07/27/2009: "spare the rod... spare the banks!"

Darling hauls the banks in over expensive lending to business sounds like a another "tough stance" on protecting the vast amounts of money the UK taxpayer has been forced to use to shore up not only the banks but to fight the depression.

as is all too frequent these days, it is totally pointless and only for the benefit of the headline writers, it will achieve precisely NOTHING!

the banks are exactly the same as a small child:

- if you give it what it wants all the time, it will constantly demand more
- no matter how many times you tell it something, it wont listen until what you said happens, then it finally learns
- it is an expert at exploiting any given situation it finds itself in, for its own benefit

ive long advocated that the financial collapse could have been largely avoided, but the government kicked itself (and each and every taxpayer in the UK) in the teeth, by following a foolish path to pull us out of this mess.

the problem that needs addressing first is mortgages
the interest rate is currently 0.5%
the libor rate (interbank lending rate) is currently 1%
why are new home buyers facing an increase in thousands for a deposit and why is the lending rate so high?
why are people looking to fix their mortgage rate for 3,4 or 5 years, now being charged higher rates when the interest rate is 0.5% than when the interest rate was 3.5%?

because the banks are having to find all the money to pay back to the taxpayer.
banks only operate under the criteria allowed by those that are running the country - they will manipulate and squirm around and always find a way to make money.

banks should have been allowed to fail when they collapsed, this way new banks would have appeared in their place, competition would have grown as banks fight for custom (helping savers) but best of all.... banks (like a child) would have learnt the lesson, that if they do not fund themselves safely, and they fall, no more bank! (this is akin to a child and road safety)
the "fear factor" would have kicked in and despite lax regulation, care would have been taken to protect their own interests.

instead what we got was banks given lax regulation by the FSA and government, and allowed to be reckless as the taxpayer would bail them out.
the only saftey net from the taxpayer, should have been to protect the savings of the people. if the banks fall then with it they lose their consumer credit license, and discounted sales of their current mortgage book go to their customers.

as it stands, the banks know the government will use taxpayers money to bail it out, which is recovered by higher taxes and weaker public services (we lose) the banks put up their charges and costs of services to recover the money they have to pay back (we lose again) and competition for savers and mortgage holders in the banks market fall (once again the public lose out).

so what can the government do to ease the pressures on us all now?
absolutely nothing at all - words and waffle for the headline writers, whilst you and I get completely shafted on paying taxes and higher costs just to survive!

Today's "hauling in of the banks bosses on small business lending" is the latest in the government's "show we are being tough" routine. spin spin and more spin.
people are struggling and will continue to do so for decades... the recession is easing they tell us... we cannot go on paying vast amounts of money in interest payments at the problem.... something needs to give, before the UK goes BANKRUPT!