Britannia Radio

FINANCIAL TIMES Blog 27.11.08
Merkel tells Brown to be responsible
by Alex Barker

Germany is leading the fightback against Gordon Brown’s drive to
stimulate the world. Angela Merkel is distinctly unimpressed by the
case for a tax cuts, in spite of sitting on a big budget surplus. In
a speech to the German parliament she endorsed Brown’s diagnosis of
the problem, but dismissed his proposed solution.
“Excessively cheap money in the US was a driver of today’s crisis.
I am deeply concerned about whether we are now reinforcing this trend
through measures being adopted in the US and elsewhere and whether we
could find ourselves in five years facing the exact same
crisis.” [All the hysteria about bank lending here is a good
example of what she is talking about -cs] [See “Ludicrous,
disgraceful and destructive government bullying” just sent]

If you thought that was undiplomatic, take a look at the views of her
confidant and adviser. Steffen Kampeter, the budget expert in Ms
Merkel’s Christian Democratic Union, said:
“I see the danger of creating a new bubble. Massive interest rate
cuts and massive borrowing may bring about new problems.”
“How good is a policy package if it has to be changed every other
week? How good is it for confidence? The latest British decisions on
VAT [value added tax] and income tax, for instance, are inconsistent.
Better to wait a bit longer and put forward more durable solutions.”

Merkel said leaders must resist the temptation to “overcome the
crisis” and instead “build a bridge so that we at least can start
recovering in 2010″. Is this what David Cameron would be saying if
he was prime minister now?
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The World at One, Radio 4 at 13:22
Government "dragging heels" on enforcing bank measures, says Cable

Vince Cable, Lib Dem Treasury Spokesman

Mr Cable said he was "amazed" by the lack of urgency displayed by the
government in tackling the financial crisis and that government
directors in banks would help set to "set the strategy" in the
immediate term.

"The banks are not lending [BUT they are! See “ Ludicrous,
disgraceful and destructive government bullying” just sent]
, despite the undertaking that we entered a few weeks ago that the
banks would maintain their lending, it isn't happening.

"The individual banks are acting in an entirely rational way in their
view - but in the process are behaving in a suicidal manner.

"To ensure this doesn't happen government members should be appointed
to the banks - I am amazed about the lack of urgency," he said.

He accused the government of "dragging their heels" on a very
important step, as companies continue to be unable to raise the
capital needed.

He added: "I think the government is actually confused and
embarrassed about being confused.

"They are effectively giving the banks completely different and
contradictory measures, the banks are being pulled in different
directions."
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FINANCIAL TIMES 27.11.08
Mortgage payment crisis grows
By Norma Cohen, Economics Correspondent
]This is the background against which the government is urging banks
to lend recklessly - again -cs]

Almost one in four subprime mortgage holders have fallen behind in
their payments, a sharp rise from the one in five delinquent
borrowers a year ago, according to Standard & Poor’s, the rating
agency.

The percentage of loans 90 days or more behind on payments – the
category most likely to default – rose to over 13 per cent of all
loans, up from 9.7 per cent in the third quarter of 2007.

“The roll rate from the 90-plus-day delinquency into repossession is
likely to be much higher than in benign economic conditions when
borrowers still have options to refinance their way out of trouble or
sell their property to pay off debts,” the report says.

The stock of repossessed properties on lenders’ books has increased
to almost 2.8 per cent of all loans, up from 1.5 per cent in the same
quarter of 2007, according to S&P’s data – despite pledges from
lenders to help borrowers stay in their homes.

The study, based on an analysis of bonds collateralised by subprime
mortgages, offers insight into an aspect of recent consumer lending
that has never been tested in a downturn. S&P believes about 80 per
cent of subprime loans have been securitised because the most active
lenders have been dependent on the wholesale markets for funds.

Kate Livesy, asset-backed securities analyst at S&P, said the rise in
delinquent subprime mortgages probably reflected what she described
as “affordability issues”. “For this quarter, it is loans that
cannot be refinanced,” she said. The withdrawal of products for
borrowers with patchy credit histories and the expiry of low-
interest “teaser rates” had raised costs for those who took out
mortgages in 2005 and 2006, she noted.

Indeed, mortgages originated only last year are showing a pre-payment
rate that is well below that of earlier years, suggesting that
borrowers are having difficulty refinancing their debts. Moreover,
loans originated in 2005 and 2006, which would recently have come to
the end of a two-year fixed period, are much less likely to be repaid
in full because borrowers cannot find new deals.