The announcement by Gordon Brown of restrictions on bank lending, with the stated intent of restricting mortgages to those able to repay them, the statement put out in advance of the Financial Services Association draft rules, is significant for one thing: it is symptomatic of New Labour, of the way the UK has been governed these twelve years.
1. It is superficially attractive. The lay public see the banks offering 125% mortgages and see them go bust, and so think that the one caused the other. But they did not go bust lending to the public. It was their commercial, wholesale lending (a far greater sum) which did for them.
2. It treats the public as idiots, who can’t be expected to work out what they can afford so the government has to regulate it.
3. It displays a complete lack of understanding of business. (a) it is not just the mistaken assumption that personal lending was the cause of the bank’ collapse; they don’t realise that this analysis goes on already. Some people’s circumstances change, losing your job for example, and that cannot be forecast (b) these risks are within the framework both of the banks’ business model and the customer’s self assessment. They are both happy with the risks they are taking and don’t need the government to intervene.
4. Gordon makes the announcement, his placeman in the supposedly independent quango draws up the rules. This shows that the Tories would be right to impose their own people, even though they acknowledge that government patronage is too high, and that it would be an idiocy if Adair Lord Turner were, as has been mooted, appointed a deputy governor of the Bank of England.
These awful people just can’t help interfering. It will be a huge weight off the people’s backs when they are finally voted out.
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