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Tuesday, December 09, 2008

The Gloves Come off

The Times reports that Michael Coogan, director general of the Council of Mortgage Lenders, made a scathing attack on the government:

"To different degrees lenders are facing conflicting pressures to recapitalise against possible future losses, service government's preference shareholdings at 12 per cent, pay a premium to access the Bank of England Special Liquidity Scheme, show forbearance to borrowers in arrears, follow base rate moves down to help their existing borrowers, keep savings rates high to support existing savers, and provide competitive rates to new borrowers and savers to maintain economic activity in a recession.

And they are supposed to ensure their long term financial stability to help the UK economy rebuild itself when we are out of the recession.

Current policy objectives are conflicting and incoherent. The government needs to decide on its key priority. The tug of war with lenders being pulled in every direction at once needs to end

I would normally have some sympathy for the banks, under different circumstances. However, this mess is entirely of their own making. Many banks have had to use taxpayers' money to stabilise their finances, and now are partly owned by the taxpayer.

The rules of the game have changed, banks need to face up to the fact that politics now supersedes balance sheets and bottom lines. They have become subject to the whims of politicians and the "public mood" as gauged by the media.

Good luck to them, this will get worse before it gets better.

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