Saturday 20 December 2008

Reckless lending

Both major parties have been rumbling on about "encouraging the banks to lend to small businesses" and appear to have entered an arms race whereby each party promises something more generous than whatever it was that the other party just promised, at the moment, government guarantees for such lending are top of the agenda. Essex and Kent County Councils have even seriously suggested setting up their own banks.

Right, we all know that the government is bad at most things, but quite how bad, I wonder? The UK has long had a scheme whereby the government guarantees 75 per cent of loans of up to £250,000, I think that this is partly recycled EU money. According to yesterday's FT:

Defaults on loans covered by similar schemes since 1981 have run at 28 per cent...

Dude, WTF?

3 comments:

Dick Puddlecote said...

I remortgaged last month and found it very simple. Then, I'm not a borrowing risk, the banks must have sussed that one out. I'm not a banking expert so I can't understand why this rush to relax lending criteria when that was what got us in this mess in the first place.

Meanwhile, my mortgage is £460 a month less thanks to the interest rate cuts. Thanks Labour ... still not voting for your corrupt arses though.

Anonymous said...

It's quite shocking how quickly this sector has turned from something close to a capitalist free market towards socialism.

When the government first got into taking over banks, there was a nagging thought that they would rule the banks with an iron fist in a velvet glove. So, they don't have to regulate them, just make certain noises and make the directors a little nervous and they start doing things like NatWest giving money advice rather than trying to sell you something.

Every day you can hear noises from backbenchers about how, now the government owns the banks, it should do x, y and z with them. Then there are the "they bailed out the banks, they can bail out Woolworths, Jaguar etc."

Lending by local authorities will be a very bad idea. It will politicise lending. If a council lends money to someone to run a Hummer rental service, or someone who produces an Essex Girls web site, or that makes turkey twizzlers, how quickly before various groups come out of the woodwork and start lobbying councillors to make sure that investments are "ethical"?

Mark Wadsworth said...

TA, the "should" brigade launched their attack back in October, if not earlier.