BoE to bail out the banks

UK007BullDog

I think the government has lost the plot:

http://business.timesonline.co.uk/tol/business/money/property_and_mortgages/article3783516.ece

QUOTE: An unprecedented £50 billion injection to bail out Britain’s ailing banking system could be doubled if it fails to stave off a collapse in the housing market.
Alistair Darling, the Chancellor, will tell MPs today that the Bank of England is to allow lenders to swap assets for government-backed bonds in an attempt to restore confidence and ease the effects of the credit crunch.
The initial offer is for £50 billion of bonds, but senior Treasury sources told The Times yesterday that further cash injections up to a total of £100 billion were possible.

However, they admit that there is no guarantee that the bailout will lead to banks offering cheaper mortgage deals.
Mr Darling is also braced for a dispute over whether the bonds should be counted as government debt.


I think Darling and Co are seeing a lot of Pink Elephants..... they have lost the plot.

Please discuss!

UK007BullDog

It seems as a confirmed deal
BoE unveils liquidity solution


The Bank of England has confirmed it is to launch a scheme to allow banks to swap temporarily their high quality mortgage-backed and other securities for UK Treasury Bills.

The move was widely expected following Gordon Brown’s meeting with the leading banks last week.

Under the scheme, banks can, for a period, swap illiquid assets of sufficiently high quality for Treasury Bills. Responsibility for losses on their loans stays with the banks, according to the Bank of England.
The asset swaps will be for long terms - each swap will be for a period of one year and may be renewed for a total of up to three years. The swaps are available only for assets existing at the end of 2007 and cannot be used to finance new lending.
Usage of the scheme will depend on market conditions, though the Bank of England said discussions with banks suggested that use of the scheme was initially likely to be around £50bn. Mervyn King, Governor of the Bank of England, said: “The Bank of England’s Special Liquidity Scheme is designed to improve the liquidity position of the banking system and raise confidence in financial markets while ensuring that the risk of losses on the loans they have made remains with the banks.”

http://www.mortgagesolutions-online.com/public/showPage.html?page=790040

tonyE1

UK007BullDog wrote: »

I think the government has lost the plot:

http://business.timesonline.co.uk/tol/business/money/property_and_mortgages/article3783516.ece

QUOTE: An unprecedented £50 billion injection to bail out Britain’s ailing banking system could be doubled if it fails to stave off a collapse in the housing market.
Alistair Darling, the Chancellor, will tell MPs today that the Bank of England is to allow lenders to swap assets for government-backed bonds in an attempt to restore confidence and ease the effects of the credit crunch.
The initial offer is for £50 billion of bonds, but senior Treasury sources told The Times yesterday that further cash injections up to a total of £100 billion were possible.

However, they admit that there is no guarantee that the bailout will lead to banks offering cheaper mortgage deals.
Mr Darling is also braced for a dispute over whether the bonds should be counted as government debt.


I think Darling and Co are seeing a lot of Pink Elephants..... they have lost the plot.

Please discuss!

Why are they losing the plot? If banks aren't able to lend how does that help anyone, unless you personally have a a bank account with a big fat balance in and are waiting to take advantage of those people who suddenly find themselves unable to pay their mortgage. If this action alleviates the cash flow problems of the banks then its good in my view. Successful business don't fail because they aren't profitable, often its because they run out of cash - same for people. If someone finds themselves out of a job for a few months should they potentially end up losing their house because they have a short term cash problem even though there home may hold significant equity? of course not. If the risk is small then it is to most peoples benefit ( although maybe not yours? ), you are clearly keen for people to end up having to enter into fire selling of their homes

Ephemera

OK... and if you're NOT a home owner or about to take on a mortgage...

I'm saving for a home and I see my savings being eroded by high inflation, while at the same time low interest rates are not making up the shortfall. It's bad this end, too, tonyE1!!

Bismarck

Don't personally think they've lost the plot.....I just feel the accounting's getting murkier and murkier...have t osee what the banks actually before passing judgement....then again...we are kept largely in the dark....

therealdelboy

Of course it’s a good idea. There really is no alterative – the government have been far to slow to respond to the credit crisis with the resulting downward pressure on house prices. Hopefully this will be the shot in the arm that the market needs in order to stop house prices falling any further. If it isn’t, then the government need to keep on pumping in more liquidity until we can see reduced mortgage rates, and house prices rising again.

UK007BullDog

The banks make billions of profits off all of us every year. Where is all of that money going? They (Government) cannot or will not help pay people decent pensions, look after us properly, but the banks who made profits and sure had a way to ensure they pay as little tax as possible now get bailed out.

This extra money does not mean a return of the 100% mortgage or make it any easier to get a mortgage. The banks have money but dont want to use their own resources to lend.

I think this is a wrong way of dealing with the crisis. I personally think its a storm in a teacup. Those people being repossesed now would have been anyway even if no credit crunch. Most people will just sit it out and hopefully fix for longer if they have any sense.

therealdelboy

... but that doesn't help those trying to remortgage or get onto the housing ladder, with other than perfect credit records.

As a short term solution, pumping large sums of secured funds into the market should help relieive pressure on bank rates and borrowers, thereby reviving upward movement in house prices sooner rather than later.

If the BoE doesn’t take swift action now, then house price stagnation or even marginal deflation could be the order of the day for the next two to three years, rather than the next two to three months

neas

When people dont have enough money (maybe through bring irrespondible with the money) ... and owe too much... they

Declare Bankruptcy

When a bank doesn't have enough money and cannot loan anymore (maybe and most likely through being irresponsible with said money) It gets bailed out more and more by the government and the people.

BAILED OUT

Yet.... the bank have been happy making massive profits from the people for years and years... now they hold out the beggar bowl from every person in this country.

Thats what this really is... Banks with the beggar bowl.. how ironic... but also how saddening.. that what you work your heart and soul out for is eroded by people defaulting... after living the high life for ages.

High inflation will erode savings and debts alike... Banana republic ftw.

neas

This wont stop the house price crash,... and this decision will further screw our economy... The labour goverment will be remembered for the amount of tinkering it has done to the economy... how it has trashed us.

Dan_Collins_2

I have said it before and I will say it again! The banks run this country.....

.... Just after the media!

Its a bit of a joke, they take the securitised books off of a lender and swap it for nice clean government backed bonds. The banks will try and off load all the crap and keep the good. The only winners will be the banks and the investments companies who will now invest in these bonds but the old securities.

The general pubic will not get anything out of this unless one of the larger banks worries about its market share. then we could see rates drop to pick up business. However with less competition than ever why would they bother to lower rates?

Also regaring property prices, I think we will see a slight decrease in prices.