If the 2008 global financial crisis was caused by anything, it was by reckless mortgage lending that fuelled a lending and housing boom that then led to a banking crisis as it was realised that there was nothing to back up the value of the assets placed on the balance sheets of the world's banks.
After the event, we said 'never again' and put in place reforms that were meant to achieve that goal.
And then, along came Rachel Reeves with an obsession for growth at all costs, and so the FT reports this morning that:
The UK's Financial Conduct Authority has announced plans to water down its rules on mortgage lending to make it faster and cheaper for people to get home loans, despite consumer groups warning of increased mis-selling risks.
They added:
British lenders will be freed from having to provide formal advice or to carry out full affordability assessments when arranging mortgages for many customers, under plans outlined by the Financial Conduct Authority on Wednesday.
“We want to make it easier, faster and cheaper for borrowers to make changes to their mortgage,” Emad Aladhal, the FCA's director of retail banking, said in a speech.
And so, here we go again. Another banking crisis is in the making because, in the absence of any other indicator of growth that is working, Rachel Reeves has fallen back on the perennial obsession of the UK middle classes and is trying to stoke an increase in house prices, which throughout history have only ever been a measure of an increasing economic divide within our society, and not of increasing well-being for all.
This will end in tears, or worse.
Stupidity is rarely displayed so obviously, but it is out in force today.
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UK politicians always act to increase housing demand without increasing supply because it makes their core voters richer.
What is key about this is that it is yet another indicator of the corruption at the top of the country. We are going back to and trusting the same system that destroyed capitalism in 2008 again and what makes it worse is that the banks know they they will be bailed out too if it all goes pear shaped (which it must as the supply is just not there) by the same politics that thinks it is OK for kids to go hungry and for old people to be cold.
‘Democracy’ as practiced in the West is now becoming completely untenable.
Again the parallels with post communist Russia are uncomfortable as a number of bailouts to reset the Russian economy failed as the money was just whisked away by oligarchs.
If it works – don’t fix it. That is what the oligarchs who run this country are saying. It certainly works for them – doesn’t it?
Thanks Rachel.
The Great Financial Crash was the result of neoliberal policy shelving regulations that protected people. $5-trillion went missing, so a great success for the few who profited, paid for by the rest of it.
A very irresponsible policy but not surprising seeing that Rachel from Accounts is not up to the job. Rising house prices give an illusion of being better off, for most people it’s ‘dead’ money.
Might the majority of the finance industry, and their enablers in Parliament etc.,have learned that, given a decade or two break, much the same con can be repeated?
Rachel from accounts is following the “to make us even more competitive” trope from the City you must release us from red tape.
The red tape is there to protect the ordinary punters from being ripped off.
Last time rubbish home loans rated Z were bundled up and re-rated AAA. The fear of missing out meant that no one knew ( that’s the genius bankers) what they had bought. The result the state had to bail them out.
History tends to repeat itself. Get ready for another Great Recession.
I wonder where the brilliant no steer and Rachel will end up when they are kicked out at the next election?
Stupidity is really displayed so obviously — I thinnk you mean ‘rarely’.
I wonder if any journalists or presenters will ask her or any other Minister/McTeam drone about the last time we deregulated lending?
Probably not.
Here we go again…
Should that be “rarely displayed so obviously” in the last line?
Edited
Thank you
Unfortunately, it is true.
I can remember, back in 2003, when the BBC actually produced a programme of quality reporting on self-certification mortgage fraud, called Mortgage Madness. It is available on YouTube, and was an eye-opener of the level of fraud that was going on at the time. The journalist reporting went undercover with a hidden camera, and showed that estate agents, mortgage brokers, banks, were all telling people to lie about their income, as it was the only way to get on the property ladder. They did so, because, as one of the mortgage brokers on camera encouraged lying said, “you have to be a bit cheeky”. And that it was “perfectly fine” — to commit fraud.
Yet, here we go again. Let’s relax the rules, because we know everyone can be trusted to do the right thing.
https://www.youtube.com/watch?v=vT1UnGS91BY
When the crash came, of course, the fraud of self-certification was swept under the carpet as the state — in the name, and at the expense of all of us — rescued the banking system.
Something else that is shocking in that report.
“The FCA said 41 per cent of new mortgages last year extended beyond the state pension age of 67”.
Neoliberal politicians will never understand that affordability is the real issue.
Agreed
“The FCA said 41 per cent of new mortgages last year extended beyond the state pension age of 67”.
That’s the growth in 35 and 40 year mortgages, especially among first time buyers.
I admit, I am really glad I am not paying a mortgage now.
Creating yet more overpriced Terminal Crop to indenture individuals into perpetual debt, is insane. Terminal Crop is the term used by local Californians to describe the postwar replacement of the once rich orchards of the Santa Clara Valley by the concrete middle class slums and light engineering complexes now known as Silicon Valley. We seem to be plagued in the UK by a political ruling class who base all of their policies first and foremost upon the biblical Proverb 26:11:
As a dog returns to its vomit, so a fool repeats his folly.
With the BBC there is a total disconnect between the occasional ‘backroom ‘ programme which really explains things – like the mortgage fiasco and the day to day headline news about government boasts about dismantling regulations.
Only this week there was a decent R4 programme about the building regulations fiasco that led to Grenfell and that’s still wrecking thousands of lives and has led to hundreds of shoddy dangerous high rise flats – even some in canary wharf.
‘
But they never push govt ministers about the reality – BBC does not ‘seek the truth – but balances opinions.
As we all say here another disaster looming – but we are the extremists
Disaster
[…] I noted the reckless relaxation of mortgage lending rules by the UK's Financial Conduct Authority, which […]
https://davidgraeber.org/articles/against-economics/
Interesting to read Mr Graeber take on the World / Economics , seems to fit in well with you Richard ?
I like his work.
He died too young.