Do you ever wonder if Gordon Brown has too much money?

[AtheneNoctua]

WTF, as if Norther Rock wasn't bad enough... let's just sell out the taxpayer to whole banking industry.

Banking industry bail out

Interest rates are low and people are still struggling.There is nothing for it but a short sharp shock imho.No matter how much they are bailed out for their pre december folly the mortgage lenders are still charging more for new loans.If they keep lowering rates they will alienate savers the very people they need to encourage.We need a return to stricter lending surely otherwise the whole thing could happen again?Tbh I think a recession here and in the US is coming.The debt bubble is huge and even worse here than there.Apparently even if we paid 100% tax and the gove halted all public spending the UK balance book would still be in trouble

Also interest only mortgages are classed as sub prime in teh US but not here.

This govt has definitely been a tax and spend government. I just hope it doesn't take another Thatcher to get us back onto the straight and narrow.

terribly responsible in this country and it is only those Americans . . ."

That's not what I said. What I said was, it's not the loans per se that caused the problem. It could have been any other type of security. What's caused the problem is that as well as being quite risky, they've been repackaged and sold all round the world willy nilly. Banks have bought them without understanding what their risks are whereas the original lender (let's say the Alabama Building Society) had a much better idea of what their risk was and were therefore better qualified to manage it.

UK banks have actually bought quite a lot of this stuff and have therefore been at least as irresponsible as the US banks.

I am certainly no supporter of reckless lending - in fact I would favour more regulation, higher interest rates, and capital gains tax on property. But as I've said before, no one would vote for that, particularly the latter.

I would suggest that 125% mortgages, interest only and self cert are all sub prime - you could also argue that 100% mortgages are sub prime as it shows that you can't afford to buy!

I just hope that Brown et al are not going to stoke up inflation to inflate away the debtts.

margo i think there is a growing contingent that would vote for that!And I think its coming in perhaps stages and a modified form.Inflation is high but the official figures atill not showing that.As soon as something in the basket becomes over priced they whip it out and replace it with something that is going down in price It is one big fiddle.I am a prudent shopper and my weekly spend has gone up aboout 15-20 pounds.there is huge need for change.

Margoandjerry - the point being that if it was some other type of security, millions of homes would not be on the line. They are quite risky because of UK banks' lending policies, and the banks probably wouldn't have behaved in this way if they had not expected the government to bail them out. It is moral hazard.

Labour's policies over the past ten years have increased the gap between rich and poor. I think there is a growing number of people who don't like the way these policies are damaging the fabric of local communities. There is also increasing bitterness from a younger generation who bear the brunt of this and can't hope to aspire to the quality of life that their forebears enjoyed. But what alternative have the conservatives offered them?

It seems that in teh US mortgage lending rates are rising still This money is to save teh banking system but will have no effect on the housing market

Also, I think it has divided the country - in terms of north and South. If you live in the North, it was always difficult to move South, but I would suggest it was now impossible.

You could come down and rent.

I know, Margo, and there's the rub. As someone else said, the poor old taxpayer bears the losses in bad times while the greedy privateers run off with the profits in good. And then have the cheek to lecture the public sector on sodding efficiency!

It's not just the current crisis, either. Gordon Brown pushed through PFI deals, insisting that they were the ONLY way health/education authorities could build hospitals and schools. Greedy companies sold on the contracts - cue everyone in the chain getting richer at the publics' expense. Most of these companies are tax exiles, just to add to the injustice. AND we the public are stuck with paying billion pound mortgages for the next thirty years for buildings that will be not what we need by then. And often aren't up to scratch now, anyway. MRSA would be a lot easier to defeat if bed occupancy rates were a bit lower - but PFI hospitals were built with many fewer beds.

It's okay Athena - I am happy where I am, but my dd would just love to live in Brighton - shops, shops and more shops - what more could a 16 year old want!

Edam I couldn't agree more. As someone who used to be in the public sector (Treasury as it goes ) but is now in the private sector, I know it's all a load of old baloney about private sector efficiency. Makes me quite furious actually.

"MRSA would be a lot easier to defeat if bed occupancy rates were a bit lower "

Absolutely right - they also need to turn the heating down a bit, haven't they heard that bugs thrive in warm conditions?

Nulabour have carried on their tax and spend policies and have got the country into a right mess with a huge budget deficit.

This is a scandal as they are effectively privatising profit and nationalising loss!

They do actually need to keep the patients warm, though, figroll! All those elderly people, ill people and newborn babies aren't too good at regulating their own temperatures.

Another interesting article in the guardian

"All in all, Labour's tax system has encouraged the rich to get richer, so would that Martian guess a Labour government had been in power?"

OMG!have just read in todays paper that the bonds are being traded not just for high quality mortgage products but also for unsecured debts too and not even top grade debts but it seems almost anything will do!This was not what GB and AD initially proposed and is a shocker if true

Which paper? I am stunned to read it will be £50 billion. Think how every public serviec imaginable could be transformed for that kind of money. And all in the interest of "helping" first-time-buyers by keeping prices high. That is like helping motorists by upping the tax on new cars!

From the bbc

"The Bank of England will next week unveil a plan to swap £50bn of government bonds for British banks' mortgages, the BBC has learned.

...the lending programme could open up the Treasury to accusations of creative accounting by opposition parties by limiting the maturity of the bonds to one year, but allowing the lending facility to be in place for three years. If the Treasury had chosen the simpler route of issuing bonds of two-year and three-year maturity, the new bonds would have been part of the national debt under accounting standards. This would probably have led to a breach of the so-called fiscal rules put in place by Gordon Brown in 1997 to keep the public sector's balance sheet in reasonable shape. Bonds with a maturity of less than one year, issued in what is known as a "repo" operation, do not count towards the national debt."

public service obviously

rumours that it is closer to 100bn and they will have to admit that next week

It seems that the bank of England will also be exchanging these bonds for dodgy credit card debt. Announced just before the local elections too.

MargoandJerry, can you defend that?

Okay, today's bbc ffront page news (here), "Banks will be able to swap potentially risky mortgage debts for £50bn worth of secure government bonds..."

Can anyyone tell me what they mean by "secure government bonds". Does this mean the value is guaranteed? And what with "potentially risky"? Don't they mean "guaranteed to contain at least some bad debt"?

How stupid does Gordon think we are?

It's not for me to defend - I'm just trying to point out that our options are limited and actually the best path forward at this point is to try to shore up liquidity in this way.

The other option is to let liquidity dry up altogether and engender a massive recession.

The reason why this is for governments to do (and a previous poster completely misunderstood my post on this) is that they are the only agency able to do this. The reason for my posting about schools etc is that surprisingly, banking is also a social good. It operates in the private sector but it only successfully operates in the private sector if it is anchored by the public sector via regulation (FSA) and provision of liquidity where necessary by the Bank of England.

What else do you think the Bank of England is for?

It's like restaurants - they are run in the private sector but the public sector imposes the health and safety legislation and pays for the training of inspectors etc. Yes, that costs us all money via the taxpayer. And the restaurant owner should run a clean restaurant anyway. And usually only the restaurant owner profits. But better than us all getting salmonella.

It's easy to be outraged by this but how would you steer the banks through this problem without causing thousands of people to lose their homes and people to be made redundant?

It is only to restore their books isn't it?mervyn king has said it is not 'to impede the much needed readjustmenyt in house prices'.It doesn't seem to have worked v well as several banks stocks have already fallen and teh abbey national have said they are increasing deposit required on trackers to 25%!Nightmare.I agree something had to be done but they could drop their bonuses for starters.This will all lead to inflation surely?