raise taxes to fill the void of debt.
5. Re-enforce common sense banking rules/ ethics with legal consequences for those would be risk takers.
6. Begin lending but only to those that can afford it. (and kill the buy to let market in the process
)
Is there anything else that could regain public confidence and get the economy moving again?
I would be hit hardest by these steps but the only other was is to do what GB is doing and plaster over the cracks with huge amounts of borrowing, this will only come back to haunt us and is just a short term government view to see them thro to the next election where they will lose....and lose by a huge margin!
Complain about this comment
Nothing Brown says has any substance or bearing on reality. This is an empty post. Flanders' blog is much better these days anyway - an all-round higher level of debate.
Complain about this comment
RP " Under this prime minister, banks ..... will not be banned from engaging in speculative trading in securities, even though such trading and investment has caused so much of the losses that have hobbled the banking system."
++
Surely they have to get a grip on this practice?
After all that has happened they still cannot see the problem.
Complain about this comment
closing a stable door that was left wide open during his many years as chancellor.
Someone is tryign to distracting the public with talk of closing the stable door. But we should stay interested in who left the gate open and wher are the horses now, but most importantly, how to get them back and change the gamekeepers who may be helping the poachers.
Complain about this comment
As others have said, the property price bubble was, in part, a consequence of Brown's punitive taxation of pensions. Essentially, pocketing tax from the dividends that pension funds receive strips away a lot of the pension industry's ability to keep up with inflation over time. People thought that property might be a better bet, so this contributed to the boom.
But another important factor was imposing, on the Bank of England, an interest rate policy which looked only at consumer inflation and completely ignored asset pricing.
Meanwhile, Brown was actually proud of deregulating banking, and accused other countries of being too conservative (which makes his latest pronouncement a piece of gross hypocrisy)!
Another point to note is that the tax system actually encouraged the use of debt rather than equity capital - interest payments are tax-deductible, but dividends paid to shareholders are not.
All of these policies encourage the use of debt and discourage savings. As a result, we have huge mortgage debt, huge consumer debt, huge corporate debt and huge (but under-reported) public sector debt.
Being up to our necks in debt is bad enough, but this has happened at a time when national income is under pressure, in part because of past dependency on financial services and neglect of manufacturing.
Just like a family, a country which maxes out on debt and then loses a big chunk of its income is in deep trouble. Its credit rating - in the national case, the exhange rate - gets hit first.
Then, the next time the family - or, in this case, the country - needs to borrow, they either get turned down by potential lenders, or stung with high interest rates.
That is what will happen next. Ouch.
Complain about this comment
This reveals the pact between governments and private banks that guarantees taxes (real wealth) go straight into the pockets of the bankers in the form of interest (usury).
Taxes do not pay for services but service the debt.
The debt is increasing because of interest.
Private banks get to create as much credit as we are prepared (or forced) to borrow.
Private banks create the credit out of nothing but our promise to repay.
Thee hundred or so years ago, the banking families discovered the nearest thing to the Philosopher's stone.
Instead of turning base metal into gold, they turned credit into wealth.
The effect is the same.
They got greedy and now they are very greedy.
They now openly advise (tell) governments to pledge future taxes for their use, stealing wealth from future generations.
Nationalise the money supply, create an honest money system and get the private banks to buy money from the people through their government.
Freedom from debt slavery.
This is an issue about liberty not just credit
As Dostoevski wrote, "Money is coined liberty."
Complain about this comment
What a brazen cheek. Crash Gordon, the man who zealously pursued the path of PFI in order to take billions of government spending "off balance sheet", who gloried in the new financial religion of manic mortgage lending and consumer debt, the man who gave banks and bankers carte blanche to follow each other like lemmings, over the cliff, this man is now preaching financial orthodoxy like some reformed sinner and expecting us to forgive him. No chance, Crash, call an election so we can consign you to history.
Complain about this comment
Difficult to think of a new name for Gordon -
Rip Van Winkle Brown. He`s just woken up after a decade of sleep and realised what was really wrong with the money market. Now he`s decided to return to commonsense measures to make sure the same doesn`t happen again.
Or could it be Nero Brown who fiddled while UK PLC went down the pan.
I am absoultely astounded as to how inept he and these bankers (trying to keep it clean) were.
It just gets worse week by week. Its either more financial scams involving billions which went undected, although these institutions were making claims which could never be met. Or its industry after industry wanting to be bailed out.
I thought we might have been reaching the peak of the recession; but events and the ineptitude of this govt show this to be unlikely.
If Gordon Brown was in charge of one of the banks that have gone under he would have walked by now - so why is he still in office?
Complain about this comment
SEE THAT THE GORDY HUGGERS HAVE BEEN
COMPLAINING ABOUT VARIOUS POSTS.
PITY THAT NUlabour CANT TAKE THE HEAT.
SEEMS NUlabour HAVE NO PROBLEM
CAUSING MISERY FOR MILLIONS.
Complain about this comment
@50 rahere according to the interweb the amount was £65000, albeit a lot of money then
which it is written was raised by the novel taxes they had then, money from Scotland,
etc, now this info above is not verified, but likewise there was little evidence of banks handing out loans then.
reading about all these people, there many marriages, the courtesans , the inter marriage deals, even the many people who claimed to be holier than though, were in it for the power, the pleb stood no chance, much like today.
There are still a couple of decent building societies about, I suggest we move all our money into them, then withhold our taxes so they do not get pumped into the banking system that is clearly corrupt as is the governments and the oppositions.
Let the corrupt crumble, we might have to take a hit initially, but it will be better in the long run for everyone.
Complain about this comment
So GORDY and HIS mates HOLD a PRESS
CONFLAB TO PROMISE 100'S OF MILLIONS
DOLLARS/EUROS/POUNDS.
WHO IN THE HECK ARE THEY GOING TO GET
IT OFF?
TAX HAVENS?
HA HA!! WHATEVER!
Complain about this comment
I'm surprised the govt have not got this message yet, if you restrict the amount you lend to people to the traditional 3 times sole income, 2.5 times joint, together with unemployment and sickness protection (but a good policy that pays out when you need it) then this would have prevented the bust scenario. If people are restricted to the amount that they can borrow and this is applied across all lenders, people can afford the mortgage repayments, they have not over committed themselves, they have more disposable income which means they can continue spending or saving, they can sleep at night and this would have prevented house prices rising to an unsubstainable level. Lenders should also increase the level of the capital repayment bit of people's mortgages so they are paying more capital off than what they are currently paying - people dont tend to know exactly how their payment is made up (ie exactly how much is capital and how much is interest) they just know how much they are paying each month and that their mortgage will be repaid after a selected number of years. So if the price of the house they have just purchased decreases over the next couple of years, the more the person would have paid off in capital and less likely that they will end up in negative equity. Its up to lenders to be a bit more imaginative with their mortgage products.
Asking people to have a bigger deposit is only going to discourage from buying a property. How about a stamp duty holiday for the next two years for properties up to 500k to kick start house buying.
Complain about this comment
Robert, please would you ask Lord Mandelson his views on borrowing the mortgage deposit. Does he agree with the Prime Minister that this practice contributed to our present woe?
Complain about this comment
Death and Taxation are inevitable. Never heard of 'higher death' before but steel yourselves for higher taxation and interest rates, just as the suicide rate also goes upwards.
What I cannot reconcile is the reported contraction in our economy with the number of happy buyers on the parades. OK, half of the shops are boarded up but their wares were not necessary anyway.
IT IS NOW TIME for decisive, not reactive, international government action AND truthfulness in their communication with the populaces of their countries.
My pardon, ranting again!
Nice to see you still have a job, Bob.
Fun to see Mr. AC on flow too!
N.
Complain about this comment
To #163 and #170
The point about 100% mortgages is that in a falling market IF you default then the bank will not be able to recoup the money lent. The bank is guessing the lowest price the home will fall to and setting that as the maximum it will lend.
A lot, probably most people, can pay the money back when they take out the mortgage (and even more so with the amazingly low tracker costs) but even the best payer may hit hard times. The banks want to cover this.
In a rising market the problem doesn't exist BUT if interest rates are rising then those who have got used to the pleasant low costs of trackers could be the ones that hit hard times. That means more (but different) defaulters but less problems for banks as at least they can resell and get their cash back.
Complain about this comment
Robert
Your second paragraph of assertion is wide of the mark. Neither Barclays nor HSBC nor Standard Chartered are currently relying on state aid.
However those banks north of the border are (understand why GB did so much to push thru' the LTSB/HBOS merger making it 'more British'?).
Both RBS and HBOS current/deposit accounts (infrastructure banking) could have been separated and sold onto other UK banks.
A separate corporate accounts auction could also have been achieved.
This could have been done whilst bank shares were suspended for a week (as has been done before). In RBS case separate profitable subsidiaries could have also been sold (like in retail) and fire-sales if necessary.
This would have left a rump of 'toxic mortgages and derivatives which could have been handled by the BoE - not dissimilar to the original US idea (and dumped in with Rock and B&B both of which should have gone bust after current account purchases).
We wouldn't have had to subsidise the banking industry with the amounts we've seen nor got into a mess over the inherent problems with which part-nationalisation brings i.e. the bonus issue and the bogus 'lending issue'.
By the way as an owner of two SMEs the last thing I'm looking to do is to BORROW MORE MONEY. Any SME who is currently seeking more money is either bust or about to go bust - that's why banks aren't lending in a sign that they have returned to 3Cs banking (Capacity, Caracter, Collateral).
If GB is trying to tell them differently then what is the Government actually saying. GARBAGE is the answer.
G Brown was fine taking the banking taxes on profits which have now evaporated(wonder why the FSA was such a light-touch?)
As the other recently retired GB said 'this sucka's going down.'
Unfortunately this government is hell bent on taking the country with it.......
No matter the BBC news resembling some Labour party political broadcast these days or the 'spin dressing' of the current incompetent cabinet (for any entrepreneur CEO like myself - would I hire any of these people - a resounding NO is the answer).
Unfortunately the nation gets the leader it deserves. When I think of Brown I think of Canute and Nero not Titian........
I unfortunately have to live with that fact even though I have been in the past minority.
Complain about this comment
NO SURPRISE THE BNP ARE GETTING IN
HERE AND THERE.
THERE ARE SO MANY SIMILARITIES TO
1930'S GERMANY.
CRASHED ECONOMY BY CRASH GORDY
WITH THE GREAT CLUNKING FIST.
Complain about this comment
This is typical Gordon Brown deluded fantasy economics. Like his "ending world poverty" nonsense, Brown's schemes typically involve committing (or stealth taxing) other people's money (mine and every other honest, hard-working UK taxpayer) on a fantastic scale to achieve ludicrous and unrealistic ambitions. What on earth goes on in that man's mind? He really does inhabit an alter-cosmos.
This is another one of Brown's nonsensical schemes, this time based on the assumption that politicians the world over, of every persuasion and belief set will now come together in short order and agree a monumentally complex global bureaucracy for regulating every damned bank and look-alike bank across every currency on the planet. Yeah right Gordon.
The man is completely deluded and the sooner somebody carries out the latter-day political equivalent of knifing him in the back ("Et tu Brute ..."), the better.
For God's sake, somebody please stop this bloke before he leads this once great nation of ours into economic oblivion. We're well on our way already.
Complain about this comment
The man who explicitly/deliberately created the insane conditions that caused all these problems is still, 12 years later, in charge of "fixing" them.
He still doesn't understand the root causes, or understand any workable/correct solutions.
So, tell me again, why is it that this man is still in total control of the country's money? It certainly wasn't a democratic mandate; he's never been elected to lead by any of the tax payers who he's so happy to fleece to fund his insane plans.
The Americans were lucky; they managed to replace their ruling party that created their mess.
If only we had a democracy we might be able to stop this madness, but sadly with 12 years of labour in charge, and especially with Brown throwing his tantrums and making implicit threats to his fellow MPs via his heavies, we no longer have one.
In the unlikely event that Brown actually allows an election by 2010 and doesn't enforce martial law a-la zimbabwe, my guess is that labour will, after that election, come 4th, somewhere behind the greens, and never be heard of again by the time of a 2015 election.
Consign labour to the dustbin of history; they deserve it; they've ruined us all yet again.
Complain about this comment
The economic logic of the 100% mortgage - or for that matter the 125% mortgage - is sound, as house values tend to rise over the long term, which means that the bank is almost certain to get its money back.
The Loan to Value ratio is far less important than the simple affordability criteria which so many banks seemed to ignore.
Liar mortgages - where you told the bank what you earned and they believed you - are the real problem. OK in a rising market, but if you are only paying the mortgage from your credit card for 12 months in the hope that you can then sell and make a profit, then you cannot afford the mortgage. When the market turns down, then you go bust and so too, probably, does your bank.
Brown, as usual, is aiming at the wrong target!
Complain about this comment
176. At 6:17pm on 22 Feb 2009, Raedwulf wrote:
+++"If I take a 100% ?20k mortgage when I'm earning ?100K/year, that is hardly irresponsible."+++
Yes - but why would you take a mortgage out for 20k when earning 100k? This example would be most unlikely to exist in the real world
+++"If I take a ?100K mortgage on ?20K/year, regardless of my deposit, that's pretty stupid."+++
Why? The repayments on that mortgage would be around 650 GBP a month on an interest rate of around 6% (and I am using a capital repayment mortgage, over 30 years, for this example). Which could well be 200 GBP less per month than renting a similar property (pretty much the case for anybody trying to buy a property in the whole of the South East of England).
People have to live somewhere. That is an inescapable fact.
Not too long ago people took the decision that their 30,000 GBP salary would be best put to used to fund a 180k GBP house purchase at 6x LTV. That 180K may well have only bought them a 1 bed flat in a new-build development; but it was all that they could afford at the time.
Of course, the fact that you had to be earning 30k in order to be able to buy a bottom of the rung shoebox - and even then you had to stretch yourself to breaking point - is the most shameful aspect of this entire episode.
Complain about this comment
"banks ..... will not be banned from engaging in speculative trading in securities"
+++
- GAMBLING with taxpayers money.
Come on Gordo, put a stop to this.
Complain about this comment
Gordon Brown, Prime Minister, chancellor and controller of our country's finances for the last ten years had a chance to avoid the "irresponsible" high LTV mortgages.
The only thing irresponsible are his actions. The fact that he made no attempt to bring in legislation to control buy to let. He allowed house price inflation to rage out of control. I had the opportunity to buy in 2000 and unfortunately didn't buy until 2007 - when we had to take out a 100% mortgage and relocate from London back to the midlands to be able to afford a property. The price of the house we own was £110,000 more than in 2000. That is the reason we have to borrow more. Have wages increased with such proportion?
For too long people were allowed to buy 4/5 houses stripping the country of much needed supply. All the governments housing efforts based in the SE. (and dare I say the East London 2012 regeneration project...)
It's time our prime minister put his hands up and said for once I'm sorry that I got you here and stop blaming other people for his mistakes.
Complain about this comment
Onto the main article:
+++"But what's striking is that although he has extraordinary and perhaps unprecedented power over the banks, the prime minister's programme of change for the banking system is strikingly conservative (small "c")."+++
Strikingly useless, more like. Well - not entirely true. His 'reflection' (see below) will drive down average house prices faster than the queues formed outside NR. Finally, GB has done something for First Time Buyers!
+++"And much of what he's suggesting will be seen as closing a stable door that was left wide open during his many years as chancellor."+++
The stable was built around empty space, and the government convinced themselves that there was a thoroughbred stallion inside. If they listened hard enough, they could hear it snorting and champing at the bit.
That's the stable door analogy taken to its extreme. Moving on...
+++"Even his eye-catching reflection that perhaps "we should control new mortgages for more than 100 per cent of house value" isn't a formal pledge to outlaw those homeloans that have been shown to be particularly risky by the losses experienced on them by Northern Rock."+++
Nice one GB. Not only have 100% LTV mortgages disappeared from the market, but so have 95% LTV and even the 90% LTV mortgage is on its way out. Well done for keeping up to date with the current market conditions.
In my local area, if you want to by a house you will need to fund a 15% deposit of approximately 22.5k in order to buy a one bedroom flat. Not to mention a salary of around 35,000k. Maybe all those new jobs KFC or Subway are creating will pay that much? I must have been out of touch for the minimum wage to have gone up THAT much.
+++"What's perhaps more significant is that the prime minister explicitly rules out a formal separation of retail deposit-taking and investment banking.
Under this prime minister, banks that look after the savings of households and businesses will not be banned from engaging in speculative trading in securities, even though such trading and investment has caused so much of the losses that have hobbled the banking system."+++
Of course he does. Can't let anything get in the way of the banks ability to supply jam tomorrow, can we? Well, maybe the day after tomorrow.
+++"Much flows from this, including that we as taxpayers will continue to provide a guarantee to banks, even those engaged in what many would see as high-risk international speculation, that we won't let them collapse."+++
Great - Too Big to Fail theory raises its scabby head again. Maybe GB will throw more money into discovering Ether. I mean, Michelson must have been wrong. Might as well tear up all that quntum theory and go back to trusty old Classical Mechanics.
+++"Why is the prime minister keen to maintain this pact between taxpayers and institutions that underwrite and sell equities and loans transformed into tradable securities? Well he remains persuaded that "global financial flows and liquid capital markets have brought massive benefits to our economy".
...
But note that he says global banking can only be made safe if there is effective global regulation, not "a patchwork of national regulators."+++
Oh good. He still thinks that we can have our cake AND eat it. Maybe the banks will supply the jam.
Ooo - that was cathartic. I'll try to be bit more constructive next time!
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
alexandercurzon: what is wrong with you boy? Too many Pink Gins? Caught Syphilis off one too many 'French Lessons'? Whatever it is, you should learn some restraint.
Complain about this comment
labour may be under the cosh now because of the negligence of our prime minister but greed always has a way of winning at the expense of the ordinary working taxpayer.
brown was around when thatcher allowed the disastrous outrage of endowments with their false promises and the outrageous greedy selfishness of the financial institutions. thatcher oversaw mass bankruptcy, mass house repossession, mass unemployment.
brown learned nothing from this. we should learn that politicians whether red or blue put self interest first just like the banks.
with cameron we risk another thatcherite empire builder.
with labour we risk underperforming, blundering negligence
your choice - its your money
Complain about this comment
Well Robert, he's not doing it too soon is he!
His twiddling and ill considered (and never revisited) splitting of supervisory responsibilities between Treasury, FSA - then with no relevant world class competences and resources - and the BoE has worsened the problems, along with his pouring of fuel on to the burgeoning indebtedness of all too many - credit card funding of holidays, - I know a guy who bought his near new Porsche on a credit card, paying off the balance over 3 years! - and irrational house pricing and related indebtedness are all consequences of his imprudent policies as Chancellor and havering inactivity (while talking a great story) condemn him as a great failure. I remind you:
So what have we learned in 2 millennia?
"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance."
- Cicero - 55 BC
Evidently Nothing! Historians of Kirkcaldy – bah!
.
Complain about this comment
MANDLESON & MORTGAGES?
BEST IF WE DONT GO THERE??
ISNT IT MANDY!
Complain about this comment
"The 100% mortgages are not the problem."
Wrong! .. They are the problem.
The value of the asset you buy with that mortgage can go down as well as up. If it goes down, and you have borrowed 100%, then you have negative equity. If you don't have enough other assets to cover the difference, then you are bankrupt.
If you go bankrupt, whose risk is it? That of the lender. That is why we got ourselves into this mess.
When you take out a loan to buy a property, there should be sufficient equity margin to cover reasonable risk that the value will go down. The problem was that nobody seemed to think that there was any reasonable risk this would happen ... but it did.
I were a bank, I would not lend more than 75% of the asset value ... unless you can let me hold some other asset of yours in escrow as a guarantee against the risk.
Complain about this comment
BANKERS BEING SERVILE?
ASK HSBC?
APPARENTLY LENDING THEM MONEY IS BY
"THEIR" INVITATION ONLY!!
BANKERS WHO NEEDS THEM?
GET IN THE BUTLERS PANTRY LADS, GET
SCRUBBING OUR FLOORS!!
Complain about this comment
To#156
If people can't save a deposit it is highly unlikely they can afford a £150k 100% mortgage which would cost about £1,000 per month. That is unless you are suggesting they take it on interest only which is the next ticking timebomb.
One in five mortgages are taken on interest only with no repayment vehicle. Just about all buy to let mortgages are taken on interest only and in a significant number of cases the rent does not cover the mortgage payments. People have in effect gambled that prices would keep rising and will now get their fingers burnt.
The whole point of financial prudence is to instil some responsibility into both borrowers and the banks. Saving for a deposit is hard work and requires cut backs on the nice to have things in life such as holidays. It also gives the borrower and the banks some additional protection in case house prices fall for whatever reason.
People that are prepared to save for something generally manage their money better than those that don't. Of course in this day and age most people want things immediately. Unfortunately the financial services industry built their business around such greed, forgetting in the process the values that they should be looking for from borrowers, such as financial prudence and being able to manage money, which is why we are where we are now.
Complain about this comment
@ #182 thomas_paine
"Nationalise the money supply, create an honest money system and get the private banks to buy money from the people through their government.
Freedom from debt slavery.
This is an issue about liberty not just credit."
I agree 100%! When will we stop blaming individual leaders (however disgusting their behaviour), and realize that the largley hidden powers of banking cartel(s) have turned us all into slaves? Maybe people like Rahere have known for a long time that the power behind so-called "government" has almost always been the banker, but isn't the truth of this now obvious to us all every day?
Anyone who thinks Obama and Geitner are any more prepared than Brown and Darling to fundamentally alter the relationship of government to banking and to concern themselves with real liberty, as opposed to mere credit, are, I fear, sadly mistaken.
Complain about this comment
pete in halstead 202.
This is NOT a time for RESTRAINT.
Except RESTRAINING GORDY!!
Complain about this comment
RE FAKE KFC & SUBWAY JOBS.
GORDY WILL ONLY BE HAPPY WHEN THE
PLEBS ARE ALL ON MINIMUM WAGE THEN
HE CAN DOLE OUT TAX CREDITS AND
PRUDENCE TO HIS HEARTS CONTENT.
WELL GORDY WE ARE NEARLY ALL THERE
BROKE AND IMPOVERISHED!!
FRAU SMITH CAN TAG US ALL. . . .
Complain about this comment
MODERATORS NOT BAD ONLY 50 mins in
ARREARS.
Better than the 218,000 over 3 months in
arrears on finance payments.
Complain about this comment
The bottom line is that it doesn't matter if someone has a 50% mortgage or 150% mortgage...how have people become hung up on these figures?
If you lose you job then any monthly repayment is likely to become impossible..it wasn't mortgage borrowers that are the cause of this economic problem...DON'T let GB try and run that particular red herring!
The real problem is caused by us the electorate...we have 'the government we deserve'...to incorporate a well known political axiom.
Complain about this comment
Brown has become the true master of Orwellian type "doublethink".
First he engineers the reduction of the BoE's powers in 1997 and creates the toothless Financial Services Authority which appears to have been almost as asleep at the help as its US cousin the SEC.
Now having presided over the creation of a structure that neutered the BoE in relation to the irresponsible bank lending policies, he now steps forward as the man best qualified to sort out the mess.
When will the British public and indeed New Labour MPs wake up to the enormous liability this man has become to the country?
P.S. How comforting to know that Banking minister Lord Myners has said banks were " "foolish" to offer 100% mortgages" and that "costly lessons had been learned worldwide "about reckless, feckless, witless lending"".
Why was Myners (or his predecessor or the then Chancellor) incapable of grasping the stupidity of government and banking policies at the time, rather than after the creation of a mega financial disaster?
Complain about this comment
Gordon Brown might restore confidence to some degree if he could prove he that was able to tie his own shoelaces and also demonstrate that there is more to his one club political golf than, bribing old age pensioners with winter fuel payments and other such vote catching populistic deceipts that only add to the run up of the seven deadly sins debtly pile up.
Its a pity the conservatives spent a decade saying nothing about the self evidently self destructive practices of the financial system, now referable to as crapitallism which promoted survival of the weakest through freely available loony loans .
Anyone who thought that our form of closed loopy democracy allows reality to be expressed politicaly in a way that is superior to the king and jester had now better now think again .
With the continued decline of asset prices ,many who purchased overpriced properties using large deposits , whilst in bidding competion with disposessed loonatics with 100%[and above]mortgages will find themselves in the 100% mortgage bracket if they try to shop arround when their"deal"comes to an end [having efectively lost their deposits].
Those with 100% and above mortgages lose nothing and gain the samsonesque shadenfraude of pulling the pillocks of westearn sillivisation down
The modern God denying world will eat its debt [that masqueradied as wealth ]in the same way that the lapsed followers of Moses had to eat their golden calf.
Unrecoverable debt described as toxic waste will prove as deadly to the world body as the swallowing of powdered gold buy those that were suposed to build heaven on earth[freedom from poverty freedom from fear etc etc etc .
Complain about this comment
#202. pete_in_halstead
Don't underestimate Mr A Curzon
Complain about this comment
@180
Indeed, and maybe we should ensure that the paddock fencing is improved to ensure that we know the ground over which the horse will roam in future
Complain about this comment
#48 somali-pirate-st500 wrote, talking about Gordon Brown
"He's desperately hoping that the City will be able to return to its pre-eminent position as the world hub of tax evasion and avoidance as well as other dodgy dealings, especially if the US and other markets become more regulated."
While the comment is negatively worded, in the short to medium term does the UK have any serious alternative to trying to maintain the City as the major financial centre in Europe? Without it we are going to get a lot poorer quickly. So while, in common with many other financial centres, it has done some things that now don't look so clever, and has had excesses that turn the general public against it, he has to be careful about how he regulates it. It must remain a leading financial centre.
Money and banks poured into the City partly because it had light regulation. What do the wealthy want from a financial centre now and over the coming years? Do they want light regulation or have they had their fingers burned and now want stronger properly enforced regulation to gain confidence?
If it was my money I would want it in a properly regulated City. But it isn't my money.
My gut feeling is that a sensibly regulated City would be more attractive than a free for all City and Gordon does have some room for rule making and enforcement. I believe that the World may have changed its view on regulation. Gordon obviously disagrees and thinks he would be frightening investors out of the City if he regulated.
Now, if Gordon could find a way of making the City less short termist when lending to other UK businesses (possibly through the Government owned banks) then maybe, in the medium term, the UK could reduce its dependance on the financial services industries. Given the inequalities brough about by that industry that really would be something worth achieving.
Complain about this comment
Gordon Brown ignited the housing boom when he introduced/encouraged the current buy to let conditions. from that moment on, house prices were no longer linked to wages. the result is that we have a whole generation of well educated, hard working young people, many of whom are reaching an age when they would like to start a family, who still haven't a hope of buying a flat, let alone a family home. Others have many homes at their expense. I think it stinks, and I've never been left of centre. In a country without enough homes, why should some people have more than one?
Complain about this comment
So we all know what Gordon wants for his next job then.
Head of the global finacial regulatory system
A glass stegall like separation of banking and greed, sorry, investment banking seems the least requirement of future regulation, it seemed to work for 60 odd years. That way next time the investment johnnies make a mess of it they can go to the wall without the need for governments to bail them out to prevent chaos in the high street.
It does however occur that Gordon is actually not qualified for this job, not having any banking qualifications.
Perhaps he should use the unemployment period coming to him to obtain some re-training - sure Kirkcaldy Job Centre will oblige.
Complain about this comment
" Third, moving from the trade bloc era to the era of Global Europe requires a long term commitment to regulatory reform that balances the need to lessen the burden of regulation and enhance our flexibility while still ensuring high standards. In Britain I am determined that we not only impose a competitiveness test to all new regulations but pioneer a risk based approach to regulation - no inspection without justification, no form filling without justification, and no information requirements without justification " Gordon Brown Mansion House speech 2005.
"Financial services are now 7 per cent of our economy. Financial and business services as much as 10 per cent. A larger share of our economy than they are in any other major economy, contributing £19 billion of net exports to our balance of payments, a success all the more remarkable because while New York and Tokyo rely for business on their large domestic base, London's international ranking is founded on a large and expanding global market.
London now the home and natural location for 20 per cent of all cross border lending: 30 per cent of world foreign exchange turnover, 40 per cent of over-the-counter derivatives trades, 70 per cent of the global secondary bond market.
London is the favoured location of choice for more international business than ever before, the world's leading banking centre with more foreign banks than in any other city, the location for 200 foreign law firms - including home for six of the worlds largest ten, and last year new foreign listings not only from China, India and Russia, but also the USA itself. " Gordon Brown Mansion House speech 2006.
Where does he go now? He's stamped his authority on 'anti competitive' light touch regulation for a global City of London punching above its weight adminisitering other people's capital. If he retreats now and the City becomes a bit-part player, overtaken by the new world order, what other vision can he pursue?
Complain about this comment
Gordon Brown is a total failure, reducing the mortgage multiplier will also reduce house prices further as the sugested multiplier limit won't buy very much for someone on the average wage.
It's frightening to think this guy has been in charge of our finances for 10 years, and now he's in charge of the country, it doesn't matter where this problem began, he didn't see it coming, he has no idea what to do, he didn't put anything aside when we were "Booming" and now we're "Bust" he is behaving like a frantic gambler at the slot machines with his last bucket of quarters.
I don't think he is capable of running a piggy bank, he needs to go now!!!
Complain about this comment
Qestion. When banks lend money as loans, they only do so in the knowledge that they will expect to get the loans repayed back and with "interest". It's the whole basis of how the banking system works. So, as a Tax Payer, if I am now lending money to the banks in the form of a load, (or rather that is what the goverment is doing in our names) what rate of interest can we expect back and what are the banks putting up in the form of a guarantee.
Complain about this comment
Brown really isn't the full ticket, is he.
According to Myners on Channel 4 news tonight, it will be expected of this government that you will need to save a 25% deposit to get on the hosuing ladder. On the avaegae property that means between £35,000 to £45,000, depending upon who's figures you take.
As the interviewer said, how do you expect a teacher of £25,000 a year to save that type of money. Answer there came none other than 'that's why we are financing shared ownership'!
It doesn't take a genius to realise that, as a result of such huge requirements for a deposit one thing will happen.
House prices will collapse. In the world of no buy to let, no first time buyer means no housing market. Well done, Gordon, I thought your whole plan was built on high house prices.
And the result of that collapse? More bank losses.
You couldn't make this up, could you?
Complain about this comment
LTV or loan to value. The various bloggers who have asserted that this is unimportant are incorrect as it has been observed time and time again that mortgages granted on low LTVs are far less likely to default than those based on high ones. In fact if you build a model to predict how likely a mortgage is to go into default, LTV is the best single predictor. The reason is simple enough. If a mortgagee has a lot of their own equity tied up in a property they will do anything to avoid repossession. The less equity they have, the less they care and if in negative equity they even walk away. So it's a double whammy for the lender, the mortgage is more likely to go belly up and when it does, there is less margin for error when it comes to recovering the loan. The latter is not helped by the fact that repossessions typically sell at a 20% discount. The financial prudence that can be inferred about mortgagees who willingly over extend themselves is just icing on the toxic cake of high LTV mortgages.
High LTV lending works in a housing market that is inflating at a steady rate of 10% p.a. and continues to do so in perpetuity, without a downturn. Such a housing market has never existed and if the likes of Northern Rock, HBOS et al hadn't realised this, they should have,
Yours Aye,
Graucho
Complain about this comment
149. At 4:36pm on 22 Feb 2009, denzil69 wrote:
@105 lighteningconducter
".... Then Mr.Brown launched a tax raid on peoples pensions which caused the buy to let market to explode, this wasn't driven by greed but by people wanting to provide for their retirements."
spot on there sir, if brown hadnt raided the pensions of everyone currently 40 or under, then they wouldnt have removed their funds and put them into property to safeguard their retirement!
====
Absolute bull. The buy to let market was driven by pure greed. Nothing else.
You can't remove money from a pension in any event (maximum 25% at age 50 or over).
If you think borrowing will provide a pension I suggest you visit a shrink! The only thing borrowing to invest does is increase your risk and magnify your gain or loss. It does NOT provide a pension.
Complain about this comment
I don't think many of the posters read your piece closely Bobby.
I thought it was very well written, and with just enough impertinance. Good sign for the future. Crank it up mate.
In the dozen years Brown has been in power, not a single thing he said he would do actually came to pass........
Today's article is just more of the same. I thought Mandy had told him to zip it for a while, but he can't resist.
Control the banks, reduce the civil service employment totals, dampen boom and bust, hold down inflation, look after your pension, stamp on corruption and fraud, block the ugly bonuses .... every promise he made, didn't last a day.
Time to go Gordo. If the BBC is starting to criticize you then the game's a bogey.
Bobby P. has you in his sights.
Regards,
Complain about this comment
"The 100% mortgages are not the problem."
"Wrong! .. They are the problem.
The value of the asset you buy with that mortgage can go down as well as up. If it goes down, and you have borrowed 100%, then you have negative equity. If you don't have enough other assets to cover the difference, then you are bankrupt."
This is clearly another red herring. I can get a 100% bank loan for a car that has no mortgage value at all relative to the car but I'm not 'bankrupt' the moment the car's value dips below the sale price ( as it probably does the moment I drive it out of the garage).
Borrowing problems are not necessarily related to asset values....I can actually buy cheaper properties in some areas on my current credit card..but if I go to a bank for a 'mortgage' on the same properties I am expected to jump through hoops.
By the above poster's definition....a good percentage of the people in the UK are bankrupt because they continually use credit cards to buy goods that are subsequently worth less than the purchase price...hell...most of what I bought this weekend is in that category!
Complain about this comment
Robert
Your last paragraph fills me with confusion - If the banks are world banks then surely every county in the world must consolidate to bail them out, how else does it work?
Several comments here match my opinion on the HUMAN GREED (Bankers, Buy-to-letters, government - raiding pensions and creative accounting of second home, etc) thar has prevailed on the Brown/Darling watch.
I am just unsure how it will all pan out - unemployment benefits, bank bail-outs, company bail-outs, transport costs, defence expenditure (T45, Carriers, helicopters, A400M, etc), gifts to other countries. Just where will the money come from without bankrupting the country?
Those of us that live within our means, brought up to get house in order (roof over heat, Light, heat, food then other luxury/un-necessary items) are OK as long as we still have a job.
Generalistically, everyone forced the housing bubble skywards (buy-to-let, house-builders, banks, estate agents, etc) until it reached the ceiling and now there is nothing to keep it there it is falling to earth.
Inflation is statistically low (but I don't see it as petrol is rising in price, food is still increasing and by more than 3% per annum). How can those that led us into this pile of doggie doo now lead us out of it? And how will their replacements fare?
IMHO There needs to be several tiers to the lending - First Mortgage (for the first home) at x%, Car loans at Y%, Personal loans at 2Y% and credit cards at Y% so that they force the debts down on the irresponsible and force them to be unable to extend their credit. Those responsible borrowers and savers need to be rewarded above and beyond the irrresponsible.
Complain about this comment
All these disillusioned references to "democracy"....
Simple response, really, provided by Gordon Gekko:
"Now you're not naive enough to think we're living in a democracy, are you, buddy?"
At the last election, less that 21% of those eligible to vote voted for NuLab. The understanding of those voters was that Blair would be P.M.
79% plus of eligible voters either did not vote at all, or voted for other political parties.
Nobody voted for a political party led by Gordon Brown.
I believe that it was Churchill who declared that democracy was the worst form of government in the world, apart from all the others.
I don't especially know which one of "the others" we are currently living under, but I suspect that he had a point.
Complain about this comment
The behaviour of the discredited and unelected leader of the self-styled saviour of the world this weekend, Gormless McStalin, has amply demonstrated for all to see (if further evidence were required) of the arrogance and hypocrisy of this deluded maniac. A stage-managed PR exercise with other European leaders in what was simply a further opportunity to indulge in his favourite pastimes of globetrotting and grandstanding on the world stage. A person frighteningly too similar to Robert Mugabe (another deluded megalomaniac in complete denial of the responsibility he has played in the disintegration in the economy of his own nation) now with the gall to dispense his perceived wisdom to other world leaders on how to solve the economic mess he was so instrumental in creating. The arrogance and conceit of the man just simply beggars belief.
So just what can we hold McStalin accountable for? The person responsible for a creating a phoney economic boom based on jaw-dropping increases in personal consumer debt, who had the arrogance to announce he’d abolished ‘boom and bust’ but who now is without the integrity to concede he got anything wrong in the process. The person who trumpets the ‘British jobs for British Workers’ sound bite yet for 10 years has actively encouraged organisations to offshore jobs or recruit overseas at the expense of British workers. In fact there’s no deceit to which this hypocrite won’t stoop.
And whilst McStalin loses no opportunity to blame world events for the nation’s current plight, his fingerprints are all over the murder weapon responsible for the death of financial compliance i.e. the creation of the tripartite regulation structure of the finance industry comprising The Treasury, The Bank of England and the FSA. Whilst I don’t hold government ministers responsible for junior civil servants losing CDs containing government data, it is just not credible that McStalin in his 10 years at The Treasury could not have been made aware of the Northern Rock business model and its reliance on a single source of funds. It was a recipe for disaster and can only be explained by the individual with ultimately responsibility for the financial business sector not having their mind on the job. So just what could have caused such an oversight?
What seems to be forgotten in the present economic meltdown is just how this disagreeable individual achieved what his deluded ego viewed as destiny and his god-given right to lead the nation in what was nothing short of a 21st political coup by instigating a plot to overthrow an elected, sitting Prime Minister, Tony Blair. McStalin plotted and schemed for 10 years to take over in 10 Downing Street and nor should the part played in this disreputable act of treachery by his loyal and obedient sycophants Messrs Balls, Cooper, Alexander, Darling be forgotten. That the person they deposed was their own party leader was the ultimate act of backstabbing and betrayal but no act of treachery was beyond adoption such was monumental urge to satisfy McStalin’s insatiable lust for power. The simple question which should be asked therefore is perhaps if he’d kept his eye on the ball and concentrated on the job to which he was appointed and paid by the taxpayer i.e. Chancellor of the Exchequer perhaps we wouldn’t be in this present monumental economic mess.
The fact is such is the scale of the irresponsibility and incompetence imposed on the British electorate that any other public servant would surely face charges for negligence and gross misconduct. However, politicians such as McStalin can conveniently walk away from the mess they create, secure in the knowledge that directorships or a lucrative book deal await when they can place their spin and bias on past events. Unfortunately this country is lumbered with this discredited, egotistical hypocrite until the next general election which can’t come soon enough. In the mean time we’ll inevitable hear the perpetual platitudes about ‘getting on with job’ when the only thing this deluded, egotistical maniac is concerned with is blaming anyone and everyone except himself for the current mess and saving his own political skin.
Roll on 2010.
Complain about this comment
Many have commented that high LTV mortgages do not matter so long as:
1) The borrower can aford the payments
or
2) house prices are rising
Both are predicated on the narrow view that the only thing that matters is that the mortgage lender gets its money back. Understandably this is the position the lenders take.
However the issue here is the wider economy, not the narrow interests of the mortgage lenders.
House prices famously have nothing to do with the cost of making them, they are determined basically by ability to buy, and are very sensitive to LTV. If you have to save up a minimum 20% deposit this puts a natural restraint on the price of house you can buy - it won't exceed 5 times the amount of money you can save up. Go to 95% LTV and you can quadruple the house price you aim for! Great, we all want a nicer house. But guess what, if the competing buyers have a 95% mortgage too then you are still buying the same old house and not a 4x bigger one - it just has a new 4x higher price. Moving LTV up to 100% will seriously inflate the price you can aim at, as long as you think you can make the payments you can aim at any price you like - and hey, with an interest only mortgage even the repayments aren't a drag.
So houses which cost 100k are now "worth" 200k or 400k or more. The extra money will leak out into the wider economy - I know, I have customers buying expensive cars on their Virgin One account, I have friends who "did up" a secound home and made a mint, now they have money to spend.
But where did all this extra spending power come from? There is no extra "value" in the econom - its all fresh air really, fanned by ever higher LTVs.
Like the ebb and flow of the tide all the extra money which washed out of houses is now flowing back in. It was always going to happen, and given the high amplification effect of LTV to house prices and the feedback effect in the economy, well ask any control engineer what happens with high amplification and feedback, it gets unstable and the down swing is very sharp. And very sharp it was, ask people in retail if they saw anything coming until it hit them suddenly.
So LTV does matter, very much, to the economy. It is a powerful factor in making the economy systemically unstable - AKA boom and bust.
And I sill want to know Mandleson's views on borrowing the mortgage deposit!
Complain about this comment
Now I'm just a regular hard working taxpayer not an economist like Gordon Brown. However let me see, Gordon now wants to go back to the good old days of mortgages - saving for a deposit then facing the bank manager to argue for an 80% loan. Surely it's a bit late in the day for this, I agree that it's sensible to do it this way but where's prudence been over the last 10 years. Anyone could see that with the reckless lending fueling ridiculous house prices a huge crash was coming. First time buyers have been forced to sell their souls and family futures to get a roof over their heads. Suddenly reducing lending by the amount Gordon's suggesting can only deepen the housing crash, leaving tens of thousands trapped by negative equity in homes that are no longer suitable or affordable. The labour party and Gordon Brown in particular have betrayed the British people and should leave power now in the disgrace that they surely deserve.
Complain about this comment
I supose as Tony Blair is now MIDDLE EAST
PEACE ENVOY.
GORDY ASPIRATION TO BE WORLD
FINANCIAL REGULATOR IS A FORGONE
CONCLUSION?
BOTH HAVE WRECKED THE UK WITH EQUAL
AMOUNTS OF IDIOCY.
Complain about this comment
This is just Gordon Brown making sure the banks may employ him when he is booted out of office.
He clearly is living in another world to the rest of us.
Regulation has failed time and time again but now we are going to get even more of it by the same people that were responsible before.
Still I suppose the only positive aspect we can get out of this is that there cannot be much more money left to actually lose (expect the new money we are about to print)
Complain about this comment
Sigh...
I generally try and avoid politics in my comments on these blogs - my feeling being that the current situation is far too serious for that kind of nonsense.
But the big concern regarding Gordon Brown is excess caution and an unwillingness to accept just how badly went wrong during his time as Chancellor (as well as under the previous regime).
Refusing to contemplate Glass-Steagall style reforms that would separate the Mr Mainwaring style banking (which we now need) from the reckless gambling of the City (which we absolutely don't). Insisting that globalisation of finance "have brought massive benefits to our economy" - when all the evidence shows that it has been a disaster both for this country and for the world.
Sigh again....
Actually my feeling is that Gordon Brown really does want to redeem himself and repair the damage that has been done. He just can't find the courage to do so. For goodness sake man, take a deep breath and do what needs to be done.
Complain about this comment
I think that Gordon is walking a tightrope - on the onehand he needs to get us all back to responsible lending and be seen to advocate saving and 'prudence', on the other hand he knows his last 5 years of economic growth were driven by excessive house price growth and easy credit.
Being between a rock and a hard place... well he may as well use the rock... Northern Rock that is!wheel in the £14bn new mortgage fund! He knows that if house prices keep sliding, the feelgood factor gets less and less. Interest in the property market is returning? well for those houses that are discounted by 20% in a desperate ploy to sell yes.
On jobs, I agree with comments above. When I hear 'good news, KFC are creating 5000 new jobs' or 'Tesco to create x000 jobs' or subway etc... have we thought this through? Skilled well paid jobs are lost and we learn how to fry chicken, stack shelves, run cashouts and make sandwiches. Also be mindful these will be at about 30-50% lower paid than jobs held previously. yes its a job but disposable income falls - BAD NEWS!!!
Complain about this comment
for the record
i have never
and would never
criticise
gordon
except when he did
the party trick of
tax changes
which was reversed
so it is not his fault
Complain about this comment
"I have a 100% mortgage. I'm doing very nicely thanks, because although it's 100%, I didn't borrow what I couldn't afford to repay.
The 100% mortgages are not the problem.
The stupid, greedy borrowers and the stupid, greedy lenders are."
More of the same......unless I read the early stories incorrectly, it wasn't that Americans in the sub-prime market had been 'greedy' in wanting to buy their own homes....it was the banks that decided to hike the interest rates to maximize (protect) profits that caused the spiral of defaults....but now the defaults are coming from people who have lost their jobs....so they have serious problems meeting repayments whatever the % of their mortgage.
There are far more fundamental causes of the economic melt down than the relatively few people ( percentage wise) that obtained 100% plus mortgages..our continuing to elect not very clever or honourable people to govern us being one of the most serious.
Correction...the most serious.
Complain about this comment
I had to make a cuppa after reading this and then read the actual article. Where has Gordon been the past 11+years? It really does show that he has no idea how things are or what has been going on. We have had one of the most accelerated periods of house price inflation ever during his watch, there was a quango set up in 2004 (or thereabouts) to report on the matter and how it would affect us. I sit in disbelief that he could even spout such rubbish and that the so called journalists let Gordon and labour get away with what they have done to this country. Too little too late. They are THE KNOW NOTHING PARTY.
Complain about this comment
#90 "If there was any honesty from those who attack Brown they would admit the UK finances would be no different if we'd had a Conservative government for the past 12 years."
Are you serious ? The Tories left a golden legacy for Labour to squander (yet again). If we are going to speak about some hypothetical alternative universe, then it is more likely that the Tories probably would have carried on with their policies of supporting wealth-creation, savers, and families with restrained government spending. In the universe we actually inhabit (except for Brown, the destroyer of the UK's future) Labour created a bubble of fake, debt-fuelled, growth, overloading wealth-creators (and everyone else) with taxes spent on a bloated public sector, while undermining the family .
I could go in (as could 70% of the electorate) but suffice it to say - LABOUR ARE TOAST ! Roll on the election ! Remember, Labour always, always, wastes vast amounts of our money.
Complain about this comment
So Crash and Ally want Northern Rock to provide £14bn worth of mortgages...
This is obviously a move to try to drive house prices back up so that we'll all feel wealthy again!
Complain about this comment
"We should control new mortgages for more than 100 per cent of house value" What exactly was Brown doing over the past 11 years while lenders gave out loans of 125% of value, with income multiples of 5, 6 or 7 times income.
Surely it was his place to have a word with the city regulators about the credit criteria being applied at that time. To suggest it now is insulting our intelligence, especially as the lenders collectively retreated from the 100% loans some months ago without any prompting from government
Complain about this comment
Robert Preston was a lucky journalist who happened to get a couple of leads on banks from mates, he is not and never will be the Business guru he purports to be
This cult of personality which the BBC by their fawning promotion of this myth is doing no one any favours and is nearly as bad as the myth they perpetuate about our former chancellor having the solid credentials as chancellor to deal with the crisis he created
Robert and the BBC would do us all a better service if they started to do some proper investigative reporting on how and why we are in this mess and who led us here instead of regurgitating the PR releases from the politicians and allowing Robert and Gordon to perpetuate their respective myths
Complain about this comment
Having spent 3 months in hibernation in order to escape this discussion, I am going back until you all come to your senses.
A
Complain about this comment
Gordon Brown is, I suspect, already over the edge and now living in a make believe world. He blames everyone but himself and thinks that only he can save us from ourselves and the coming economic catastrophe. This banning of 100% mortgages is just another symptom of his growing insanity. That 100% mortgage horse has not only left the barn but is now enjoying a five star holiday in the Caribbean. The next thing GB might try to ban is private ownership of property or the consumption of apples in a public place. Both are just as illogical but, I think, just as likely with our Beloved Leader.
Complain about this comment
The strange thing is, separating retail and merchant banking would seem to reduce the need for taxpayer support for higher risk activities.
It would however mean that retail banks would be excluded from going after the high risk, high profit business.
Seems Brown doesn't want to limit the potential wage packet he can get as a "consultant" for the banks once he leaves politics.
Such consultant roles always strike me as payment for "services rendered".
....
Complain about this comment
226. At 10:00pm on 22 Feb 2009, Bluematter wrote:
149. At 4:36pm on 22 Feb 2009, denzil69 wrote:
@105 lighteningconducter
".... Then Mr.Brown launched a tax raid on peoples pensions which caused the buy to let market to explode, this wasn't driven by greed but by people wanting to provide for their retirements."
spot on there sir, if brown hadnt raided the pensions of everyone currently 40 or under, then they wouldnt have removed their funds and put them into property to safeguard their retirement!
====
Absolute bull. The buy to let market was driven by pure greed. Nothing else.
You can't remove money from a pension in any event (maximum 25% at age 50 or over).
If you think borrowing will provide a pension I suggest you visit a shrink! The only thing borrowing to invest does is increase your risk and magnify your gain or loss. It does NOT provide a pension.
Dear Blumatter 226
You'll have to seperate the two statements as mine at 105 is different to Denzil69 at 149.
I was actually commenting on the cause of the buy to let bubble and not how it was funded.
You are spot on that greed took over and speculation was rife but it was Mr.Brown that opened the door to the madness.
By launching his raid on the pension funds he scared Joe Public into doing the next best thing which has traditionally been to invest in bricks and mortar.
Sensible people were deciding to invest in a second property instead of putting their hard earned cash into a pension market that looked increasingly like the Government were about to wreck it.
You can revise history if you like but Mr.Brown's actions were what actually drove the flight into property which led to that bubble being inflated.
Once the speculators got their grubby hands involved the whole thing blew up.
Complain about this comment
So many of you want to get rid of Brown and the Labour government. OK, if that is the democratic result of a General Election.
However do you really know the policies and proposals of the alternative parties? OK, you can rant on here but I hope that you really take more care when you do vote - you may get worse than you wish for!
Complain about this comment
Why are 37 bankers in government posts? Are the general public (taxpayers) really fooled that Gordon Brown puts their interests above those of a poweful wealthy elite with instant access to the prime minister.
The money men are the masters and they laugh at us hardworking honest taxpaying ordinary folk as they mug us.
Their mates in the media don't ask searching questions either.
Complain about this comment
To tell the truth I wouldn't have expected much different from the conservatives...
Maybe a bit more sense re the obviously unsustainable bubble - "the Emperor's new clothes" always seemed the most accurate analogy.
Of course a 2 party system reinforced by first past the post guarantees that others can't ever expect a way in.
It pretty much ensures that the same "club" will remain in control.
In light of that is it any wonder that politicians are always likely to support institutions considered part of the "establishment"; so closely linked to the political status quo.
Of course ordinary people take 2nd place...
Complain about this comment
I am afraid his proposals look as if they are designed to get a few headlines rather than do any good. There are probably quite a few people about who do not realise that the 100% mortgage has virtually disappeared anyway.
Initiative after initiative with ever more money being poured out and yet he has to keep going back in spite of claiming he had saved the world.
What does a control freak do when he has lost any semblance of control?.........
Complain about this comment
Another Peston special. Interesting and intelligible! There is no wonder Peston never became a politician!!!
Complain about this comment
Robert
Thanks for your report. I viewed across to the Observer and was shocked at the highly critical posts on the Brown article there.
My conclusion about his cautious response to the bank mess is that he is preparing the way for a retirement bolt-hole - he knows he is finished politically. This horse must be able to clear the stable door in time ! Comments?
Complain about this comment
I would be interested to see the statistics on the percentage of people who borrowed 6x their salary to obtain a mortgage, compared to the rest, I would guess it is small. In saying that if the average salary is 22k and the average house price is 160k, then there is quite a large gap between obtaining an average mortgage on an average salary. The ability to pay your mortgage is directly related to your income, the vast majority of people who took a mortgage out on a house did so in the belief that they could repay that mortgage. Putting aside the mis-selling of mortgages, the only reasons for not paying your mortgage is stupidity, or the loss of your job. So all the people who are not able to pay their mortgage now are either stupid or have lost their job, or perhaps both?.
So who is to blame for lots of stupid people being out of work then ?. Have a guess Gordon. It is outrageous to try and put the blame for all this mess on the ordiary hard working people of this country, forced to pay 6x their salary just to buy a house. My vote will not be going to labour at the next election, hope that others take the same view, time for complete change from two party politics, or is that one party ?.
Complain about this comment
Its not difficult to find raw data on the web for RBS and Lloyds and Barclays that indicates that the number of mortgages arranged by these organisations with a LTV greater than 90% was less than 0.5% by number.
I can't get at the Northern Rock data, presumably its not in the public interest!!!!!
Nevertheless, at this point in time, LTV is a red herring. Stables, doors, horses,
Just get the FSA or the BOE doing what they are supposed to do
And where is the current chancellor????
Complain about this comment
I read that the amount being "loaned" to for the banks was in the order of £33000 for each taxpayer (give or take a few thousand). but the amount just seems to be disappearing. If it's going to disppear would it not be better to just give each person a £33000 tax rebate, which is deposited into the individuals bank account.
It could then be decided by the individual to either repay the loads they have or be left as savings, or just spent in what ever manner chossen. That way it gets money in circulation and into the banking system. But at least we (the taxpayer) whose money it is "suppose" to be get's a chance to benifit from the debt being created...........Yes ......silly is'nt it !.
Complain about this comment
Taxpayers should not be underwriting bankers risky bets, so this part of banking should be separate from the more boring mortgage lending and saving part of banking. Mortgage lending should be no more than 3 times income, then house prices will fall to more affordable levels as wages rise with printing money (quantative easing). The government is schizophrenic about this as they want to return to more responsible lending of earlier times, but wish to continue the illusion of boom times, at least until election time, as we head into bust. We will have deflation in house prices, but inflation with everything else as wealth is transferred from savers and pensioners to pay off the debts of the profligate.
Complain about this comment
Robert,
I am just about to start watching the Oscars here in the good old US of A. It's 1.30am UK time.
In the break before the show starts Citizens Banks of RBS fame was advertising savings rates of 2.5% and 3% depending on product
Do you think you could what Mr Brown thinks about savings rates
Complain about this comment
For God's sake wombateye learn to spell, proof read what you write, learn some grammar skills, and do make use of a spell checker.
Complain about this comment
249 foredeckdave wrote:
"However do you really know the policies and proposals of the alternative parties? OK, you can rant on here but I hope that you really take more care when you do vote - you may get worse than you wish for!"
I don't think it's possible to get any worse than the current set of labour MPs (and especially their leader). They're all in a world of their own, totally devoid of any understanding of reality, totally unwilling to admit they've ever made any mistakes.
When even the BBC is attacking Brown/Labour for being delusional, and/or just plain stupid/ignorant on every front, then you know the game's up.
Complain about this comment
It really is time for journalists to start giving this government a hard time.....We have a wealth of 'investigative' hacks who, instead of worrying about some celeb sticking coke up their nose, should be out there exposing this government/cabinet/un-elected primeminister/peers for the crooks they really are. This country is in a financial mess, not because of people accepting what was offered to them on a plate, but because of the greed of people trusted to run this country. People are starting to get angry, protests unseen in this country for many years will build up in the months ahead, and, hopefully, Brown and his gang of thieves will be physically overthrown.
Complain about this comment
#261 getridofgordonnow
I think you make my point for me
Complain about this comment
#228 antonygh. You seem to have missed the crucial sentence in my posting : "If you don't have enough other assets to cover the difference, then you are bankrupt."
I am not saying that if your asset goes into negative equity you are automatically bankrupt. I am saying that if your asset goes into negative equity AND you don't have enough OTHER assets to cover the shortfall, THEN you are bankrupt.
Example: Suppose I borrow 200K for a house that is worth 200K, and I have 100K in, say, a long term savings account, or ISA, or unit trusts. Then the bank should say "OK you can borrow the 200K, but we will freeze 50K of your savings as guarantee. You have the option of cashing in your savings scheme, provided 50K of the proceeds go to reducing your mortgage."
In this case, if the house drops 20%, the house is in negative equity, but you are still not bankrupt because the shortfall if covered by the frozen savings scheme.
I think it is irresponsible of the banks to lend to anyone who will go into OVERALL negative equity.
Complain about this comment
We need to come to our senses. It is not economic policy, or bad banking practices that got us into the mess we are in. It is the fact that we have worked hard to produce a society without morality and with no idea of what it may mean to have a conscience. Address those issues. Develop a fundamentally sound and good national morality. Work hard at uncovering the conscience buried within and everything could change forever. It is the only way to avoid boom and bust and their devastating consequences.
Complain about this comment
why should we trust gordon brown to sort out this mess when he created it in the frst place.
his regulatory system failed
his prudence for financial management of our economy failed .
every effort to sort it out so far HAS FAILED.
vat cut-failed
bank bail outs-failed
tax rebates -failed
loan guarntees -failed
GORDON BROWN AS PM-FAILED!!!
MOST IF NOT ALL measures he has introduced have all failed to reingite the economy.
Complain about this comment
My Previous Post #179
I get the sense from other reporting that there will indeed be more regulatory brakes on speculative trading and GB will absolutely not be able to let go of the reins in future ( to continue the equine analogies).
Complain about this comment
I don't know that GB has thought this through at all.
1) The reason for high house prices is the lack of supply of houses for the market demand. This has been true since the early 80s when house building was cut drastically. It has taken a long time for this simple truth to sink in.
2) While 100% mortgages were never too good an idea, returning to 'old-fashioned' banking is also not too good an idea. I can remember a time when people had to queue up for mortgages and young people in particular found it very difficult to find deposits. Prices may have eased 10-30% but once (if?) confidence returns, it is very artificial to try to keep the lid on house prices by restricting the availability of mortgages. We should build more houses which will slowly bring house price inflation under control.
3) Restricting credit is not the right recipe. This should be left to the market too. People will start to spend when they are confident and in the UK that is strongly linked to house prices - at least to short-term stability.
The way GB is talking, it is as if he wants us all to stop spending until we have enough money saved - presumably somewhere safe. Since business depends ultimately on consumer confidence and credit, goodbye to business.
Does GB want this?
Mortgages are only one part of the credit problem. It would be better to regulate the credit card industry to reduce their interest rates while enabling people to repay their debts by increasing minimum payments. Then folk will start spending again.
Rather than draconian solutions, the govt should enable people to earn their way out of their respective holes.
Complain about this comment
He still maintains: "global financial flows and liquid capital markets have brought massive benefits to our economy"
Does he still not see there is a link between the Boom and the Bust
Guys an idiot ........
Complain about this comment
Gordon Brown is the Traitor that caused more damge to Britain than any other traitor. And yet he still holds office, he should be hung drawn and quartered for what he has done.
Sold gold at its lowest, has now increased 300%. Bought Euro, increased only 20%.
Allowed all spare money in Britain to flood to Eastern Europe.
Still advocates a wider Europe.
And Mandelson is little better.
Believes that foreign culture should be treated with greater respect than our own.
Complain about this comment
Both the solutions and the reasons why we are in this fine mess is because we do not go any further than the perceived wisdom that got us all into these disastrous affairs. In this respect we try to fix the problem by going back every time to the very people who actually got us into this whole debacle in the first place. Even Einstein said in as many words that we couldn’t solve our problems by the very means that caused our dilemma. Therefore why is it that the Media are not brought into the blame game as well as they are still even today, after all has been laid bare, pandering completely to the ill-informed wisdom of those who were and still are the culprits of this whole financial and economic disaster.
This thinking of going back to those every time who have brought the world to its knees (which will happen over the next two years I am sure) is complete madness. Indeed, what is really required is new innovative thinking and outside the 'box'. In this respect, it is a well documented situation in the history of science and technology that main stream thinking was never the reason why major technological breakthroughs happened. In this respect it has been estimated that 75% of all the inventions that have made the modern world what is it is today emanated outside advanced thinkers and from the minds of independent inventors. The TV (Baird, an amateur radio ham), Jet Engine Whittle an RAF officer), the chip (KIlby had a personal private interest not ordered by the company to invent the chip as they were totally involved with tube/valve making - now the basis and driving a $1.5 trillion global annual industry), the car (Daimler a mechanic), the airplane (Wright Bros. who were mechanics), email(Tomlinson invented it for himself not the company) , WWW(Tim Berners-Lee's thinking not CERNs'), etc, etc are examples of a non-ending list.
Therefore the media has to start being innovative and not be just stuck in the mud with the old guard that has got us all into this 'mother' of all messes.
The sooner they grasp this and let independent thinkers put their views across the sooner we shall solve the present situation. Is the media listening, I wonder? Probably not and where they will perpetuate the whole situation by not doing so.
Therefore the villains in this whole affair are,
1. Politicians
2. The Bankers
3. The Media
and in that order, and why, the G20 Summit in April 09 will fail also.
Complain about this comment
Robert Preston:
Maybe being a little bit cautious regarding bank reform is the necessary step towards a solvent banking system...
~Dennis Junior~
Complain about this comment
I've just realized.
Weapons of Mass Destruction (WMD) were here with us all the time !
They were in 'Cabinet' working for the bankers.
Complain about this comment
The whole episode of HBOS and others appear to me BCCI all over again. Then BOE governor described it a criminal culture permeating throughout the organisation. Very high value loans were given to friends and relations who disappeared.
The head of BCCI disappeared to Pakistan with reported 2 billion $s!!!
I wonder if all those loans given to organisations that have disappeared or gone bust have not done BCCI to the tax payer once again. Then BCCI management were clearly involved. There ought to be some serious investigation!!
Complain about this comment
Clearly what is now required is an institution/club for cronies for toxic Chief Executives and senior Politicians particularly Government Ministers and Advicers and Regulaters and Hedge Fund Managers and Oligharks and similar.
Likely qualification criteria(5 qualifications required):
1. Major theft or squandering of public assets and resources
2. Ability to lie to the media or refusal to give a straight and honest answer.
3. Greed
4. Power
5. Corruption
6. Double standards
7. Offshore money tax dodges
8. Trouser dropping activities
9. Violence
10. Gold plated pensions funded by others
Please nominate a contender
Complain about this comment
I find myself utterly ashamed to be Scottish. Fred Godwin should take a look at himself and face up to the fact that he proved to be an absolutely disasterous strategist as well as a greedy, self centred megolomaniac.
He made the age old mistake of believing his own publicity that he was something special. Lots of that in the square mile just lately......
It's not as if most of these 'masters of the universe' would know personal risk if it jumped up and hit them in the face.
Do the honourable thing Fred. You're a disgrace to Scotland and I think the only way forward for you is to emigrate - and don't come back.
And Gordon, you need to look at yourself in the mirror and be really honest about what part you've played in this armageddon.
At least do the decent thing now and do whatever it takes to stop these outrageous pension payments and obscene rewards for failure once and for all.
Complain about this comment
This comment was removed because the moderators found it broke the House Rules.
What is so staggering about the figures is that the losses from non-performing loans has even overwhelmed the interest received from the reamining performing loans where one must assume that interest rates levied (at that time) were set at around 10%. Clearly RP's key observation is that 12% of the £116bn loan book is now a basket case. You only lose 3% on a roulette wheel.
Complain about this comment
Talking Shop With a ‘Vulture’ Investor
In the financial industry, there used to be a niche specialty called "distressed investing." Some called these folks vultures, because in the aftermath of a collapse, they would go swooping in to buy up the wreckage on the cheap. That's not much of a specialty anymore — the state of the market means we're pretty much all vultures now. But we thought we could get some perspective by getting in touch with an old friend who is on the front lines — he trades at one of the most established and respected distress funds. Last time we saw him in person, around Thanksgiving, he was talking Apocalypse with a capital A and scaring the crap out of everyone. It was a great holiday. We thought, given how many fabulous buying opportunities people keep saying are out there, his mood would probably have improved by now.
We were wrong.
NYM: How are you doing?
V: Since I saw you last, things have deteriorated more than even I could have imagined. We're invested in virtually all sectors, primarily through debt, so we have pretty good access to management. The color coming from them is mind-bogglingly awful. We need to flush all the banks and start again. I told my wife I'm putting gold bars and shotguns under our bed.
NYM: Can we take refuge with you, if it comes to that?
V: You're more than welcome. We have thick walls and a high perch from which to pick off the marauding throngs.
NYM: What's the least-bad news you've heard recently?
V: The only thing anyone on the desk can come up with is the fact that there have been a number of high-grade non-financials who have been able to raise debt in the market. That's it. GDP is going to be down 10 percent this quarter, is my guess.
NYM: Give me the bad news then.
more: http://nymag.com/daily/intel/2009/02/we_are_all_vultures_now.html
Complain about this comment
This makes much more sense to me than PESTon's constant scaremongering.
------------------------------------------------------
Jeremy Warner: Time to stop talking down banking assets
http://www.independent.co.uk/news/business/comment/jeremy-warner/jeremy-warner-time-to-stop-talking-down-banking-assets-1634355.html
Outlook: If every house on your street was put up for sale all at the same time and it was announced that they must all be sold within the week, you wouldn't expect to get much for your property. OK, so you might get lucky and a property developer with cash (not that common these days) comes along to buy the lot. But even then, he would expect a bargain and you would only get a fraction of your house's long-term value.
Nobody in their right mind would think of participating in such a firesale unless they absolutely had to, yet this is the sort of nonsense approach to valuation which is now routinely applied by analysts, accountants, regulators and financial commentators to bank and insurance balance sheets.
In nearly all serious recessions, most banks become technically insolvent, in the sense that, were you to try to liquidate their assets or otherwise refinance them, there would be very little chance that the proceeds would be enough to cover liabilities. Yet in previous recessions, these uncomfortable truths have tended to be brushed under the carpet or otherwise covered up. In time, the economy recovers and the assets regain their value.
One of the problems with this particular banking crisis is that securitisation has made the process of debt destruction much more transparent than in previous downturns. Many forms of debt can now be traded, and in markets such as these, this tends to give a very unflattering view of their underlying value.
You'd get virtually nothing for most collateralised debt obligations right now, even though once disentangled and held to maturity they might be worth a reasonable amount. The same with bad-debt recognition on commercial lending. Some of this lending will eventually turn out to be fine, even though it is being written down right now to reflect the higher risks of default.
The crisis in banking and the economy is being made very much worse by ever more alarmist predictions of what all these assets, or loans, might be worth. According to one report yesterday, the City expects more than half the £325bn of loans being insured by Royal Bank of Scotland under the asset protection scheme eventually to be fully written off, making the taxpayer potentially liable for around £130bn of losses.
Even assuming RBS is insuring only its most toxic credit risks, this strikes me as deeply unlikely. Accept, of course, that the more people there are who believe it, the more likely it becomes. Hedge and vulture funds that prey on distress debt can hardly believe their luck that they have a financial press so hell-bent on driving us all into the next Great Depression.
Here's another instance of the same sort of thing. According to someone I was talking to in the City the other day, were HSBC to adopt a "realistic" approach to its remaining exposure to US sub-prime mortgages, it would need to write off tens of billions of dollars more than it already has. Oh goodie. That would mean that even HSBC, thought of as one of the more solvent banks around, would be in serious trouble, and the taxpayer would have to bail them out too along with everyone else.
The negativity you get at the bottom of a bear market is the mirror image of the irrational exuberance seen at the top of a bull market, only a good sight more dangerous because it is people's jobs and savings that the doom-mongers of the press, TV and hedge funds are playing with. Bank-trashing is all the rage.
If everyone could calm down and adopt a more measured view of the likely long-term damage to bank balance sheets, much of the crisis would be over. The more we worry about the state of the banks, the worse the situation becomes. A mass fire-sale of assets, which eventually becomes inevitable if everyone keeps on talking down
--------------------------------------------------------------------------------
Complain about this comment
Good points all. But now let's turn our minds to a lasting solution we can all get behind.
There's much to be said for the work of John Bellingham. Though not popular for a long time in Britain, his radical strategy for extra-electoral PM "correction" was strongly endorsed in his day. The efficiency of his core concept is beyond doubt.
Typical of so many great British ideas, his work has not been fully appreciated here - but the broad thrust of his thinking has been widely copied and adopted to great and lasting effect in other countries.
At the risk of starting a stampede, dare I ask: is there a "disgruntled" businessman in the house? Your country needs you.
Complain about this comment
View these comments in RSS