THE GOVERNOR of the Bank of England, Mervyn King, has privately warned Downing Street that he will resign if Gordon Brown directs the bank to become the key agency in a state-backed mortgage guarantee system. Transferring the risk of investing in mortgage-backed bonds from investors to the Treasury, a move that would see the government "underwriting" mortgage deals, is understood to be one of the key recommendations contained in the final report from Sir James Crosby, the former head of HBoS. Crosby was commissioned to look at new ways of reviving the UK's ailing mortgage market. Sources say the Prime Minister believes a temporary guarantee system, with the government refinancing bonds every two or three years, could be the magic bullet that revives the housing market and Labour's political fortunes. Crosby's full report - expected to be published before Alistair Darling gives his autumn pre-Budget assessment on Britain's economy - is already with the Chancellor. Despite Crosby backing state "under-writing" of mortgages, but backing away from a full-blown introduction of a UK version of the US Fanny Mae/Freddie Mack model, Treasury economists privately attacked the proposal as "unworkable" and "liable to prolong" the credit crunch. Darling is understood to have told Number 10 that such mortgages would be a burden that the government should not bring upon itself. King told the parliamentary Treasury select committee last week what he has repeatedly been telling financial institutions: that any attempt to artificially support the mortgage market by the government is something a central bank should not be doing. In private, King has let Number 10 know that he believes risk and reward is part of the market and underwriting mortgages is not something in which the Bank of England should do. With Darling opposed to the introduction of state-backed mortgage guarantees, with his stance backed by King and leading figures at the Bank of England, the replacement of Darling in the expected Cabinet reshuffle will set alarms bells off in Threadneedle Street. One Bank of England source said: "The governor has made his position crystal clear. It is not the purpose, nor should it be, of central bank liquidity insurance to provide a source of long-term funding to the financial system." Asked whether or not Number 10 knew that King's opposition amounts to a serious resignation threat, the source said: "Yes, they know and understand that." Given the pressure that the Prime Minister is under to show his party and the country that he has a solution to get Britain out of the economic downturn, the resignation of King would be, according to one Treasury aide, "an economic catastrophe". He added: "The government's credibility would be shattered, leaving Brown and perhaps the new Chancellor in an economic no- man's land." Equally worrying for Brown is that political dithering over the Crosby recommendations will not be welcomed by agencies at the centre of the housing crisis, such as the Home Builders' Federation (HBF). The HBF says that the housing crisis is well advanced and that if there is no urgent action by the Treasury to improve market conditions then further damage to the economy can be expected.
Cameron/Osborne either do something or their is going to be the most terrible 4 years in power ever.
It's worth remembering that Brown specifically excluded house price inflation from the figures that the BoE used to determine what the base rate should be. Had it been included then undoubtedly Mervyn King and Eddie George before him would have been persuaded to use a much higher base rate to choke off house price inflation so avoiding at least some of the current mess the financial services morons have got us into.
The banks HAVE to bite the bullet here for their profligacy. If that means mergers, job losses etc. then so be it. Otherwise, it will only stymie the problem for another 3-5 years when it goes breasts heavenwards again.
What would have helped would have been a fiscal buffer, allowing tax cuts. However, that's been wasted on a consortium of five-a-day co-ordinators and the like in the public sector.
Can I also add what a fine bit of journalism and journalistic research this is by the Sunday Herald. This is a really key issue at the heart of the economy and I am not sure the Government and BoE dialogue has been well covered elsewhere. We need to see a decision that stops profligate risk taking and Mervyn King is on the side of of the good and industrious, whilst Brown sides with the feckless wastrels in the Banking and Property sector.
In reality of course, we'll have more dither and more compromise measures until the powers-that-be finally realise that playing King Canute isn't even electorally popular.
(1)the British government proposed state-backed mortgage guarantee system
or
(2)the outcome of th US Presidential election
I welcome your views.
X VOTE SNP X
INDEPENDENCE
But now that they have privatised Northern Rock they can use this organisation to issue the mortgages.
Businesses crash every day and receive no help whatsoever from this government.
This matter is a continued disgrace.
Get lost, Brown.
So people who stayed within their means and either bought modest homes or continued renting/sharing are NOW expected to bail out those who over-stretched themselves and bought bigger than they could afford?
Get lost, Brown.
Hmm? Who elected the Prime Minister? Where in the manifesto did it say that people like me who rent their homes and pay pleanty of tax have to have their tax used to provide 100% mortgages so that a vastly inflated housing bubble can be maintained - to save an unelected Prime Minister's skin?
And, Brown stood outside No. 11 Downing Street in 1997 and said 'I will not preside over a housing boom and bust'. What did he think house prices tripling and quadrupling was? Something other than the biggest boom in history? Which it is.
Brown has been a disaster for this country. Half the young people in this country have monster mortgages that will keep them in debt slavery for the rest of their lives. The other half have been priced out of home ownership. What are they to do? Spend their lives moving from one 6 month shorthold tenancy to another? What about their children and their schooling. How can you bring up a family like that.
So, to recap on Brown.
Personal Debt - MORE than doubled - from 650 billion in 1997 to 1.43 trillion now
Government income from taxation - MORE than doubled.
Net result. Same as every previous Labour government. Debt, debt and more debt.
And, of course, we now have most of the trappings of a police state with 36 councils admitting they are using children as spies.
The mind boggles.
Good for Mervyn King. If he has to resign to prevent Brown from bailing out the banks and destroying the country even further - good for him. Where will Brown have to go then? When his whole reputation stands on giving the Bank of England independence.
Underwriting banks mistakes giving carte blanche to risk riddled finance vehicles, the bankers salaries and pricing out future generations from house purchase.
I cannot find any justification for the handing over of financial control to any bank that wants to give a mortgage to anyone they choose, it's illegal and would be upheld as illegal in the European court.
The money supply must be largely nationalised for the benefit of all the people.
Sooner or latter this must be faced.
It may take another event like the American Revolution to get there. But there is always a danger of the private bankers creating enough money by fractional reserve banking to buy the media, politicians and whole governments. Sadly that is what happened in the USA.
That is why the money supply and the power must be taken from the private bankers and into the hands of the people, where it belongs.
Also there are at least two candidates in the US election who want to close down the FED. Ron Paul and the very brave Cynthia McKinney. Good luck to them.
The money supply should be controlled by the government and interest free. Issuing bonds and paying interest on them to keep up a housing market that is still far too high is insane.
And so we observe the Scots north of the border blaming their woes on the Scots south of the border. Aye, vote SNP - if only for the sake of the English...All of the stars that live in London get together and let's stage a benefit (the treasurers will have to be Mother Teresa's successor with respect to integrity). This benefit will raise money to keep Brits in their homes.
Next, let's take apart the "trusts" that the rich have hidden all their untaxes thefts in and use that to fix the economy with things like: "retrogrades to all homes to make them super energy-efficient" purchasing clean energy cars and home-energy systems and providing them on very favorable financing (regardless of credit) to everybody except Swervin' Mervyn, the Rockefellers and Rothschilds and other perpetrators of disasters such as wars, poverty, depressions, recessions, inflation and so forth..
My plan will create jobs, return stability to everybody except those who have caused the problems and obviate the need for all this Big Brothering. There will be jobs fixing the houses, installing the upgrades and servicing the paper and taking out all the video cams, chipping and other crap.
It is high time for the people to take back our own governments from these pampered inbred nitwits.
Imagine the gall of these clowns to know that there are some serious astronomical issues confronting us and to build shelters only for themselves. They justify this treachery with "but we will need continuity of government." Where is the need for government if everybody is dead...Just how stupid do they believe us to be..Even more to the point: What kind of world would be rebuilt by people who have no idea how to boil eggs, plant crops or fix anything?
Keynes was spot-on--he wrote something like, "when the people find out what the rich are really up to, they won't tolerate them any longer." I am not advocating class warfare. That is what has been going on for the last 100 years with continual "unforseen" consequences to their mad schemes of perennial self-aggrandizement. Despite all their squawking about being attacked by the poor and middle class, we have not been the aggressors. It has been the super-wealthy sucking the life out of the rest of us. What have we got to show for it? Gold toilets in their mansions, hovels for the rest of us and perpetual war with our children being the ones killed. This is why ancient civilizations required that their kings must go to war along with their children. Those who fight, despise war.
It is time for commonsense to be restored to the world and banksters to be forced to experience what they so gleefullly visit upon everyone else.
Monday, 15 September 2008
Mervyn King warns: I’ll quit over No 10’s mortgage scheme
Mervyn King warns: I’ll quit over No 10’s mortgage scheme
Bank of England governor threatens to resign if Brown forces through state-backed mortgagesBy James Cusick, Westminster Editor
Posted by: BM, Glasgow on 11:36pm Sat 13 Sep 08
Let him quit. Who elected him to dictate to the Prime Minister? He along with Brown has bankrupted the country. What right does an a jumped up unelected banker have to dictate financial policy to the country? Now he is trying blackmail. Good riddance, and don't give him a single penny of a settlement!
Posted by: Los Angeles on 11:42pm Sat 13 Sep 08
Posted by: Los Angeles on 12:18am Sun 14 Sep 08
Posted by: Samoyed, Costa del Menie on 12:20am Sun 14 Sep 08
How much damage is the Brown/Darling tandem planning to inflict on us before the get ousted? And I mean how many hundreds of £BILLIONS do they plan to compromise from our future?
Posted by: Scamp on 12:44am Sun 14 Sep 08
Errrr... Well sorry but I agree with Mervyn King. It is an utterly idiotic idea to propose that the taxpayer should bail out the banks, mortgage companies and the builders.
Posted by: Common sense ain't very common, Renting on 1:52am Sun 14 Sep 08
Mervyn King is spot on. If the Govt pursued this it would be the ultimate example of "privatise the profits, socialise the losses".
Posted by: Donald Anderson, glasgow on 7:37am Sun 14 Sep 08
Posted by: Donald Anderson, glasgow on 7:37am Sun 14 Sep 08
Posted by: Mike Livingstone, Reigate Surrey on 10:10am Sun 14 Sep 08
Mervyn King is the only guy with any integrity left, Brown should go not King.
Posted by: Nick, West Devon on 11:22am Sun 14 Sep 08
Does anyone else have the impression Mervyn King has been a reluctant partner in the schemes to throw good money after bad this past year? Good on him if he can put a stop to it.
Posted by: D.G.S Lamb, Jakarta,Indonesia on 11:28am Sun 14 Sep 08
What will have the most impact on sterling US dollar exchamge rate?
Posted by: solomon, sterling on 11:38am Sun 14 Sep 08
Before leaving his position as PM, will Mr Brown be re-naming The Bank Of England....perhaps The Bank Of GB.
Posted by: SP on 12:11pm Sun 14 Sep 08
Amusing also that the final report was written by a former head of HBOS, who are in real trouble and most of their market is centered around mortgages. We should not be bailing these people out, we should ride this out and there will be casualties. However if we do bail people out the false economy continues and this will just play out for longer. Also if the govt don't bail people out then maybe they will learn not too make too many risks for short term gain and to hell with the longer term consequences! Don't forget lots of people have made their millions in the last 5 years and never have to work again and are not accountable for the mess that they created.
Posted by: birsealmighty, Dundee on 1:01pm Sun 14 Sep 08
It is not surprising that this UK government can offer state backed mortgages. They paid and continue to pay a fortune for the failings of Northern Rock a private company.
Posted by: Rita, Glasgow on 1:45pm Sun 14 Sep 08
So people who stayed within their means and either bought modest homes or continued renting/sharing are not expected to bail out those who over-stretched themselves and bought bigger than they could afford?
Posted by: rita, glasgow on 1:46pm Sun 14 Sep 08
Oh dear, spoiled by a typo. NOW not NOT.
Posted by: Carolanne Sinclair, Glasgow on 3:56pm Sun 14 Sep 08
House prices had been highly-inflated. Prices have been unrealistic for the last decade and it's about time they were brought to a more realistic and affordable level. It's high time we learn to live within our means, and about time show off's like Miss Ultimo Bra Michelle Mone stop flaunting their rich assets.Mervyn King is the only person that makes any sense. In a nutshell...we bail out and this super-hyped false economy continues. Time to ride it out!!!!
Posted by: william, scotland on 5:16pm Sun 14 Sep 08
I think King is right, Darling and the Treasury too. There is no way the Government should issue bonds to support the housing market. If this goes ahead it is only another attempt by Gordon Brown to save his skin, and prevent Labour being tossed out of power at the next election.
Posted by: Mike Wilson, Montrose on 6:34pm Sun 14 Sep 08
The first comment says, of Mervyn King, 'who elected him to dictate to the Prime Minister'.
Posted by: Ignaz Hak, Ayr on 6:55pm Sun 14 Sep 08
Mervyn King is correct to stand up to Brown on this - if Brown's/Crosby's proposals go through, and the banks are bailed out, I'll never vote Labour ever again. Shame on them for even considering this insane plan.
Posted by: exile, far away on 7:31pm Sun 14 Sep 08
Posted by: jazzguy, glasgow on 8:36pm Sun 14 Sep 08
Posted by: Tom-Scott Gordon, Little Rock, USA on 8:53pm Sun 14 Sep 08
King's current position, and the dictum of his actual job is to provide a glimpse of sanity to this run-away situation. Doubtless, Max keiser would agree. Brown obviously must go. It also follows thant neither the USA, or the UK can afford to be ignorant of the other's handling of these matters. As you may be concerned with the 'value' of Sterling, and Real Estate, we are ALL facing an interrelated employment and thus economic meltdown. The fact is that Capital investors need to reassume the risk and the public needs to reassume control of the factors that dictate it.
Posted by: Steve Smith., Sheffield on 9:24pm Sun 14 Sep 08
I'm afraid that if the government or the taxpayers back mortgages.I will be first on the street with a placard, after ceasing all payment of central government taxes of course.
Posted by: Gordon, Aberdeenshire on 9:45pm Sun 14 Sep 08
Most of the World runs on debt. It is not debt as such that is the problem but who gets to create the credits and reap the benefits of charging interest. Private bankers have done this to date, at huge cost to people and society. The irony is that they never had the money to lend in the first place.
Posted by: Invisible Science, UKland on 9:46pm Sun 14 Sep 08
Posted by: Alan, Germany on 10:40pm Sun 14 Sep 08
Agree with Gordon from Aberdeenshire except that bankers have been in charge of the money supply in the UK since the BOE was founded in 1694.
Posted by: Thomas on 10:52pm Sun 14 Sep 08
Hey Brits. Take it from a yank: Don't nationalize the mortgage market! We screwed up, but you don't have to. Swervyn' Mervyn has it spot on. I also suspect it won't be long before our bankers and treasurers realize the blunder. Go Lehman!
Posted by: Paul on 11:32pm Sun 14 Sep 08
The PM is useless. The Chancellor is useless (as was the last one). The Defence Secretary is useless. The previous Home Secretary was useless... (I could go on). Hey, any of you 'Vote SNP' types see a theme running here?
Posted by: Mkarnak, USA on 12:37am today
Here's a suggestion for everybody.
Posted by: some dumb American, Somewhere in Texas on 5:21am today
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