Wednesday, 20 May 2009

Paragon wants a piece of the action

Its been a while since we heard from Paragon, the BTL lending specialist. However, they cropped up today. The company wants the government to give specialist mortgage lenders, like itself, a chance to use all those generous credit guarantee schemes.

Why would the government even consider such a thing? Lenders, like Paragon have a standard, albeit self-serving answer. The economy needs credit markets to unfreeze, and allow lending to recover. Presumably, this will somehow lead to faster growth and rising living standards.

The reality, however, would be that Paragon would receive cheap financing, with all the credit risk being transferred to the public sector. It would be just another tired old game of "heads the private sector wins; tails, the taxpayer pays up".

Moreover, if Paragon did receive guarantees from the government to finance extra lending, this cash would go to BTL speculators. The price of housing would go up, and again, young workers would be robbed of their chance of financial and personal independence. What is more, they would end up paying for this scam as public sector debt increases, and which in turn, will push taxes up in the future.

It is a nice try, but there is no case for Paragon to receive public assistance to expand its balance sheet. If this company wants to lend more to BTL speculators, then it should go to the capital market, issue a bond or raise more equity. It should leave the poor beaten down taxpayer alone.


Anonymous said...

I thought Paragon had gone bust.

dearieme said...

I lead a sheltered life; it was only recently that I saw BTL referred to as "lie to bet".