Panic at the Bank of England

EdInvestor

This banking crisis has been going on since last summer.Time to bring it to an end.

Jonbvn

HugoSP wrote: »

Squat Now, you have a friend.

I was thinking along the lines of "here's one we made earlier".;)

Running_Horse

acook wrote: »

The credit crunch is worse than anyone ever imaged. Today, the central banks have announced a coordinated plan to pump in liquidity into the world's major banks.

Here in the UK, the bank of england will accept inferior quality debt as collateral for short term loans to the banks.

Last week's interest rate cut has failed to stop the credit crunch. Interbank rates haven't fallen and accessability to cheap mortgages is over.

What does this mean for the UK housing market. I doubt we will see 10 percent annualized house price growth again in our lifetime.

Now is the time for panic. Sell those houses now, accept whatever is offered. The first one to the fire exit survives, everyone else gets burnt.

Alice

http://ukhousebubble.blogspot.com

Do you lie awake at night panicking about things you can't change?

I prefer to make the best of life.

Have you ever considered the chances against your ever having been born at all? If just one of your thousands of ancestors had acted just a little differently? Now that's frightening.

Generali

It's hard to see what other policy response is available to the Central Banks really. Cutting rates won't help if banks won't do business in the money markets. For very dull reasons (PM me for examples - I used to work in the treasury of a clearing bank) banks need to lend and borrow short term amongst themselves. The only thing left is for the Central Banks in their role as Lender of Last Resort to step in and do their job.

What are the alternatives? Slash rates and let inflation soar? Let the banks collapse (and take their customers' savings with them)?

It may not sound like it but the money involved isn't that much in banking terms - the foreign exchange markets turn over 40 times that each day for example. This is just an attempt to foster some confidence that your counterparties might actually be able to meet their bills.

It is my belief that there will be a Govt bailout for the banks eventually. This isn't it though. My prediction is for some sort of UK version of Freddie Mac - a quasi Governmental mortgage financer.

I'm off to buy a tin hat.

ManAtHome

Generali wrote: »

It is my belief that there will be a Govt bailout for the banks eventually. This isn't it though. My prediction is for some sort of UK version of Freddie Mac - a quasi Governmental mortgage financer.

Notsouth Hardthing...?

Surprised the BoE didn't just reduce their penalty rate last week instead of farting about with the headline rate (unless they/Tesco etc needed a "phew, the xmas rush turned up just in time"... as usual).

danm

things looked like they were getting slightly better for a while.

big banks were funding in the ABCP market at libor flat. UBS news and the fact that banks are starting to hoard cash for year end has pushed spreads back up too 100bps on CP and over 6.5% on libor.

to get these levels down is a good thing.

Generali

danm wrote: »

things looked like they were getting slightly better for a while.

big banks were funding in the ABCP market at libor flat. UBS news and the fact that banks are starting to hoard cash for year end has pushed spreads back up too 100bps on CP and over 6.5% on libor.

to get these levels down is a good thing.

It's amazing really. I don't know much about the early 1970s credit crunch but superficially there appear to be parallels on the macro/micro economic side at least - the Barker Boom, rapidly rising house prices, a strong economy(?) at the end of the Golden Age of post-austerity growth in the late 50s and 60s, high oil prices. I must look it up.

Certainly the Central Banks need to get a grip on things if at all possible. BTL LLs and assorted fools with 20 credit cards and a shiny car going bust is one thing but the longer this goes on, the more the problems look like becoming a systemic threat of the sort that is very hard to overcome (e.g. Japan 1990s).

WTF?_2

Generali wrote: »

It's amazing really. I don't know much about the early 1970s credit crunch but superficially there appear to be parallels on the macro/micro economic side at least - the Barker Boom, rapidly rising house prices, a strong economy(?) at the end of the Golden Age of post-austerity growth in the late 50s and 60s, high oil prices. I must look it up.

Certainly the Central Banks need to get a grip on things if at all possible. BTL LLs and assorted fools with 20 credit cards and a shiny car going bust is one thing but the longer this goes on, the more the problems look like becoming a systemic threat of the sort that is very hard to overcome (e.g. Japan 1990s).

The problem is that it's one thing to address the issues created by the credit crunch but it needs to be done in a manner that doesn't encourage the behaviour that caused the problem in the first place.

Offering bailouts and cutting interest rates despite the threat of inflationary pressures smacks very much of sending the message "Do what you like, we'll come to the rescue if you mess up". Basically, governments are too scared at seeing the credit junkies go cold turkey to take away their drugs.

I'd couple any bailouts with strings attached - much tougher banking regulation. I'd also make it clear that any liquidity-enhancing measures were short term only and that longer term, fighting inflation is the priority.

Generali

!!!!!!? wrote: »

The problem is that it's one thing to address the issues created by the credit crunch but it needs to be done in a manner that doesn't encourage the behaviour that caused the problem in the first place.

I'd couple any bailouts with strings attached - much tougher banking regulation. I'd also make it clear that any liquidity-enhancing measures were short term only and that longer term, fighting inflation is the priority.

Nah. If you want to reintroduce moral hazard string Greenspan up from a lampost, maybe reintroduce debtors prisons. Pour encourager les autres.

danm

the credit crunch has very little to do directly with the UK market.

I'm 99% certain that no UK lenders mortgage securities have contributed to the defaults and losses that the investment banks have reported.

Whether the UK consumer has over-extended themselves to the point that will impact the markets like the US is still unknown.

No govt actions have been as a result of UK banks over-lending to less credit-worthy individuals. Obviously that doesn't mean that it will not happen in the future.

All the central banks are trying to do is restore liquidity and confidence to the markets