Last November I found myself envious of my friends in America. They were going to the polls to elect a new President and with that they had the opportunity to vote for a leader without a legacy of economic failure to defend and who could address financial regulation and recession with a completely fresh four-year strategy.
Switch to the UK six months on and the grass still seems greener on the other side of the pond. Our retrospective positions have been brought sharply into focus again by a budget that is inevitably overshadowed by the prospect of a general election within 12 months and the possibility of different solutions to the current crisis being in place this time next year.
As a result we are in danger of being left in limbo with toxic assets being just one ingredient in a poisonous cocktail that includes borrow and spend economics, billions of pounds still being spent bailing out banks which were once considered too big to fail, and regulatory reform with the Turner review that might or might not see the light of day under the Tories.
Then you have all the ambiguity of a market dominated by nationalised and partially nationalised banks with the safest sector, the building societies, paying out disproportionately under the Financial Services Compensation Scheme for failures in Iceland and in the mortgage bank sector.
The government has vested interest in turning round the likes of HBOS and the housing market so the challenge for the rest of the lending fraternity is not only how to survive during this period of political limbo but also how to compete against a state backed monopoly. And they also have to keep an eye on what the Financial Services Authority is doing to ensure that they are not shafted by regulatory reform.
It’s hardly an environment that will encourage mortgage lending to flower so the focus has to continue to be on asset quality, arrears management and running a tight ship until at least this time next year, unless there’s a sudden economic recovery and who would bet their job on that?
