£140Bn fund for small business and mortgage lending

Rinoa

The Bank of England is to offer money to high-street banks to kick-start mortgage and small business lending to prevent loans being rationed for many families and entrepreneurs, the Chancellor announced.

http://www.telegraph.co.uk/finance/financialcrisis/9332570/140bn-to-kickstart-stagnant-economy.html

"I hope the fund could be available in a few weeks" said Merv.

pqrdef

Rinoa wrote: »

The Bank of England is to offer money to high-street banks

Will this be equity capital, or are the banks just supposed to get over-leveraged again?

Rinoa

pqrdef wrote: »

Will this be equity capital, or are the banks just supposed to get over-leveraged again?

The banks will need to hand over collateral.

Looks similar to the previous SLS scheme. However, listening to Merv, it sounds as though this scheme will give banks longer to repay.

Not much point in offering to fund mortgages if the BoE want repaying in 3 years, as was the case with SLS.

MacMickster

So we are going to devalue the pound again in a big way, printing over £2300 for every man, woman and child living in the UK.

We would be better directing this money at the construction industry, getting Britain building for the future.

Thrugelmir

pqrdef wrote: »

Will this be equity capital, or are the banks just supposed to get over-leveraged again?

Sounds like wholesale markets are drying up. So BOE is trying to maintain liquidity while banks continue to contract their balance sheets. The BOE is letting the air out slowly. Chances of an outright crash are diminishing.

Graham_Devon

So this is basically QE under another name? Isn't this going to have a knock on value to the pound?

I notice that the article on the BBC states that the BOE will give cheap credit to the banks. Will it be passed on?

Just seems another way of giving money to banks cheaply in all honesty, without giving it the title "QE".

michaels

Is it not a bit of a panic measure with an announcement away from the normal rate setting cycle - anyone in banking can confirm major stress in interbank?

Are we also going to see the other major national banks moving overnight/over the weekend with a tidal wave of liquidity after the Spain announcement from last weekend backfired so spectacularly in terms of kicking the can and of course the Greek elections this weekend?

Thrugelmir wrote: »

Sounds like wholesale markets are drying up. So BOE is trying to maintain liquidity while banks continue to contract their balance sheets. The BOE is letting the air out slowly. Chances of an outright crash are diminishing.

Thrugelmir

Graham_Devon wrote: »

So this is basically QE under another name? Isn't this going to have a knock on value to the pound?

I notice that the article on the BBC states that the BOE will give cheap credit to the banks. Will it be passed on?

Just seems another way of giving money to banks cheaply in all honesty, without giving it the title "QE".

Would you prefer an outright fall in asset prices and a sudden rise in interest rates instead?

This is an emergency move. As the seriousness of the situation shouldn't be underestimated. The UK banks have enormous amounts of fixed term debt to refinance.

wotsthat

Thrugelmir wrote: »

Would you prefer an outright fall in asset prices and a sudden rise in interest rates instead?

You're asking Graham? Of course he'd prefer that.

Lower asset prices and higher interest rates would cure everything wouldn't it?

Graham_Devon

Thrugelmir wrote: »

Would you prefer an outright fall in asset prices and a sudden rise in interest rates instead?

This is an emergency move. As the seriousness of the situation shouldn't be underestimated. The UK banks have enormous amounts of fixed term debt to refinance.

To your first point, as the telegraph points out, this is the third big stimulus package.

First 0.5% interest rates. Second £275bn, and now this.

Total £415bn basically of QE, allbeit under a different guise.

If £275bn didn't work, won't an extra £140bn simply make the debts bigger, but give the can another kick?

I did post not long back that I expected a rabit to be pulled out of the hat, just didn't know what it would be. This is it I guess. If it just means that prices get more expensive again (be that fuel, food etc), I don't think it's solved anything.

If they are getting desperate, surely 2k to every adult would give a better boost?

We've just seen €100bn given to Spanish banks. It hasn't solved the crisis, infact it's made it worse through credit ratings. Surely ours is now at risk too?

Turnbull2000

Is this enough to bring the sudden uptick in national (not just London) house prices that the BoE and Gov desire? The supply and demand imbalance is more critical than ever (and set get even worse in the years ahead), but still only see short term price stagnation due to job insecurity and diminishing real incomes. Rents on the other hand should rise rapidly.