Divert funding to non-banking lenders.
Posted on March 23rd 2009
As a stated in this column last week I am sceptical about how much of the taxpayer’s money is going to find its way to homeowners, despite the fact that literally a £trillion has been thrown at the problem. The latest attempt by the government to buy back bonds at auction and to spend up to £150bn doing so, sounds like a good idea but if you read the finer detail the government states that it ‘hopes’ the money that it spends will find its way back to homeowners and businesses. This is on the basis that the money it spends buying back its own debt will create liquidity, the first auction would suggest that the recipients of this liquidity is again the banks and that does not fill me with confidence at all.
The government should stop hoping that liquidity will find its way to homeowners and diverts some of the money it is spending to non-bank lenders who have been mothballed until they can find someway of funding mortgage loans. There are half a dozen lenders in this category that if they had funding would lend it to homeowners. The government could 100% guarantee that any money it provided to non-bank lenders would get passed on, there would be no guess work, there would be no hoarding of cash to repair damaged balance sheets and the money would go exactly where the government dictated.
These lenders are ready to go and between them could distribute £billions. Isn’t it time the taxpayer stopped throwing good money after bad?
