How Dumb can the Government get?

WTF?_2

http://news.bbc.co.uk/1/hi/business/7530273.stm

The government may have to give a taxpayer guarantee to billions of pounds of mortgage market bonds.

The recommendation is part of a report commissioned by the Treasury that looks at possible ways to revive the UK mortgage market.


So, let's go over the situation.

The banks decide to recklessly loan lots of money to people, which they use to buy property.

This pushes up the 'value' of the property.

So the banks can loan even more recklessly to enable people to keep buying property.

This pushes up property to stratospherically unsustainable levels.

As a result of recklessly loaning this cash, the banking system starts to creak and credit is restricted.

Which means the price of property starts to drop because no-one can afford to buy it without taking out an eye-wateringly large loan for which the banks no longer have enough credit to dish out.


Solution: Get the taxpayers to take on the debt. The banks can get back to lending out silly amounts of cash and profiting from the interest payments while Joe Public stands to lose out should the deal go bad.

This should enable houses to become stupidly expensive again so that the banks little pyramid scheme can continue.

What an absolutely genius idea. This is actually being considered by the Treasury :mad:

Hands up who thinks that Gordon Brown will actually be stupid enough to try this in order to court popularity before the general election in less than two years time...


At least some politician is speaking sense:

The Liberal Democrat Treasury spokesman, Vince Cable, told the BBC that he was uneasy with the idea for two reasons.
"First of all this is a straightforward proposal to let the government take the risks for private lending and companies will continue to make their profits from it," he said.
"Secondly because it could have an effect of simply reflating this housing bubble that is now bursting in a rather painful way and reflate it in a way that prevents first time buyers ever getting on to the ladder."

ad44downey

They don't care any more. They know they're going to lose the next election so they're going to fook the economy up so that Tories will have a nightmare tying to sort the mess out.

Guy_Montag

Former banker wants govt. funds to fund banks. Hmmm, bit like Sir George Cox calling for govt. intervention on the Today programme.

Listen to Vince Cable give him some !!!!!! here:

http://news.bbc.co.uk/today/hi/today/newsid_7530000/7530357.stm

Jimuth

If this happens, I give up.

As a wannabe FTB being a good boy and saving for a deposit, the fact ideas like this are even being considered just seems so patently wrong.

Suuuuuuuuuuuuuuuuuuuurely no-one but EAs and Kirsty Allslop thinks prices can go up indefinitely?

mizzbiz

ad44downey wrote: »

They don't care any more. They know they're going to lose the next election so they're going to fook the economy up so that Tories will have a nightmare tying to sort the mess out.

Spot on, my friend

Datasafe_2

Its a genius move in that the taxpayer takes all the risk and the banks get all the profit.

Sir_Humphrey

http://www.guardian.co.uk/business/2008/jul/29/creditcrunch.houseprices.crosby

Whilst I would be unhappy to see the government try to reinflate the property bubble, the truth is they cannot.

First of all, that is an interim report. Secondly, it predicts that the mortgage famine will continue until 2010 at least. Thirdly, it has rejected already a UK version of Freddie and Fannie.

All the "bailout" would do is slow the falls a bit, and they aren't trying to do so anyway.

We can all be angry with the government policy on the housing market since the 1980s (I sure as hell am) but lets keep our brains functioning here guys!

mystic_trev

The Crosby report will also say that Britain should avoid US-style government-backed agencies to tackle the funding crisis.

http://www.ft.com/cms/s/0/3e588326-5ce3-11dd-8d38-000077b07658.html

Alistair Darling should reject setting up an American-style mortgage agency as a way to give a long-term boost to the crippled housing market, according to Sir James Crosby, the former chairman of HBOS.

http://www.timesonline.co.uk/tol/money/property_and_mortgages/article4419346.ece

Paul_N_4

And what would Merv have to say about this? Since the credit crunch he's always been against bank bailouts and reinstating reckless lending. If such a scheme was introduced, I can't see him swallowing this without a heck of a lot of strings attached to the conditions of the swaps.

BTLNEWbie_3

!!!!!!? wrote: »

Hands up who thinks that Gordon Brown will actually be stupid enough to try this in order to court popularity before the general election in less than two years time...

I think GB is so desperate that he will try anything but even he is not so stupid to go down this route.

epz_2

got to love the bankers point that only a third of people could buy at current prices based on savings as though that isnt an indictment on how out of touch lending has got to the real world.

i say we windfall tax them on their turnover annually till all the money is paid back with interest.