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I normally wouldn't bother, but some of our regulatory friends in Europe have been unduly hard on the US guys, saying that we socializing losses, rescuing banks, coddling the system, etc. Then, all of a sudden, they nationalize Northern Rock, pump untold billions of pounds and euros into their markets, and look to prop up real asset values. Hmmm! Those who live in glass houses... I have been saying for a while now that the UK and the Eurozone, quickly followed by Asia then northern Africa will all be right behind the US in a global economic slowdown. They act as if we operate in a fish bowl!



Brown, Bank of England Work to Ease Credit as House Prices Fall

Prime Minister Gordon Brown said he's working with the Bank of England and financial institutions to ease credit conditions in the U.K. after a report showed sentiment in the housing market at was at its worst on record.

Brown met with executives from Britain's biggest banks as the central bank offered 15 billion pounds ($30 billion) in three month funds to institutions, bringing to 50 billion pounds the amount of cash injected to markets in recent weeks.

The moves are part of the Labour government's effort to contain the political fallout from the collapse of the subprime mortgage market in the U.S., which lifted the cost of credit around the globe and led to a run on Northern Rock Plc last year. Brown's popularity slid in the past four months along with the confidence of voters in his handling of the economy.

``This is the first crisis of this new era of globalization,'' Brown will say in a speech at Goldman Sachs Group Inc. in London later today, according to his office. ``Behind this lies the under-pricing and under-reporting of risk and off-balance sheet activities, inadequate credit rating services'' and a failure to disclose bad debts quickly.

An official in Brown's office said that the prime minister was working with Bank of England Governor Mervyn King to restore confidence in credit markets. Chancellor of the Exchequer Alistair Darling, traveling in China today, will meet bank executives next week.

Housing Slump

Earlier today, the Royal Institution of Chartered Surveyors said the number of residential property agents saying prices declined exceeded those reporting gains by 78.5 percentage points in March, the worst since records began in 1978.

Prices may fall 15 percent or more in the coming years, suggesting the U.K. faces the worst turmoil in the residential property market since last housing bust in the 1990s, said David Miles, an economist at Morgan Stanley & Co., who has advised the Treasury on the property market. House prices fell every year for five years until 1995 after the last boom collapsed.

``The situation does not look likely to play out as badly as it did in the early 1990s,'' Miles said in a note to clients. ``U.K. house prices have begun to fall, and our analysis suggests they look very likely to fall more.''

Credit costs have surged in Britain since the subprime mortgage market collapsed in the U.S. last year. That prompted lenders including HBOS Plc, Barclays Plc, HSBC Holdings Plc and Lloyds TSB Group Plc to raise the cost of mortgages in the U.K.

Lenders' View

The Council of Mortgage Lenders says the tightening of the U.K. mortgage market can be reversed if the Bank of England injects more cash into financial markets and if the Treasury supports homeowners behind in mortgage payments.

``Underpinning those borrowers in serious and short-term financial difficulty to help minimize the level of repossessions is a clear spend-to-save policy,'' Steven Crawshaw, chairman of the lobby group that represents 157 lending companies, said in a speech on April 11. ``Yes, it has a short term cost. But it delivers tangible longer term returns from helping people.''

The credit crisis has undermined Brown's reputation for smooth management of the economy, which he built up for a decade as finance minister under Prime Minister Tony Blair. Brown took over in June and suffered declining poll ratings since October, the month after the run on Northern Rock deposits.

In other news: German Investor Confidence Unexpectedly Declined in April, ZEW Index Shows

References from this blog:

5. Banks, Brokers, & Bullsh1+ part 2 / Comments by Reggie Middleton
(Banks, Brokers, & Bullsh1+ part 2 / Comments by Reggie Middleton)
I truly believe that the US[url][/url] and Europe are full of effectively insovent banks. The ECB finally jumped on board the liquidity bandwagon, and in a
Saturday, 22 December 2007

6. Things that I may have overlooked
(Lennar Insolvent: Enron redux??? / Comments by Reggie Middleton)
...e what I see there, either. There are more than a few insolvent or close to insolvent banks in the US and Europe. The first and second week of the new year will have some fairly hard hitting analysis ...
Tuesday, 01 January 2008

7. Banks, Brokers, & Bullsh1+ part 2 / Comments by John
(Banks, Brokers, & Bullsh1+ part 2 / Comments by John)
So, if there ARE us and european banks that are insolvent why isn't there more "panic" in the media about this? Aren't insolvent banks generally concidered a "bad thing". Aren't insolvent banks
Sunday, 13 January 2008

8. here's the info I saw about the HSBC CDO
(After Reading the Prospectus and Reviewing Potential Losses, Would You Buy These Notes? / Comments by moodyszero)
...d by… a CDO Bloomberg reported -via the wires- on Tuesday: Jan. 15 (Bloomberg) — HSBC Holdings Plc, Europe’s biggest bank by market value, set up a collateralized debt obligation to repackage ...
Thursday, 17 January 2008

9. I warned about this earlier... / Comments by dismale
(I warned about this earlier... / Comments by dismale)
The coming collapse in some European markets will be remarkably similar to the US. UK property loans were supposedly all of high quality with no equivalent to US subprime. (We are beginning to disco
Thursday, 13 March 2008

10. One of the main reasons why all of my strategies need to stand on their own, without leverage... / Comments by Reggie Middleton
(One of the main reasons why all of my strategies need to stand on their own, without leverage... / Comments by Reggie Middleton)
...ake an interesting leverage play when (or if, but I think when is most appropriate) you have a run on the European I banks. Just a few of my random thoughts right back at ya! Remember my logo up top,...
Saturday, 15 March 2008

11. This expresses my thoughts on Europe rather accurately / Comments by Reggie Middleton
(This expresses my thoughts on Europe rather accurately / Comments by Reggie Middleton) by taking advantage of the silly rules the BOE instituted trying to keep their currency within the Pan European trading band. Just like the banks on Wall STreet next week, eventually, everyone will...
Sunday, 16 March 2008

12. From the UK Times Online
(A closer look at the exposure of the other brokers / Comments by Reggie Middleton)
...hough British banks have tiny exposures to the American mortgage market in comparison with the big US and European investment banks. ...
Sunday, 16 March 2008

14. This is going to be an exciting, and scary morning / Comments by Reggie Middleton
(This is going to be an exciting, and scary morning / Comments by Reggie Middleton)
...ip over there to see how things work. I believe they are a little bubbly as well, just not as bad as Asia/Europe/US. I must admit that I know very little about Sharia though. I hear the first of many...
Monday, 17 March 2008

16. This goes to show you how underpriced monoline risk premiums were
(The outlook for European banks: a quick summary of recent news / Comments by Reggie Middleton)
...onoliner and cash in the risk-free spread difference.) --> 6 banks out of 8 planning monoline rescue were European; expected losses in $20-140bn range # European banks also reported to be exposed to c...
Thursday, 20 March 2008

17. Quick thought on the recent state of affairs / Comments by willydog66
(Quick thought on the recent state of affairs / Comments by willydog66)
...upward momentum muted. We just now saw our first counterparty litigation, Thornburg is ready to go under, European banks are starting to have their own credit crisis, LEH quality of earnings was weak ...
Thursday, 20 March 2008

18. Well stated Mark
(Quick Morgan Stanley update from my lab / Comments by Reggie Middleton)
...ot all of their equity). I also hear that MS has rating companies looking at their some of their deals in Europe. I haven't verified this, though. As I said, I believe the poor credit risk controls i...
Thursday, 20 March 2008

19. It's amazing...
(Does this scenario sound familiar? / Comments by Reggie Middleton)
...globally in relation to the US. 2008 and 2009 will be the years for the astute global macro investor. The European banks are showing a lot of stress (see my post that will go live as of midnight for a...
Friday, 21 March 2008