Stable doors and bolted horses

Gordon Brown is to prevent banks and building societies offering 100 per cent mortgages in an attempt to usher in a new era of "responsible lending".

Just what we need, eh? A law against something that no one\’s going to do for another generation.

11 thoughts on “Stable doors and bolted horses”

  1. I assume he is referring to the US mortgage market otherwise he is admitting he allowed irresponsible lending while he was Chancellor.

  2. We may have been stupid to close our industries and put faith in the square mile to earn foreign revenue, but that’s water under the bridge now. The last thing we need now is idiot Brown throttling what’s left of the financial sector to death.

    With simple, enforced regulation it should be easy to ensure the banks themselves stop doing stupid things. When a banker knows that no bonus, possibly financial penalties, or even jail is going to be his or her reward for imprudence, then you can be sure that prudence will make a rapid reappearance.

  3. With simple, enforced regulation it should be easy to ensure the banks themselves stop doing stupid things.

    Letting them go bankrupt has a similar effect on most businesses.

  4. Gordon Brown is to prevent banks and building societies offering 100 per cent mortgages

    Oh marvellous. Can we now expect him to take control of all lending, secured and unsecured, to make sure that people can’t ever borrow 100% of any purchase on a credit card, or a personal loan? Or that having got a maximum mortgage of whatever %, they won’t go out and borrow extra on their credit card?

    It isn’t lending 100% of the value of a property that’s the problem, per se. It’s lending 100% of the value of a property to people who can’t afford it and who won’t insure against the unexpected. Lending 90% or even less is far too much in some cases but if you want Gordon Brown telling you all how much you’re entitled to borrow, then you must all be mad.

    The trouble with lovely simple targets beloved of Socialists is this: if you decree that 100% mortgages are forbidden, then anything less than 100% is by inference more acceptable. The focus becomes “is it less than 100%?” instead of “is this lending sensible?”

    If you forbid people from borrowing the amount they “need” to buy the house they “want”, they’ll find some other way of borrowing the money at a higher rate or on shorter terms that’ll sink them.

    We have a choice. If people want to over-borrow, they’ll over-borrow. We can either expend huge energy and money trying to stop them and end up with State-controlled credit and/or repair the damage when it happens. Or we can let them learn the lesson for themselves and be forced to sell their house or go bust. And let the lenders go, too, if they’re dumb enough to set maximised short-term profit over reasonable long-term profit.

  5. So if Bill Gates wants to buy a palatial London Residence, but does not want to dip into petty cash to do so, he is to be barred from borrowing 100% of the value of said property.

    As former tory says, it just ain’t that simple.

  6. Bad decisions and losses can never be eliminated from human affairs; it is the fear of losses which guides decisions more properly.

    As long as people believe that government has a legitimate role in the forms of money, in the manipulation of its quantity via “reserve” requirements, and the coordination of banking activities and practices, the prospect of periodic “system failures” cannot be addressed.

    Ultimately, the very idea of authoritarian management of the financial apparatus and currencies is incompatible with the “market” process through which specialization of function and comparative advantage constantly increases interdependence of most of the people on the planet. One element of instability is to be seen in the differences in authorities’ practices, requiring ” harmonization” from time to time, not only with regard to trade but also to monetary realtionships.

    There are only two possible solutions to the problem. The first and more obvious is that what is wanted is a world-embracing scheme of a single currency and monetary authority.

    The other is for monetary and financial matters to be entirely determined on the market with no interference by authority: freedom of money and banking.

    The first would be equivalent ot world socialism and would carry the fundamental socialist flaw: an inability to calculate economically.

    The second is entirely workable, though dramatically different from experience. First, it need not exist everywhere to be successful (and its success where it existed might encourage others to emulate). It would scrap all “legal tender” laws and permit the private production of whatever “money” or other financial vehicles might be preferred (on the market) and would extend the same freedom to banking activity.

    It is my own view that a practical and personal preference would emerge very quickly in this second scenario: gold would become, even more universally than ever before, the medium of excahnge.

  7. A loan is a loan. The lender is in the position of
    comprehending the various risks and setting
    an appropriate (in his view) rate of interest, repayment period, etc. There are “general guidelines” but no hard and fast rules which must be observed in every situation and, therefore, no absolute requirement against a “100% ” loan.

    Nearly fifty years ago, an acquaintance of mine wanted to buy a house in the Philly suburbs and applied to a local bank for a loan. He’d enough for a 20% down payment on the price but, because of his income, asked whether they’d consider (very unusual in those days) a 25-year
    repayment period (instead of the prevalent 20 on a “conventional” mortgage). What they told him surprised him: that they’d give him a mortgage for as many years as he wished; that they considered the property so “solid” at the price he was to pay that they’d be delighted to collect interest-only “forever” (but requiring inspection of condition at 5-year intervals).

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