This blog is closed and has moved to http://Charlottegore.com. See you there!
"Right, we've decided to use Government money..." said the politician."You mean tax payer's money?" said the economist.
"Don't be so reactionary! As I was saying, The Treasury has released funding for us to bail out the banks."
"Oh. What for?"
"Well to stop them going bankrupt, of course!"
"You're such an idiot," said the second politician.
"Yes, an idiot," said the first politician. "In fact, today we've decided we're going to buy a controlling interest in RBS and HBOS."
"With tax payer's money?" said the economist.
"Well of course, idiot. It's the national interest," said the second politician. "What price security?"
"Indeed," said the first politician. "Besides, those wretched Capitalist pigs aren't lending to the ordinary people. If we buy a controlling interest, we can get our people on their boards and make them start lending to the right sort of people again."
"You mean the people the banks can't afford to lend money to?" said the economist, barely containing a smirk.
"Yes they can! They're rich! They've got lots of money. They're just being greedy. We're going to make them serve the national interest by letting ordinary people get the credit they deserve."
"They deserve?"
"They're voters. There's a general election coming up. If they can't get credit, Christ, they'll vote for the bloody Tories and then were would we be?"
"I see."
"It's political reality. You can't ignore political reality."
"As opposed to actual reality?" said the economist.
"Don't be so quaint. You're such an idealist. This isn't the time for people like you. This is the time for men of action, like us," said the second politician.
"Indeed. You'll see, Mr Economist. You think you're so clever, but once the ordinary people can get credit again, you'll see: The economy will pick up and they'll vote us back in. You'll see."
"If you say so," said the economist.
"Well, we might have to raise taxes but the people will understand. They know that this is political reality. They know we can't just let the banks fail... besides, we probably don't have to put up taxes until after the election anyway. We'll just borrow until then. It'll be fine. We'll save the economy, and we'll make sure that when it's all over, we have a banking system that serves the people, not just the fat cats in the City. Everything will be better. You'll see."
This blog is closed and has moved to http://Charlottegore.com. See you there!
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5 comments:
Charlotte you seem obsessed with saying that most of the problems were that people were FORCED to give sub-prime mortgages to people that couldnt afford them.
I showed you evidence last time but you still persist in this - to be honest if we're creating this facility for banks (and i see no other alternative) I WANT someone there on my behalf telling them what's what - we sure as hell haven't been able to trust them in the past!
Now to the more fundamental point - banking reform - there are only two real things that work either a free-for-all and let banks fail when they get it wrong (and put everyone else in the mire) or TOUGH REGULATION (mortgages - no more than 4x income and full income paperwork please, domestic lending to be controlled properly (no over-easy credit perhaps limits on credit cards to one months salary?), and let's have house prices as part of the inflation indices.
Sounds patrician? After the past month I really can't see any other way? Can you?
The problem isn't that the banks are being reckless now. They can't afford to be. The problem now is that they're being sensible now that they've got severe cash-flow problems.
The Government's solution is to give them a pile of cash (our money) to get someone on their boards to force them to start lending to people other than the absolute AAA grade credit risks.
I always knew that this 'bail-out' would eventually carry serious strings. It's the way these things always work. It's a blatant, shameless power grab done in few view of the public and the media because, like absolute blithering idiots, we're cheering them on, putting our concerns today ahead of our concerns in five years, ten years and so on.
If you live only in the moment without regard to the future you make incorrect decisions concerning your own self interest. This applies equally to individuals (the fact that too many people are now loaded with debt that they willingly took on - no-one's blaming the individuals that took out 125% mortgages are they?).
The mantra of today is that this crisis needs whatever is necessary to get it fixed, irrespective of the long term consequences. We must just fix it now and deal with the results later.
This is the path of madness.
I meant to say, "applies equally to individuals, businesses and economies"
But banks aren't being sensible now, at all.
They're hoarding and cherry picking, basically they're swinging as excessively in the opposite direction to before.
If you look at what is actually on offer, you'll see that banks are charging siginificant fees upfront, pocketing ever increasing differential between base rate and SVR, fixed or tracker rates, and basically proving the old proverb about banks and umbrellas to be very true.
So, what is actually happening is that consumers are being ripped off, viable businesses are being closed because banks that happily lent loans before are demanding repayment in full regardless of ability to pay.
The government is trying to get the banks to fulfill their role and restore some sort of equilibrium, the freemarket has a tendancy to over-correct wildly like a learner driver on an icy road, that's not sensible, it's as damaging as the reckless lending that it's correcting.
It's also pretty clearly not a power grab, the government, treasury and public wants out of this deal as quick as the banks and rabid libertarians.
The idiots who took out 125% loans and buy to let loans, are getting what you would expect - they're paying well above the market rate to service mortgages, and the buy to let mortgages are being foreclosed - we don't need to assign blame there, it's obvious and self-correcting (to a point).
The buy to letters and 125% mortgage borrowers aren't getting bailed out, and nobody is saying banks should lend in such a way again, but banks are instead being over cautious, refusing to lend to each other, withdrawing lines of credit without notice or negotiation - now that *is* shortsighted - losing money and and ruining a customer for a quick buck is every bit as crazy as lending badly.
Yes, banks are basically having to raise as much Capital as they possibly can (their business depends on it), and they're doing that by increasing their margins and by only lending to good risks. YOu call it 'hording and cherry picking' - I call it the only option available to them since the wholesale money markets closed.
This is the *only* business strategy that makes sense in the current climate.
Banks demanding immediate repayment in full from businesses? Do you have any links for that?
And really 'regardless of ability to pay' is what got is in this mess.
Now you need to be able to pay, and the Government doesn't like it like that.
But, sorry, I keep forgetting that banks are evil aren't they? Sheesh this is where I'm going wrong isn't it?
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