Sunday, 1 May 2016

Probably the Most Annoying Article of the Week - in soooo many ways.


It's getting mighty wearisome dealing with all this shit, but here's what I can be bothered to say.

Exhibit 1

Last month the Prudential Regulation Authority at the Bank told lenders to do more to make sure BTL landlords will be able to pay the bills if interest rates go up. The planned rules tell lenders to test borrowers’ finances to see how they can cope with the tougher of a two percentage point rise in interest rates, or 5.5pc.

WTF? Dude? These are supposedly commercial decisions by professional borrowers. Why do they need hand holding? It's 'capitalism'. Y'know. Risk and reward?*. Or more probably its the Bank telling the banks that they need to check their own carelessness.

* Yes. Yes. I know. I know. It's really landlordism, but You Know What I Mean.

Exhibit 2

They [Owner occupiers] cannot sell their property as easily should interest rates rise, when landlords can sell, raise the rent or use other income to pay the mortgage.

What? How? Eh? And, not a problem then?

Exhibit 3

He [Nigel Terrington] believes the latest worry is a case of mis-measurement by regulators who have far less data on the BTL sector than on the rest of the market.”

Never! Really? Well, I am surprised. Not. A bunch of bureaucrats being ignorant…

Exhibit 4

"Sceptics worry that regulators, having failed to spot the financial crisis coming, are simply playing a game of whack-a-mole in which sudden growth in any market is immediately deemed to be a risk, regardless of its cause.”

Yes, well. I'd agree with the 'whack-a-mole' analogy. And the cause is..?

Exhibit 5

Bank analysts are also on the lookout for bubbles, but right now they are relatively relaxed.”

Are they really?  AFAIAC that's a signal to run for the hills. Most of them were saying the same thing in 2007.

Exhibit 6


If problems do emerge, they might lie elsewhere. Terrington argues the Bank of England should keep an eye out for the activities of currently unregulated lenders rather than banks or building societies.

“In the BTL market you can become a shadow bank and step outside of the rules,” Terrington says “Where are they, and how much do they lend? “That is part of the problem.”

Shadowy indeed – just the sort of mysterious spectre to send more shivers down the spines of your dinner party guests.”

I just knew that they'd get round to the 'unregulated meme sooner or later.  Listen chaps, it was the 'regulated' bit that failed in 2008.  D'you think that there might be a causal relationshiop there?

Exit stage right back to the shed. Mumbling.  "Death's too good for them..."


Mark Wadsworth said...


Oooh I'm scared. Next they'll be wailing on about "Shadow BTL-lenders"

Bayard said...

"In the BTL market you can become a shadow bank"

Does that mean that if I persuade a rich friend to invest a few grand in a BtL, he becomes a "Shadow Banker". Does he then have to wear a black cloak with a pale purple silk lining , a mask and a top hat to dinner parties?

Bayard said...

"when landlords can sell, raise the rent or use other income to pay the mortgage."

Isn't that KLN No 1 , or somewhere close to it?

Mark Wadsworth said...

B, "landlords will just pass on the LVT" is a top ten KLN.

Rich Tee said...

@Bayard, He has to loan the money to you. BTL means people who take out a mortgage, not buy with cash, but the two are now often conflated with ridiculously confusing results.

I don't see why a BTL "investor" will find their property any easier to sell than an Owner Occupier, they are both subject to the same market forces and the BTL investor will still be paying the mortgage on it like an OO.

Lola said...

RT. Yes. The whole piece is a mass of contradictions and nonsense.

DBC Reed said...

Strange title for the week of the Hillsborough verdict .
Lets face it: what could possibly go wrong with mortgage-market self regulation?

Lola said...

Careful, DBCR, you're on very dodgy ground there with mortgage market self regulation. For nigh on 35 years I have sat and watched the mortgage market get more and more regulated and more and more chaotic such that it is now an utter mess. What's more it massively favours BtL over OO's. You really do not know that half of it and how badly the Financial Shambles/Catastrophe Authority have messed up. E.G. You do know that the FSA TOLD the banks, building societies and mortgage intermediaries to sell PPI, don't you?

DBC Reed said...

No I did not know that the FSA told the banks etc to sell PPI but you didn't mention that in your complaint which, as I said above,was about things very much less annoying than Hillsborough in the larger scheme of things since the latter showed the Establishment and its institutions and agents as unlawful killers and organised liars.
Your "exhibits" appear to show a concern that lenders have enough reserves or other sources of funding to cover unpredicted movements in the market which is only reasonable given what happened last time for which ordinary people are paying now with the State violence of cuts in public spending (ie less spending-power around in places like L'pool where the resistance to the Monetarist cuts under Thatcher led to the place being at daggers drawn with the Establishment).

Lola said...

DBCR. Eh? Wot? Hillsborough? Yes, total government and bureaucratic failure and then the cover up. Precisely the same as the PPI scandal - but with much more alarming consequences, (depending on how you price human life).

The second half of your post is just the usual nonsense. But as you will have read in a post I made somewhere else on this blog, I absolutely support your right to speak your mind. However misguided.

Oh, and BTW, the 2008 debacle was markets succeeding and passing an accurate judgement on multiple government and bureaucratic central planning failures.

Lola said...

DBCR Oh, whilst I think about it, what about the 'state violence' inflicted on all those people whose wealth is sequestered to pay for all that public spending? There can be no 'state violence' in cutting spending. That is self-evidently a nonsense statement.

DBC Reed said...

Liverpool resisted the absurd Monetarist inspired experiment by Thicky Thatcher of removing great tranches of local government spending through cutting the central government's Rate Support Grant.If you don't think deliberately impoverishing a whole lot of badly-off people is state violence then you share the mental limitations of Thicky herself.
We now have quite unnecessary Austerity; an attempt to take money out of the economy during a recession when fair-minded right wing commentators are saying low interest rates present an opportunity for distributing spending power by "public works" as they were called inter-war.
But since you think the Credit Crunch was the act of ever wise and never stupid mortgage market makers( who dished out mortgages to sub-prime customers on a no recourse basis) correcting central government planning failures then there's not much help for you or this country. For you accurately represent the Establishment point of view which is expressed ,not in market signals or price discovery but in forcing people into foodbanks and leaving them shit scared they will lose their jobs while your sainted businessmen won't invest in British firms but stash the proceeds in tax havens because you don't think that rich greedy twisters should pay tax .

Lola said...

DBCR. Oh dear. The classic 'austerity taking money out of the economy'nonsense. There are only three places government can get money from. One, it can tax people and deprive them of it and then spend it on someone else - i.e. moving money around the economy. Two, it can borrow it from the people who have it - i.e. moving it around the economy and depriving private borrowers of it. Or three it can print it - bad idea as that is 'money for nothing' and ultimately leads to further failure.

I am sorry son, you are now entering the realms of the hysterical. You are accusing me of things I am patently not. You are confusing (deliberately?) my arguments, or wilfully ignoring the facts. Compared to me to you know absolutely nothing about the mortgage market, and you appear to know little about the deleterious effects of the utter failure of the regulatory system installed by Brown, which actually encouraged all the mortgage expansion.

When people start using epithets like 'Thicky Thatcher' (which she patently was not - in error maybe, but thick, no.) you know that they have lost the argument.

DBC Reed said...

@L I am surprised you think that austerity policies do not take money out of the economy.Monetarism, which stuck in L'pools craw, but about which you remain absurdly, even hysterically, enthusiastic (especially about schools spending) was singularly dedicated to the Statist proposition that money should be taken out of the economy to cure all ills.(Like the reinvention of bloodletting for economic purposes).
For a land taxer the notion that tax invariably takes money out of the economy is odd: we tend to believe that the tax gets it back into the active part of the economy; that there are parts of the economy where value is hoarded and other parts where it is desperately needed. Likewise, your idea that the State must borrow money off the banks, which the BoE has made clear just create it out of thin air, is just Establishment Megapropaganda. There is no reason why the State should not create money instead, which Major Douglas suggested a hundred years ago could fund a National Dividend to buy all the products of robot factories.An intriguing idea, lost under the Thatcherite State steamroller whose monetary control policies continue to this day straight out of the command-economy textbook.
I apologise for my angry tone but the Hillsborough verdict accusing our Establishment of criminal behaviour has disturbed my usually equable disposition.
I agree I know less than you do about the minutiae of the mortgage market but this does not mean I am not allowed an opinion about the sources of its mismanagement.As usual you have dodged the glaring issues before hiding behind ad hominem and patronising smokescreens. Are you still saying that the American mortgage market makers were in 2007/8 entirely innocent of greed and imprudence and, what is more, honestly trying to correct American central planners mistakes?
If you don't think Thatcher was thick, you have obviously not had much experience of the education process where such over-confident, slightly autistic screwballs abound, amongst both students and staff.
Perhaps you don't think that the Poll Tax was just plain stupid. It took the Anti Poll Tax rioters, organised from L'pool, to put a stop to this her last "brainwave" and provide an opportunity for her colleagues to project her back into the personal fantasy world where she belonged.

Lola said...

DBCR. Look, I hold no candle for the 'establishment', as you well know. The progressive destruction of the quality of policing and their sense of responsibility to the private citizen is one of the disgraces of the last about 40 years. I have posted on here previously that the police have lied to me three times in my life, once in Court when I was 19. So forget the Greta and the Good.

I am no supporter of Monetarism.

I thought the Poll Tax was both wrong and stupid.

LVT is a good tax because it takes money off rent seekers. That's why I support it. It does not 'take money out of the economy'. It's pretty well the only tax that does not 'take money out of the economy'. Economic rent is a 'tax' on production, just like Corporation or Income Tax say. So capturing it as a user charge' is not the same as taxing wages and capital.

In re mortgage market, you are indeed entitled to your opinion. But you are misinformed as to the source of the problems. I have written elsewhere on the mortgage madness. I read a paper in 2004 (ish) that highlighted the credit and monetary expansion issues and by about 2007 we were exiting mortgage advice as fast as possible as well as reconfiguring our investment client portfolios. In about 2007 I had a very interesting telephone conversation with the MD of the oldest and best self certification mortgage provider who was closing its book. he said the same as me. the world had gone mad and he was not prepared to both lend at current self cert rates and also not prepared to expose his business. (BTW his impairment rates were a fraction of the Halifax's). I have no doubt at all that the banks behaves stupidly, but they were led into it by the predictable, abject and unremitting failure of US, UK and EU governments and their attendant regulatory bureaucracies.

I think that you need make your posts less emotional and more considered.

mombers said...

Isn't part of the problem that BTL is so much less regulated than OO? Whether tight regulation or light regulation is most suitable, if there is a regulatory arbitrage available, there is always going to be a predictable cock up. Add in political pressure to avoid OO repossessions and throw money at BTL via HB and you get prices wildly out of whack with normal market forces, even if the land market was remotely competitive.

Lola said...

M. Yes, I think that there is a lot of that. BtL regulations are lighter. Lenders have an easier time lending to BtL. In a sense they outsource their potential financial underwriting and impairment problems to BtL landlords.

Anonymous said...

Lola: How can it be "capitalism"? There is no capital involved in a bank loan if the money was created out of nothing.

Meaning the only place left is the land. The income of which is economic rent.

Anonymous said...

Folks, the so called "mortgage market" is a giant legalised pyramid sale (multi level market if you are politically corrected)

The loans are a giant legalised Ponzi.

There is no conspiracy in wealth and power either. The majority of people rich and poor are fully and willingly involved in both parts of the system through delusion. Which is why its foolish to blame landowners alone - there is no one excluded from those who own land, or who aspire to it one day.

No one can see this because the system is covered up by a collective delusion in which the majority partake willingly, in the hope they might one day win the game... no guarantees. It's a game, our children are the stake. All of us are involved if we choose to remain deluded.

If we really loved our children, would there be so much conflict?

This systemic delusion, covers up reality, in our collective psyche, so nothing changes, despite the evidence (KLN's).

Both dogmatic science and so called religion have everything to answer for here.

Is it time to end our ideologies, both secular and religious - and then, with our delusions removed, have a real chance to save the planet? That includes YOU.