The Crosby Report is Published at last
Posted on 24 November 2008 by
Some of the key comments from Sir James Crosby in his Report, published today, are:
- “I believe there is a strong case for intervention in mortgage finance markets.”
- “The real risk is that the shortage of mortgage finance now forces the housing market to overshoot on the downside.”
- “It is very likely that net mortgage lending will fall below zero.”
- “In my opinion there is a strong case for further government intervention.”
- “Injecting some sort of Government guarantee into mortgage funding markets looks like the best option. Whilst not entirely without risk, this intervention would be highly likely to be profitable for the Government.”
Specifically Sir James has made three recommendations:
- Auctioning in 2009 and 2010 £100bn of guarantees to be attached to new issues of mortgage backed securities.
- New standards of standardisation and transparency to be adopted for new issues of mortgage backed securities.
- The International Accounting Standards Board to review its fair value accounting principle, i.e. mark to market accounting, so that it is “no longer itself a cause of instability in the financial system.”
Unfortunately, The Chancellor’s comments on these proposals in his Pre Budget Report prove he has failed to recognise the urgency with which Sir James’ principle proposal to guarantee the issue of mortgage backed securities needs to be implemented. He said "I share Sir James’s concerns about the availability of mortgage finance. To implement Sir James’s recommendation, the Government would need to obtain State Aid approval from the European Commission and resolve some technical and practical considerations but we will proceed to work up a detailed scheme based on his recommendations and seek State Aid approval to proceed." Actions speak louder than words and The Chancellor said he won’t be reporting any further on Sir James’ proposals until next year’s Budget. That’s much too slow.
It is unfortunate the British Government has delegated to the European Commission the power to dictate whether or not we can support our domestic mortgage industry in the way deemed most appropriate by Westminster. It is also unfortunate that as a consequence The Chancellor apparently feels unable to indicate when he expects to be in a position to start offering the guarantees, although at least his comments suggest he does expect the European Commission to kindly allow him to implement the scheme.
The mortgage market needs help with its funding problems now. Bearing in mind The Crosby Report has been months in preparation and The Treasury will no doubt have seen this key recommendation in drafts well before today it is a pity action was not taken to allow an announcement today that the scheme had been agreed and that the first auction would be, say, in early January.
Categories: Property market, Bank of England, Mortgages, Personal finance, Regulation
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