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February 23, 2009

Comments

dearieme

I suspect that your analysis is wildly wrong. We are in an unfolding catastrophe; the Government's main job isn't to avert it, that being impossible, but to try to stop it being any worse than it need be, subject to the overriding constraint of protecting the creditworthiness of the Sovereign state. If it pisses money away until the state is effectively bankrupt, in a vain attempt to prop up insolvent banks, doomed car manufacturers and whatnot, it will deserve severe punishment. If we do end up with murderous mobs, I hope that they at least spare our soon-to-be-former rulers' wives and children. The Jacobins didn't, a couple of centuries ago, nor did the Bolsheviks more recently. But then, as a Marxist, you perhaps approve of those guys?

Kit

"Instead, our big problem is a lack of supply of loans to companies."

Is this true? Anecdotally, speaking to tame bank managers they say that loans are available but businesses have stopped borrowing.

Recusant

Kit

You're right. Partially.

UK banks are lending to corporates at pretty much the same level as they were in 2007. The trouble stems from the departure of foreign banks from the UK corporate sector: all those friendly Irish, Dutch and Icelandic bankers for a start.

When Gordon keeps wittering on at the banks to lend to UK businesses it is easy to forget that other governments are saying the same to their own banks. The net result is that we have financial protectionism, which in the end will bugger us all.

Bob B

What chances are there of transparently obvious conspiracy theories being correct?

Bankers wanting to preserve their bonus culture have powerful incentives to delay abatement of the recession in Britain in the hope and expectation that the general election due next year will bring a Conservative government, which will be much softer on (necessary) regulatory reforms of financial services than the GB government is likely to be, notwithstanding support for tougher regulation between leading Eurozone countries and the Obama administration.

The worse the recession in Britain gets, the more blame can be heaped on GB and the bigger a Conservative majority at the election. Earlier talk of a hung parliament at the election has evaporated. Even the LibDems are now also promising income tax cuts to judge by the stuff dropping through my letter box: at the last election, it was 1p extra on income tax to fund more spending on education.

Compare and contrast:

"David Cameron has used his monthly news conference to attack the Government for failling to curb big bonuses in banks in which it has a substantial share." [9 February]
http://news.sky.com/skynews/Home/video/Banker-bonuses-in-recession-criticised-by-Conservative-leader-David-Cameron/Video/200902215219467?lpos=video_Article_Related_Content_Region_4&lid=VIDEO_15219467_Banker_bonuses_in_recession_criticised_by_Conservative_leader_David_Cameron

"Hugh Osmond, who has given more than £80,000 to the Tories, said Mr Cameron's opposition to some bankers' bonuses was a sign the Conservative leader does not understand the current financial crisis." [19 February]
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4698260/Tory-donor-Hugh-Osmond-criticises-David-Cameron-on-bank-bonuses.html

On current bank lending to business in Britain:

"Small firms are being starved of money pledged by ministers to save them from collapse.

"Labour set up a £1billion loan guarantee scheme last month to encourage banks to lend more to small businesses.

"But so far, banks have lent only around £12 million to firms through the scheme."
[Daily Mail, 16 February]

But then the recession does increase the risk of lending to business.

Bob B

For signposts on possible prospective changes in financial services regulations, try this speech in January by Lord Turner, chairman of the Financial Services Authority (FSA):
http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2009/0121_at.shtml

The FSA is due to release an extended review of financial services regulations on the (?) 18th of March.

chris

@Kit - a recent CBI survey found that most firms are reporting a reduced availability of finance:
http://www.cbi.org.uk/ndbs/press.nsf/38e2a44440c22db6802567300067301b/0ceee97d7c30e6ed8025755400521bc8?OpenDocument
Remember, it's possible for the credit crunch to hit firms, even if lending continues to flow, say if firms fear a reduction in their overdraft limits and cut spending as a precaution.

Andrew Duffin

A state-owned corporate lender which can increase loans to companies?

Hmm.

So all the money will go to loss-making metal-bashers in marginal Labour constituencies?

I can't see that being a great recipe for economic recovery, personally, but I suppose you never know.

Matthew credits

I'm a bit confused. How is making more loans available to companies going to help, if companies aren't taking out any loans?

Bob B

On bonuses for bankers, readers may have missed this latest gem:

"Senior City bankers are demanding pay rises of up to 10 per cent this year to make up for the clampdown on the bonus culture, a senior City head-hunter has told The Independent."
http://www.independent.co.uk/news/business/news/8216we-need--a-pay-rise8217-bankers-demand-1630307.html

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I agree, the worse the recession in Britain gets, the more blame can be heaped on GB and the bigger a Conservative majority at the election. Earlier talk of a hung parliament at the election has evaporated. Even the LibDems are now also promising income tax cuts to judge by the stuff dropping through my letter box: at the last election, it was 1p extra on income tax to fund more spending on education.

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