Monday, October 20, 2008

Have I got this straight?

After "a few badly-sold mortgages in the US set off an international banking crisis", the first UK institution to fall was Northern Rock - an energetic mortgage lender. Mortgages were "badly-sold" in the US in part because of government intervention.

The cause of this and subsequent bank failures has been a tightening of wholesale lending between banks, something they need to maintain liquidity. The root problem has been one of confidence and for confidence to be restored, among other things, banks need to be able to manage their credit risks carefully.

So now Yvette Cooper, the chief secretary to Treasury, has, um... intervened in the mortgage market, telling banks they should not manage their credit risks as they see fit.

Have I got that straight?

1 comment:

JuliaM said...

Pretty much. Yes.