And another thing…

“First, if the scheme is a blatant lift from something the Tories proposed, I don’t care”

Then admit that it’s lifted wholesale.

“Secondly, and more importantly, why in hell’s name do we have to have such a scheme a few weeks after we stuffed the bankers’ mouths with gold?”

We haven’t got any gold. Brown sold it all…

true , all true but dangerously ‘off message’

First, if the scheme is a blatant lift from something the Tories proposed, I don’t care. A good idea is a good idea, even if the opposition thought of it first.

I presume you will now refrain from using the tedious ‘do-nothing’ mantra then

Have you suggested that there be a public enquiry into how and why the bankers broke all sensible rules and why politicians have been so quick to give them the taxpayers money?

It would be interesting to find out.

I am also concerned that no-one has been held accountable for this debacle, all the top bankers still have their jobs and in Northern Rock the people appointed to run it are being payed rather a lot (£75,000/month for the CFO IIRC); who approved this profligacy with public funds?

“Why in hell’s name do we have to have such a scheme a few weeks after we stuffed the bankers’ mouths with gold? ”

We haven’t stuffed the bankers’ mouths with gold. The government bought preference shares with a yield of something like 12%. Considering gilt yields are around or below 4%, the recapitalisation of the banks if actually profitable for the Treasury.

Paul @ 4.52: Let me think about that… Nah!

Personally, I think the government has missed a golden opportunity with the Credit Crunch, and it all centres around the phrase “if something is too big to fall, then it’s too big to exist in the first place”.

Take the banking industry. They have all merged with each other and been bought out so many times that the whole UK system is centred around 3 collossal banking giants that own a bunch of brands. One (I think it was RBS) has 60% of the countries savings on it’s books! Both incredible and dangerous. The very definition of “all your eggs in one basket”.

So what I advocated, and still advocate is letting them fall. The government should guarentee everyone’s money, provide an investment fund whereby people/groups can apply for money to canabalise the banking system, and then sit on their arses and watch the system come tumbling down.

With the fund in place the banking giants will be broken down into many many smaller institutions which the taxpayer will have a key stake in exchange for their investment, and each of these new institutions will be both entirelly separate from each other, and who’s balance sheets will be free from the effects of the credit crunch. They will each have a few % of the market each rather than any one having a majority, and if in the future they fail, they are small enough for the market to sort it out themselves.

I’d do the same to the consumer sector too. I’d stop Tesco becoming a one stop shop for everything. They now sell so much that they are a barrier to anyone who wants to start their own business selling anything Tesco sells, and they are even threatning the survival of the bigger niche players like Curry’s, Comet etc..

The only future for the economy is based around competition, and having small business in a position to compete. Having just a few companies controling everything, yet lauding the fact that they employ millions of people is counter productive. Millions of people earning Tesco wages does not an economy make!

That’s my solution anyway. Am I on my own with it? At least I haven’t heard it even remotely uttered elsewhere? Everyone’s too busy with bailouts and “spending your way out of a recession” etc…

What do you think Tom?

Tom, it’s because the banks have no confidence in getting their money back anymore. They’re having to be as conservative (small ‘c’ !!) as possible to make sure that they don’t lose money – e.g. by lending money to a business that never gets repaid because it goes bust.

The banks were fairly delusional in loaning so much money out before the credit crunch – so now it’s swung the other way and they are only loaning money to those they know (rather than hope) can repay the money. I’m sure you understand this sort of thinking – it’s a crisis of confidence, plain and simple. Of course, it affects worst the businesses that need the loans most – and that’s why the plan’s a good idea. However, I am inclined to say that the Conservatives’ plan was better because it allocated more than double the money to the loans scheme – because at the moment we always seem to underestimate how big the problem is. Better to make more money available than less.

It’s obviously not lifted from the Tories wholesale and as much as people who persist in posting on a site simply to disagree with everything Tom says may disagree, it’s clear the government have been working on this for weeks, probably since around the time the Tories thought of it.

It’s not a startlingly original policy, it’s simply a relatively obvious next step when the previous steps hadn’t fully solved the issue of credit (and lack thereof).

So all this ‘you copied us’ ‘no you copied us’ nonsense really is just party political. Cameron knows this full well, as does Brown.

The advantage of opposition is you can make such announcements without having to explain it. Thus the Tories announced a £50bn plan, that wasn’t funded (because they refuse to borrow more to make it a ‘fiscal stimulus’), without having to do the math on exactly how they could do.

Labour’s advantage, the advantage of government, is that it can turn the idea into reality (which, like I say, both parties obviously – and naturally – had) but the disadvantage is that it has to take the time to work it through and make sure all the numbers add up and they don’t just shower the banks with money, which seems to be what the Tories suggested.

I have to say it’s a bizarre spectacle to watch the Tories complain to Labour that they aren’t offering enough government intervention, and to see Cameron – after first suggesting he wouldn’t attack the bankers, then doing so a week later – now suggesting they should just get an extra £50bn with barely any strings attached.

The problem for Labour is that the Tories messages are easier to explain than Labour’s, which is probably why Cameron is quite prepared to talk out of his arse for the next 18 months.

You’re right about this Tom. It was a good (but expensive) idea the Tories first had.

By the way, I’ll hear no more of this nonsense about business never needing the state.

“we should be pointing our fingers more in the direction of the incompetent leeches who have conspired to bankrupt our banking system ”

Agreed:
So some Chairman of Banks
The FSA
the BOE
the current And previous Chancellors.

The rest of your article proves you don’t understand economics:-)

The banks are lending less because:

the Goverenment restrictions on capital adequacy mean they have less to lend.
Norther Rock is busy repaying Government aid by forcing borrowers to go elsewhere and pay off their mortgages.
As consumers spend less, bank customers become less credit worthy.

Simple really.. (Well not but to suggest a cull of Bank CEOs only is manifestly unfair. Who let the CEO of N Rock resign with a payoff? The Government)

Tam is right to refer to Dave as ‘Do Nothing’ because Dave doesn’t NEED to do anything, as the New Tory Party, led by Thatcherite-in-Chief, Gordon Brown will implement all their VILE policies anyway!

VILE!

@ Miller 2.0
“By the way, I’ll hear no more of this nonsense about business never needing the state.”

Businesses wouldn’t need the state if one in seven of the UK’s working population didn’t hold public sector jobs.

Also, it’s worth pointing out that someone who earns £30K a year will pay nearly 60% of their earnings to the government in some form of taxation (not to mention the hidden cost on purchases) so clearly that’s where all the money’s gone.

Absolutely. If the public sector wasn’t so large then taxes wouldn’t have to be so high, meaning lower tax bills for businesses.

The state is forcing businesses to need it because of its terrible tax regime.

Don’t worry Tom.

One of you ministers has confirmed the ‘green shoots ‘ of recovery are starting to appear.
She did not say where of course but they are appearing.
So we can all sleep well tonight.

First dyslexia doesn’t exist, and now the recession doesn’t exist.

Brown’s “government of all talents” is coming together nicely.

Shouldn’t we be blaming David Bowie, as Evan Davies suggests for giving the bankers the idea?

Smart thinking…….. pinching Conservative ideas………able to blame them when it they don’t work!!!

One of the reasons there is less lending is that there are fewer banks now. The Icelandic banks, Northern Rock, Bradford & Bingley, Alliance & Leicester and others have gone under in effect. Many foreign banks have retrenched to their home markets. This includes for instance the Irish banks who are in a bad way but held up values in the commercial property market too long.

So if the remaining nationalised banks still lend what they did, that will be a fall in lending. Those people who borrowed from the “lost” banks will have no relationship with the remaining ones who will look at them closely.

So, asking the nationalised banks to keep lending at 2007 rates could still be happening (obviously I do not know if it is in practice) but the amount of lending in the economy will be lower nonetheless.

“if the scheme is a blatant lift from something the Tories proposed, I don’t care.”

Glad to hear it. As a quick favour, though, could you explain to Gordon that stealing good policies from a party that he claims doesn’t do anything is a little odd?

Cheers.

The side pot to this fund, set aside for defaults, is about 1.3% of the total fund (£260M of £20B).

Ask yourself, is that kind of default rate likely in the current circumstances? I hope the default rate is as low as that, but I think the assumption is somewhat cavalier to say the least.

This Government has a woeful record on financial projections. The regularity with which they manage to err on the side which is politically expedient is telling.

Imagine tossing a coin 33 times and getting all heads. That’s 11 year of spending, borrowing and growth figures.

No response to my point…