Now everybank’s a Northern Rock!
The amount of money being paid by the taxpayertreasury to bail out the banking system as a whole is spiraling rapidly. Though it’s not targeted at a particular institution, it’s looking like the early weeks of the Northern Rock bailout last year. That is to say, the taxpayertreasury is underwriting debts that the market won’t touch, but everyone currently insists they’re good and we’ll be repaid.
Today it’s reported that the taxpayertreasury, through the Bank of England, will buy up dodgysound mortgage debt that the banks can’t shift. So the banks can lend more, and keep the bubble inflated. The pyramid must be supported!
Once again, this smells of throwing good money after bad. The mortgages that they can’t shift in the open market are by definition the most dodgy ones. They may be better than US subprime, but speaking as a taxpayer, if I’m forced to buy this debt at anything more than 40% of its face value, I shall be seriously pissed off. Again.
What’s happening now is a correction to the housing market. This is great news for the poor, who are currently paying three times over, but more likely to be able to afford a place when the prices have fallen. It is neutral news for the comfortably-off, who are both buyers and sellers if they move house. It is bad news only for the seriously rich who have wealth tied up in property over and above their own homes.
So we can’t allow that – the long-suffering taxpayer has to bail them out as usual. No correction! The bubble must be sustained!
If chickens can’t come home to roost now for property millionaires and bankers, we’re transferring yet more burden onto the productive economy. And that’s tilted towards the young (because fewer of them own property) and high-earners (who pay more tax). That’s precisely the people who will be most welcome in other countries, when the burden of subsidising our fat-cats gets too much for them. If we drive too many of them out, the economy is basically gone!