banks

Labour plans for bank reforms – UK Bank market share

Labour plans for bank reforms – UK Bank market share

Readers Question: would you be able to comment on what the Labour party’s latest proposal to break up the banks to create competition? I can see some reasons that relate to safe guarding possible failures of large banks which can prove costly if the government are needed to bail them out. However, in terms of helping to stimulate economic growth, would it help or is it like shuffling a deck of cards? I would greatly appreciate hearing your opinion on this. Labour bank reforms include: A cap on the size of…

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US housing market main cause of credit crunch

Readers Question: The money that brokers/banks etc were making from selling on the mortgages to investors encouraged the sub prime debacle. Which I understand. The bit I am struggling with is what started the fall in the US housing market. If the banks slowed down on their lending that would surely just cause a slow down in new mortgages which would result in a slow down in the housing market. It was in the US housing market that the real problems emerged. It was mortgage defaults that caused…

Policies to Increase Bank Lending

In a previous post, we saw how bank lending in the UK fell during the credit crunch, contributing to the length and depth of the recession. Because of this the Bank of England and Government have sought to try and increase bank lending – in order to help stimulate economic growth. Fall in bank lending. These are some of the different policies that have been tried. 1. Cutting Interest Rates. In March 2009, the Bank of England cut interest rates…

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Bailout for Mortgage Companies

Yesterday, the bank of EnglandĀ  offered a scheme to bailout the banking sector by offering to exchange ‘unpopular’ mortgage debt for government backed securities. The money markets have struggled since last summer and the American subprime crisis. This has led to a shortage of funds for mortgages and increased cost of mortgages. I wrote an in depth analysis here: – Bank of England Bailout for Mortgage companies. It is not certain how successful it is going to be. Abbey announced this morning that they will increase their mortgage rates anyway.