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| Bank bosses discuss mortgage plan | Bank bosses discuss mortgage plan |
| (20 minutes later) | |
| The government could be set to step in and guarantee mortgage lending under a plan being discussed this weekend. | The government could be set to step in and guarantee mortgage lending under a plan being discussed this weekend. |
| Some of Britain's top bankers are meeting at the prime minister's country residence Chequers. | Some of Britain's top bankers are meeting at the prime minister's country residence Chequers. |
| On the agenda is the possible implementation of the Crosby Report, which was published last November. | On the agenda is the possible implementation of the Crosby Report, which was published last November. |
| Among recommendations was a plan for the government to provide guarantees on mortgage securities. | Among recommendations was a plan for the government to provide guarantees on mortgage securities. |
| This is along the lines of the so-called "bad bank" solution, which US Treasury Secretary Hank Paulson envisaged last September when he persuaded the US Congress to provide $700bn in funding to buy tainted assets from banks in order to free up lending again. | |
| The Treasury would guarantee bank bonds that used home loans as collateral. | The Treasury would guarantee bank bonds that used home loans as collateral. |
| Roughly £100bn in mortgages were provided using these types of investments in 2007 before the market imploded. | Roughly £100bn in mortgages were provided using these types of investments in 2007 before the market imploded. |
| 'Exorbitant fees' | 'Exorbitant fees' |
| It is technically known as securitisation, and it is the collapse in this market that has dried up mortgage lending and overall confidence in the housing market. | It is technically known as securitisation, and it is the collapse in this market that has dried up mortgage lending and overall confidence in the housing market. |
| Major players in this market have all but disappeared over the past 18 months, including a few major US banks, hedge funds and some sovereign wealth funds - state-owned investment trusts usually controlled by oil-rich Asian countries. | Major players in this market have all but disappeared over the past 18 months, including a few major US banks, hedge funds and some sovereign wealth funds - state-owned investment trusts usually controlled by oil-rich Asian countries. |
| The Crosby report, by the former HBOS chief executive Sir James Crosby, envisaged that the government would auction mortgage guarantees to the highest bidder and charge a fee to the eventual winner, on the condition that they would provide home loans to first-time buyers and not to remortgaging customers. | The Crosby report, by the former HBOS chief executive Sir James Crosby, envisaged that the government would auction mortgage guarantees to the highest bidder and charge a fee to the eventual winner, on the condition that they would provide home loans to first-time buyers and not to remortgaging customers. |
| The problem up to now as been that any guarantees that the government has offered to banks have come with major strings and exorbitant fees attached. | The problem up to now as been that any guarantees that the government has offered to banks have come with major strings and exorbitant fees attached. |
| Speaking to the BBC, a senior bank executive described fees up to this as "usury" and "a disincentive to lend". | Speaking to the BBC, a senior bank executive described fees up to this as "usury" and "a disincentive to lend". |
| So one of the discussion points this weekend will no doubt be how much the government will charge banks for these precious guarantees. | So one of the discussion points this weekend will no doubt be how much the government will charge banks for these precious guarantees. |
| Too little and the banks would make too much money, which would be politically unacceptable. Too much and the banks wont take up the scheme and lending will remain available to the very rich. | Too little and the banks would make too much money, which would be politically unacceptable. Too much and the banks wont take up the scheme and lending will remain available to the very rich. |
| There's also talk of extending these guarantees to small businesses, though that was not mentioned in the Crosby report. | There's also talk of extending these guarantees to small businesses, though that was not mentioned in the Crosby report. |
| The issue of mortgage guarantees needs to get sorted out soon though, as the housing market tanks and the economy weakens substantially. | The issue of mortgage guarantees needs to get sorted out soon though, as the housing market tanks and the economy weakens substantially. |
| "We need to move quickly - even within the next fortnight so that banks can start increasing the flow of money to potential mortgage holders", the senior banking executive told the BBC. | "We need to move quickly - even within the next fortnight so that banks can start increasing the flow of money to potential mortgage holders", the senior banking executive told the BBC. |
| "January and February are slow anyway for housing activity. Easter is the usual start of housing period." | "January and February are slow anyway for housing activity. Easter is the usual start of housing period." |