Didn’t we all try this before Dave?

David Cameron: 95 per cent mortgages will make ‘dream of home ownership a reality’
Tens of thousands of home buyers will today be offered 95 per cent mortgages by state-owned banks in a move which David Cameron says will make the “dream of home ownership a reality”.

Or at least, didn’t the Americans try this? Fannie, Freddie, FHA and so on? And didn’t it all fall down in the most dreadful mess?

I’m sure I’ve heard something about that somewhere along the way.

We are looking disaster in the face. A British version of Fannie Mae and Freddie Mac must be created now. Legislation to create a Gordon Mac should be introduced before the summer recess. It should be operating by the end of September. Nor is this just an economic gambit. It will be opposed by the Conservatives as an ‘anti-business’ public intervention. They are wrong. The only way out of this crisis is to embrace the politics of public purpose rooted in the economics of Keynes. Mr Brown has an opportunity to restore the housing market, the economy and his political fortunes. He must act.

And if you’re going to prove willing to try out iconoclastic ideas could you please make sure they’re not proposals from Willy fucking Hutton?

35 comments on “Didn’t we all try this before Dave?

  1. And what’s so great is that we already have those state-owned banks, all set up and ready to make more of the 95% mortgages that put them in the state’s hands in the first place.

    Do we really have such short memories these days?

  2. Certainly confirms the widely held belief, there’s bugger all difference between the major parties. Which reflects, politics & policies are now largely about which particular team of troughers gets to shoulder up to the trough. And has very, very little to do with the welfare of the electorate. They’re just means to buy votes.

  3. 1. Having argued on another thread that there is indeed a difference between the parties, this doesn’t really make the best reading for me does it. I fear the next election will be a popullist auction on the hand, if you’re going to do this shit, I supose the back end of a deep recession is probably the least damaging time to do it.
    2. Speaking out of both sides of one’s mouth (Riitchie again I’m afraid). First you campaign for a nationalised ‘social’ bank that will do the sort of productive, ‘costed’ and socially beneficial things he country needs, then you scream ‘market distortion’ when the bank goes and does one of those things.

  4. This is utter madness. The Tories have always had a bit of a blindspot on this issue. Back in the 1980s, Nigel Lawson struggled in vain to persuade Mrs T. to get rid of tax deductions on mortgage interest, even though it added to the inflated housing market.

    Needless to say, the solution is liberalisation of the planning system and further deregulation of the rental market so that it is easier for people to afford a home. Even so, homes in the UK, especially the South, are expensive relative to some other lands due to high demand. That is not going to change dramatically, or soon.

    It is appalling that we are trying to repeat the folly of the US state-guaranteed mortgage regime that played such a major part in the bust of 2008. But we never learn: Barney Frank, the Congressman who was partly responsible for the lax lending policies encouraged by these agencies, was the co-author of the Dodd-Frank Act that has arguably created another layer of pointless regulatory control on the US financial system.

    The political classes on both sides of the Atlantic are, to a large extent, morons on this issue, or simply dishonest.

  5. “It is appalling that we are trying to repeat the folly of the US state-guaranteed mortgage regime ”

    This is a mis-reading of the history of Fannie and Freddie. Both were sound for years. And would have continued to be so if it had not been for the Clinton administration’s insistence on changing the rules on creditworthiness to ensure that there was no supposed racial disadvantaging going on.

  6. This issue isn’t going anywhere until they address supply. Whether that means relaxing planning laws, as Tim says, building more houses, as other people have said, or some other solution* I don’t know, but simply giving people more money is manifestly going to inflate prices.

    That said, I’ll probably still go with it. Might as well.

    *as a thirty-something curently renting in the London ‘burbs the main problem I see is not lack of starter homes, but lack of second ones. There are lots of starter homes, and they belong to landlords who rent them out to people like me. What there isn’t all that much of is the sort of home my wife and I would like to move into next.

  7. How long is it before the BNP has the most sensible economic policy on offer?

    The problem is that Cameron is not a Tory. We have three Liberal Democratic parties to choose from. And they are all run by faceless and spineless Suits who believe nothing. Well Ed is showing some dangerous signs of believing something and not being spineless.

    Bring on a UKIP victory. Let the Tories purge their more treasonable Wets. Then see if they are electable. If not, well, in a few more election cycles it won’t matter.

  8. Quite some time ago, I asked John Redwoord on his blog how many of his colleagues are interested in economics as a subject, read books and articles, discuss economic theory. that kind of thing (I cannot remember my exact question, that’s the gist of it).

    His answer was simply, “hardly any”.

    This is our problem, really. We are led by people who neither know nor care. It is not just the problem of central planning; it is the double problem that the central planners have no more depth of knowledge than the man down the pub.

  9. I find myself in the same situation as Sam. Emigration is an obvious option – a substantial number of my peers have moved down under.

  10. Emigration is an obvious option – a substantial number of my peers have moved down under.

    Ha! Three of my best friends now live on three separate, other, continents (US, Oz, Eastern Europe). Highly educated, eminently employable, wealth creators. At least one (+wife) ain’t planning to come back.

    Anecdata, I know, but if they’re at all typical then we are going to see one hell of a brain drain. But for my wife’s job, which is rather UK-specific, I’d be thinking about it too.

  11. Danny Alexander was on the wireless this morning obsessing about how all these soon-to-be-subsidized buyers can afford the mortgage payments but not the deposit. There was also a discussion of why house prices are so high, relative to earnings, compared to historical levels… Alexander, rightly, pointed out that low interest rates are a big part of the reason for that.. yet entirely (it seems) fails to see the obvious future for the soon-to-be-subsidized when their two-year fix expires, and interest rates shuffle upwards.

    The one thing that they could have done to make this policy less stupid would have been to insist that the subsidy only be made available to long term fixed-rate mortgages. 10 years or more. We’re really not too good at long-term arrangements in this country.. which is just another symptom of the financial illiteracy that plagues the nation.

    Britain.. where one government wants you to take out a 5-year unsecured loan to buy a holiday, and the next one wants you to commit to a 30 year repayment schedule on the basis that you’ll probably be ok with the freakishly low outgoings in years one and two.

    Maybe the tories, like Labour before them, have already decided that someone else will be manning the fan when the shit hits.

  12. It is doubtful that F ‘n’ F had much of an effect on the crisis – their loans weren ‘t the worst and bankers in the
    UK, Spain and Ireland managed to fuck up without any help. Doesn’t make FF a good idea.

    BUT what what you are missing is that this is much worse than FF. That is for 80% loans, with the first 20% covered by private insurers. So values have to go down 20% before the implicit govt guarantee kicks in. Help to Increase House Prices is for 95% loans, with the govt guarantee kicking in for the first 5% of losses. So a 5% decline puts tax payers on the hook.

  13. I’m actually quite depressed (the horrible thought that I might be wrong). However, I’m going to stick to my guns (to an extent). Miliband is a dangerous leftist. What he wants -wants! – to do is Socialism, pure and simple. He is not simply displaying a literature graduate’s lack of crunchy skills, he really believes that hard left solutions will make the world a better place (whatever that is supposed to look like)m

    So that’s the difference, voila.

    One other thing though;j if UKIP does have the effect of letting him in, then it’s just a bad thing. There can be no sense in which it will ever turn out to have been a good thing, have achieved a realignment of the centre-right or…anything. Losing elections, especially to a hard left gerrymanderer like Miliband, can only be a bad thing.

  14. Ironman-

    The Barking Dog Problem. A fence, a bone on one side, a dog on the other; some distance along the fence from the point where it crosses a straight line between the dog and the bone is an open gate.

    A clever dog understands that it has to run away from the bone to get through the gate and get the bone. A stupid dog runs the straight line to the fence and stands there staring at the bone and barking.

    Every election, short termists fearful of Oh Noes The Labours Might Get In run up to the fence, and then bark and bark and bark at the ever more leftist Conservative Party they have helped create by voting for it.

    Just once, head for the gate instead.

  15. Inflationary it may be, but there is a significant difference between this measure and the American insitutions quoted. Credt ratings are not being relaxed. Loans are not being advanced to NINJA’s, are they?

    Of course, nothing can be done long term without changes to planning rules….

  16. Ian

    sadly, the fence problem is predicated on a time domain that assumes no one is going to burn down the garden, shit on the bone and kill the dog.

    And if the experience of 2008-2010 tells us anything, it is that Labour have matches, loose bowels and a misguided view of canine safety.

    Hence why I am happy to remain in the Oh Noes The Labours Might Get In camp, I don’t trust them fuckers not to fuck right up, see?

  17. sam,

    And if the experience of 2008-2010 tells us anything, it is that Labour have matches, loose bowels and a misguided view of canine safety.

    Hence why I am happy to remain in the Oh Noes The Labours Might Get In camp, I don’t trust them fuckers not to fuck right up, see?

    From Osborne and Cameron getting the jobs of shadow chancellor and leader of the opposition to the bank collapse, not once did they criticise the disastrous level of government spending. Why do you think he’s a safer pair of hands than the alternative?

  18. IanB

    Sam summed it up perfectly. This goes beyond “they’re all bloody clueless” I’m afraid. I really do believe Miliband and his boss at Unite genuinely think Hugo Chavez and Fidel Castro were visionaries and are set on introducing this world view into the UK.

    Thanks for the John Redwood story; it confirms what I have also come to believe.

  19. Conservative government does something stupid, therefore it’s important to keep Labour out. There’s logic for you.

    In reality, if you want subsidized house buying you should vote Tory, because they’ve worked out that’s a great way to buy votes which are likely to stick.

    Labour tends to buy votes by giving money to poor people. Gordon Brown even abolished MIRAS to fund it.

  20. PaulB, not a bad summary.

    The reality is that of the few senior politicians in this country with a grasp of the structural problems we face, none (to the best of my knowledge) is willing honestly to talk about causes and solutions, much less implement policy accordingly.

    If UKIP got in, they may be worse, they may be better, than the current occupants of the Whitehall revolving door, but we’ll never know if millions of people who might otherwise vote for them all say to themselves, “It’s not worth it, they’ll never get in”. If, on the other hand, those same millions all screwed their courage to the sticking post, then things might start to happen.

    (I’m not, btw, Paul, suggesting you’d be one of those millions)

  21. @PaulB ‘Conservative government does something stupid, therefore it’s important to keep Labour out. There’s logic for you.’

    Yes. Except no, because literally no-one says the Tories are bad therefore we must keep Labour out.

    Lots of people say the Tories are bad but we must keep Labour out because they’d be even worse.

    That said, this is the stupidest policy the Tories have come up with in a while, and that’s saying something.

    They really are all corrupt, and they’ve worked out that enough of the population are either in on it, or don’t care, or can’t see.

  22. Interested

    Thanks for summing the logic up correctly.

    However, this isn’t the most stupid policy the Tories have introduced; energy gets my vote for that. And it doesn’t matter that it’s a LiibDem dep’t. For the record, the Universal Credit is turning into a complete dog’s breakfast; the halfway house of an ‘internal market’ in the NHS likewise.

    As you say though, the logic begins and ends with an outright fear of the increasingly naked Marxism of Miliband and McCluskey.

  23. Well, for me- at least as I watch the economy in ruins and the last of our civil liberties being thrown on the bonfire, at least I can say I wasn’t one of the fools who voted for it. It’s not much, but it’s better than the shame of having done so.

  24. ukliberty – “Interesting how benefits but not housing subsidies are part of the ‘something-for-nothing’ culture.”

    I don’t see anyone here defending housing subsidies for the middle class. This is probably the one website in the whole of the UK where most people are solidly against the idea.

    However, if someone was in favour of them, they might point out that actually it is not something for nothing. It is something for doing the right thing. People who are claiming for their mortgage usually have a job, finished High School, don’t use drugs, got married, are earning enough money to actually pay taxes and above all aren’t presently trying to steal my DVD player.

    You see the slight difference with our feral underclass?

  25. Nick yer DVD player? Yer ‘avin a laff ain’cher? Get one’ve them down the pakishop fer a score. Now an ‘ard drive recorder…now yer talkin’. Might do yer gaff fer one a them yer ask nicely.

    Oi! Worstall ,mate. Yer needta get a betta class a reader roun ‘ear.

  26. However, if someone was in favour of them, they might point out that actually it is not something for nothing. It is something for doing the right thing.

    It’s a bribe for votes.

  27. finished High School, don’t use drugs, got married, are earning enough money to actually pay taxes and above all aren’t presently trying to steal my DVD player.

    well, yes, but by the same token you can see benefits as a bribe to dissuade people from nicking your dvd player. I mean when you get down to it, that’s what benefits are, really, aren’t they? Everyone talks about ‘compassion’ but when it comes down to it, it’s making sure that the poor have just enough that the risks of robbing other people who have more outweight the, ahem, benefits.

  28. Well, sure, we can be cynical about it: we pay just enough to stop all the poor taking what they want from homes and supermarkets, we don’t do it because we’re nice. There is also the argument that we need people to have money so they can afford to buy the stuff we make so that we can get paid.

    Of course someone in favour of receiving a handout will claim there is a good reason for it other than it being a handout. That’s my point, we categorise people as deserving or undeserving depending on our biases – ‘I’ deserve this money, ‘you’ don’t deserve that money.

    We’ve now got some bankers (yes, I know, easy target) complaining they can’t afford family homes in Zone 1 because their incomes are less than £500k and welcoming the latest handout.

  29. Of course someone in favour of receiving a handout will claim there is a good reason for it other than it being a handout.

    &

    Interesting how benefits but not housing subsidies are part of the ‘something-for-nothing’ culture.

    Hmmm, I think you may have missed your audience here. The government takes my money in taxes. If it chooses to give some of it back to me I’m happy. So no, housing subsidies are not quite the same as housing benefit. the first is a mitigation of how much the state is taking away from me (not to mention things like, say, stamp duty, which is another way it’s taking my money away) the second is, indeed, a hand-out.

    I’m not so much of a wingnut that I think we should abolish taxation completely, I do accept the need for some taxes to pay for some stuff, and I’ve even been known to express admiration for some non-traditional things outside the libertarian canon like the NHS. Just don’t pretend that taxes aren’t demanding money with menaces, because they are. Maybe, sometimes, for beneficial or benign reasons, maybe even to my personal benefit, but that’s still what they are.

  30. if you’re not using one of the myriad help to buy schemes then you are not among those receiving that particular handout. And that particular handout is arguably making you relatively worse off.

    Just don’t pretend that taxes aren’t demanding money with menaces

    I don’t.

  31. if you’re not using one of the myriad help to buy schemes

    not yet, but I plan to be.

    I don’t.

    Fair enough. It was general comment rather than a personal one.

  32. the feral underclass – “Nick yer DVD player? Yer ‘avin a laff ain’cher? Get one’ve them down the pakishop fer a score. Now an ‘ard drive recorder…now yer talkin’. Might do yer gaff fer one a them yer ask nicely.”

    Oh come on. You can get a nice hard drive for £40 these days. Brand new. Hardly worth nicking.

    “Oi! Worstall ,mate. Yer needta get a betta class a reader roun ‘ear.”

    That is true.

    ukliberty – “It’s a bribe for votes.”

    Well yes, obviously. But it is a bribe offered to those who have done the right thing as a reward for doing the right thing.

    sam – “well, yes, but by the same token you can see benefits as a bribe to dissuade people from nicking your dvd player. I mean when you get down to it, that’s what benefits are, really, aren’t they?”

    Well it is not working. As giving people my money just makes them think they are entitled to take more. I am sure that benefits were intended as a way of buying off support for Revolution, but even that has not worked.

    I suggest legalising marijuana. When the feral underclass is too stoned out of their minds to be able to organise anything, the problem will go away.

    ukliberty – “There is also the argument that we need people to have money so they can afford to buy the stuff we make so that we can get paid.”

    It is not a good argument because the underclass is both a massive drag on the rest of us and not much in the way of consumers. Better to leave the wonga with the bankers who will splash it on strippers and champagne.

  33. It’s only really the libertarian idealist who can truthfully claim he isn’t in favour of redistribution; people across the conventional political spectrum, left or right, favour redistribution while disagreeing about the recipients.

    Well yes, obviously. But it is a bribe offered to those who have done the right thing as a reward for doing the right thing.

    No, it’s not a reward for doing the right thing, it is a bribe for votes. And it arguably makes us worse off.

  34. GeoffH writes of the US federal housing agencies:

    “Both were sound for years. And would have continued to be so if it had not been for the Clinton administration’s insistence on changing the rules on creditworthiness to ensure that there was no supposed racial disadvantaging going on.”

    I am not aware that I said that these agencies – Freddie Mac and Fannie Mae – were always bad, although the very principle of state-backed mortgages is a bad one and like many bad things in America, is a product of the New Deal. As you state, the rot started in the Clinton years, and Barney Frank, whom I identified as one of the villains of the piece, pushed for a sharp relaxation of lending standards, and to hell with the consequences. This was not the only reason for the sub-prime madness, of course (the US Fed and things like mark-to-market accounting used to judge bank assets) were also at fault. But there is little doubt that state-backed mortgages are prone to the moral hazard problem. That is why, in principle, such mortgages are a bad idea and why the current UK government should be pilloried.

    Yes, it may be that the lending standards now in force are much stricter. That is good. But the principle of state guarantees for mortgages is a poor one, and needs to be attacked.

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