Sunday, 18 January 2009

Brown shocked at overseas lending

The longer this credit crisis goes on, the more surreal it becomes. Today, we were told that the Government has become angry with banks after discovering that 80 percent of lending activity went to overseas clients.

How could the government "discover" this now? For a start, banks are supposed to be regulated institutions. Banks are obliged to provide their balance sheets to the FSA, which is, at least in theory, a government agency. The Bank of England publishes this data, on a consolidated basis, every month. It is available on their website. Anyone with a computer and an internet connection can have a look at it.

Today's story is even more disturbing when we remember all that New Labour guff about London being an international centre of excellence for financial services. Did Brown and the gang ever stop and think who might be the customers enjoying all that excellence offered by city banks? Seems not.

Thus, it would appear that Brown and New Labour really didn't have much understanding about financial services. Nor did they have much idea of the risks involved by the unfettered growth of bank lending. Therefore, we shouldn't be too surprised if they are now struggling to diffuse the growing financial crisis.

Here is the story from the Telegraph

Whitehall sources said that they had discovered that some major UK lenders - including RBS, HSBC and Barclays - have had only 20 per cent of their balance sheets made up of "traditional" loans to UK households and firms.

Meanwhile, up to 80 per cent is tied up in loans to foreign nationals and companies, bond issues and other investments. The discovery is understood to be behind Gordon Brown's demand this weekend for bankers to come clean about the scale of their "bad assets" - including loans which have had to be written off at enormous cost.

The Prime Minister, speaking as ministers and officials drew up the second phase of their bank rescue programme, said in an interview: "One of the necessary elements for the next stage is for people to have a clear understanding that bad assets have been written off."

British banks increased their exposure to foreign individuals and companies during the booming financial markets of the last few years, a practice which raised few eyebrows at the time.


mike said...

Good story. Just shows that the banks are clearly not acting in the best interests of the UK. I hope these banks are now shunned by UK depositors.

Brown is not the only one who doesn't understand. Housing minister Beckett seems to think first time buyers should now rush to buy:

Most FTB's that didn't get into the rising housing market have waited a long time for it to fall and so see no logical reason to dive in after just over 1 year of falls.

Mitch said...

Another huge "brownie" the man is deluded if he thinks we will believe this rubbish.
whatever next?

K T Cat said...

You are judging him improperly. Mr. Brown's job is to win votes. How well is he doing at that? At best, Mr. Brown can be expected to manage the government budget with some amount of thrift and efficiency. It is not his job to manage the economy. That's your job. If you happened to give him that task and are now unhappy with the results, then the fault is yours, not his.

Not to worry, we here in the States are in the same boat. We've decided to allow someone with no management experience whatsoever to "manage" the largest economy in the world. I'll leave it to your imagination how that's going to turn out.

Mark Wadsworth said...

"it would appear that Brown and New Labour really didn't have much understanding about financial services"

As opposed to other parts of the economy, where they do have a good grasp, for example ... er ... ah .... wait, it will come to me.

No, it's gone.

Electro-Kevin said...

We also have to put up with banking executives demanding their pre nationalisation salaries.

Trust NuLab to f*** it all up. All they're any good at is spin.

Anonymous said...

I wonder what he's going to stay when Britain 'does an Iceland.' My guess is the total collapse of the pound and national bankruptcy is only a few weeks away. I suppose he'll say foreigners caused it by refusing to lend us more money.
I think it's going to destroy him, he doesn't realise how clueless he is.

Anonymous said...

Yes, Brown really is a dangerous person to have in charge.
He knows all the buzz words to win votes ie "Britain's hard working familes", "Support savers", "Guide the UK through uncharted waters", "Our troops out of Iraq"... but actually does nothing or worse still, the opposite !
He ENCOURAGED reckless lending in the first place and is prescribing yet MORE of the same medicine to get us out of this mess - he really is a complete idiot !

Anonymous said...

Just shows that the banks are clearly not acting in the best interests of the UK. I hope these banks are now shunned by UK depositors.

And why the bloody hell should they?

Banks are businesses, businesses exists solely to benefit their *owners* AFAIK.

Since those owners are not (yet) "the UK" (whoever that might be) nor NuLabour then what happens to the UK is certainly not the Banks problem - it might be Gordon Browns thought; But I bet he will fob it off on "the banks" or "the voters"... well he just did ;-)

mike said...

I 'as a UK tax payer' who is supporting effectively propping up this bank via the government would not expect 80% of lending to be to foreign countries/investors.