What a difference a year makes.
Last year, Northern Rock was ignominiously nationalized, with the government promising to downsize the bank and recover the massive loan injections into the balance sheet. Today, NRK is back; leading the fight to revitalize the UK mortgage market.
The government are ready to pump in billions of taxpayers money in order to get NRK back into the game. Bad assets will be hived off, hidden somewhere in the nether regions of the public accounts.
Two quick questions; is the objective here to stabilize house prices? If so, then why? Don't tell me it is to get us all spending again. I, for one, won't be going out and buying anything just because someone else can get a new mortgage.
It is time to save not spend. This new NRK bailout will have to be paid, sooner or later. This means higher taxes. Since we all know that taxes are going to go up; either as direct taxes on income and spending, or as inflation, it would be wise adjust spending downwards now.
Unlike the government, households do think about the future. As far as public finances are concerned, the future looks very bleak. Rather than forcing state owned banks to inject credit into an overvalued asset market, the government would be wiser to simply reduce their deficit.