Despite the lengthened timetable, Mr Hoffman said that state aid clearance was “good news” as Northern Rock would now be able to press on with plans to increase mortgage lending in the UK. Under the agreement with Europe, it will be allowed lend an extra £21bn on mortgages between now and 2011 – much of which will be directed at first-time buyers and those with deposits of less than 20pc.
They\’re deliberately targeting the market for sub-prime mortgages.
Haven\’t we, erm, been here before?
Sorry, that’s just a daft interpretation. Sub-prime mortgages are those written for borrowers with a history of default or who for other reasons present a high risk of default. First time buyers and those with deposits of less than 20% are hardly sub-prime. They might become so, but the overwhelming majority don’t – as we’ve seen.
What is wrong is any insistence of politicians that lending must be directed to specific areas.
Shoddy lending practices support our whole phantom economy. What more should we expect.
Yup. Anything to get the housing market going again…
Formertory:
Your second paragraph is the operative one; it is the independence of the enrepreneurial function (of the lender risking his own/investors’ funds)that provides a predictably low experience of default (to the point they could be “packaged” and “derivitavized” onward).
Repayment characteristics of different classes of buyers ought concern only he who must gauge prospect of profit or loss (and price his product acordingly).
Eventual failure (and subsequent whole or partial nationalization) followed by even yet more substandard performance is the entirely to-be-expected result of political interference in almost anything, not just vital industries such as banking.
Here in the U.S., the pols are, as everywhere, intent on getting their fingers into everything imaginable. Over at mises.org, they’re whining about barbers requiring licenses and one state not recognizing the validity of another state’s licensee. I’ve got news for them: a friend of mine got busted 50 years ago for that crime (especially as he was doing it for “free” for fellow school-teachers). Natcherly, one thing leads to another–and the next thing you know, you’re lending millions to unemployed people just taught how to sign their names, etc.
Some states have laws decreeing minimum prices for milk (because farmers are nice, wholesome folk and shouldn’t be put out of lifestyles they’ve so long enjoyed) to enable their competition with truly efficient producers of that commodity. It came to me that maybe we could solve the entire problem by freeing the entire economy from political interference while allowing the state-activists free reign in the milk puddle (to absorb their energies). If we could just interest them (right now, it’s only ordinary milk products that are regulated) in different supports for differing products (there’s a long list: ice cream, cottage cheese (and a long list of other cheeses), whipping cream, half-and-half, evaporated milk (and only ignorance prevents my naming more). Of course, (I reflected) they might want the gov’t. to legislate more on reproductive matters on the grounds that children are milk’s natural, foremost consumers and, therefore, worthy of subsidy of their parents; we’d be, perforce, back to square one with the very most reproductive justifiably entitled to housing loans without regard to race, creed, color (or prior evidence of or lack of ability to repay). You see where I’m going, don’cha? Why, we could use the barber-license model and it wouldn’t be any better. When they all got in there, it would be only hours before they’d insist that the new regime might elicit underground resistance by some malcontent, anti-social enemies urging the wearing of long hair by males, controllable only by regular hair-length exams on school-entering and monthly thereafter (and, to keep things “gender-neutral”) and a code of law and penalties regarding such things as braiding and other things that mothers (and others) do to each others’ hair that should rightfully be done by the licensed professionals. I can’t describe the route, as was easy with the milkmasters–but you can bet your bottom dollar (or pound, as the case might be) it will end up with the banks and financial industry.
How do I know–what makes me so confident? Easy, my friend. As a very astute man one said, “That’s where the money is.”