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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (145900)	9/11/2008 10:53:26 PM
From: Les H	Read Replies (1) \| Respond to of 306849

King cuts the BoE funds rope for banks Hugo Duncan, Evening Standard 11 September 2008, 2:35pm The Bank of England today ruled out an extension to its emergency funding scheme for ailing banks in a bitter blow to the mortgage market. Governor Mervyn King said it was not the job of the central bank to 'finance bank lending' by acting as 'a magical piggy bank' or execute bailouts such as those of Fannie Mae and Freddie Mac in the US. It came as he confirmed the Special Liquidity Scheme set up to help banks struggling to raise funds in the credit crunch was always a temporary measure and would close as planned on 21 October. Mortgage lenders had hoped for an extension. King said long-term funding for banks and other lenders must come from either the money markets through interbank lending or the taxpayer but warned any Government-funded mortgage scheme carried significant risks to the taxpayer. 'If the Government provides the funding, it takes on the credit risk,' King told MPs on the Treasury Select Committee. 'You cannot provide the funding without taking on that risk.' Chancellor Alistair Darling is considering how best to kick-start the mortgage and housing markets and is thought to be lukewarm on the idea of Government-funded mortgages. The SLS was set up in April and allowed banks to swap untradeable mortgage securities for liquid Treasury bills for up to three years. It was brought in to provide banks with breathing space to repair their balance sheets. It is thought troubled lenders may have tapped the Bank for as much as £200bn. King said the Bank will next week outline what it plans for the future, including a permanent liquidity insurance facility and a framework to ensure the stability of the banking system. He said the SLS was only ever 'a temporary measure' and the new scheme will provide help to banks over a much shorter period than three years. 'The objective of the new facility will be to provide short-term liquidity insurance to smooth the adjustment of financial institutions hit by unexpected shocks,' said King. 'It is not the purpose of central bank liquidity insurance to provide a source of long-term funding to the financial system - indeed it cannot do that. Only private savers or taxpayers via the government can provide such funds. So I hope everyone will understand that the proposals to be published next week, important though they are, will not and cannot solve the shortage of funding to finance bank lending, including mortgage lending.' He continued that it was down to the banks to sort out their balance sheets. 'The problem does not lie in the mortgage market, he said. 'let's step back and look at the source of the problem.' thisismoney.co.uk

To: Les H who wrote (145900)	9/11/2008 11:04:08 PM
From: James Hutton	Read Replies (2) \| Respond to of 306849

The Brits haven't gone to the Bernanke/Paulson school of central banking. "The Bank of England governor, Mervyn King, yesterday warned the government not to try to artificially support the mortgage market as that could further prolong the year-long credit crunch. He also held out little immediate prospect of interest rate cuts to boost the flagging economy." I think those buying dollars and selling pounds (and euros) are assuming the opposite. "Appearing before parliament's cross-party Treasury committee, King said the Bank did not have the resources to underpin lending across the entire financial system and thereby boost mortgage lending" I wonder if the fed has an extra printing press in the basement we can lend them. Sort of a modern-day lend-lease program. "But he made clear he did not favour a state-run mortgage bank offering cheap loans, saying it would impede the commercial banks' incentive to improve their balance sheets and find fresh capital so they can resume lending." With today's letter from Congress requesting Fannie and Freddie to delay foreclosures 60-90 days, IMO, we'll end up with just what the Brits are trying to avoid.