Saturday, 27 September 2008

Woin Swan is an idiot

Why does the government feel the need to bail out the non-bank lending sector, given that some of these idiots are responsible for writing the crummiest mortgages on the planet? Talk about reinforcing failure.

"Prudence" used to be a by-word for banks, but it seems that word was excised from their in-house dictionaries in the 1980's. Banks are supposed to be prudent because they are looking after our money - your money and my money. When I go to the ATM this morning, I want money to come out, and the only reason the bank will be able to dispense it is because they have not blown it on one foolish scheme or another.

I fail to see why any of the following statements by Woin make any sense at all:

"We need to have a competitive mortgage market so that people out there who are under financial pressure can get a fair go," Mr Swan said.

Does that mean that people who already owe a lot of money need to be able to go out and borrow more money? Or does it mean that people who don't have enough of an income to support a loan of any size will be able to get a loan?

"This is an important measure to introduce competition into the mortgage market over time."

The mortgage market is already quite competitive. The problem is not a lack of competition between lenders - it's that all of them no longer have great pots of money to lend out. Keeping more lenders in the market will do little, if nothing, to increase the total pot of money available for lending.

And what's with the phrase "over time"? I take it that is a cop out so that if no one notices any difference in 6 months time, he can say, "This process will take time blah blah blah".

Mr Swan described the move as a temporary measure, but did not rule out further taxpayers' money being spent to help the non-bank sector.

Interestingly, all the comments in the article are from the banking sector, rather than the non-bank sector.

Since the middle of last year mortgage lending from the non-bank sector has plummeted to $2.5 billion a quarter from $18 billion a quarter.

And if you ask me, that's a good thing. Do we really need these guys issuing even more low-doc and liar loans to those that can least afford to pay them back? Do we need hordes of shonky mortgage brokers prowling the western suburbs in BMWs enticing people to sign up to NINJA loans, and pocketing a handy commission up front in the process?

Our housing market has been horribly inflated by stupid amounts of money being lent to people suckered by the tale of an ever-rising market.

I just hope we don't end up following the UK down the crapper.

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