Stewart Hosie, MP, displays his financial ignorance at the TSC

Posted on 16 July 2012 by Ray Boulger

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I watched last week’s Treasury Select Committee interviews of Paul Tucker and Marcus Agius at the weekend. The difference between Bob Diamond’s prevarication and Marcus Agius’ openness was enlightening.

In general I also thought that Paul Tucker answered most questions well but he must have had a mental block when SNP Member, Stewart Hosie, exposed his ignorance by asking a stupid question, which Tucker should have batted away easily, but failed to do so. Mr Hosie asked why when Bank Rate was cut by 1.5% (to 3.0%) on 6 November 2008 Libor didn’t move on that day but fell by a record amount of 1.07% the following day after a breakfast meeting where he claimed The Chancellor read the riot act to the bank chief execs because they hadn't passed the rate cut on to mortgage borrowers.

It doesn’t seem unreasonable to expect any MP quizzing witnesses at a Select Committee to do a little homework (as a barrister would do) on the topic if it is something they are not familiar with. Mr Hosie is clearly not very clued up on financial markets, or at least certainly not the Libor or mortgage markets. This rather begs the question as to why he is on the Treasury Select Committee, unless none of the SNP MPs have suitable experience.

If Mr Hosie had bothered to do even basic homework about the Libor rate fixing scandal he would have realised that as the Libor fixing is based (or at least meant to be) on rates prevailing at 11.00. a.m. (which he should in any case have known from the earlier TSC meeting when Bob Diamond was questioned) and the Bank Rate announcement is made at midday it would require a leak from the Bank of England for the published Libor fixing rates to react the same day. A sharp reduction the following day is exactly what one would expect after a large Bank Rate cut.

Mr Hosie demonstrated his ignorance further with his comment about mortgage lenders not announcing the same day that they were passing on the rate cut. It is normal for lenders to take a few days, and sometimes a few weeks, to announce SVR changes after a Bank Rate change but in fact Santander/Abbey was very quick off the mark and announced the same day (6 November) that it was passing on the full 1.5% cut by reducing its SVR from 6.94% to 5.44%.

Categories: Bank of England, Mortgages, Regulation, Interest rates

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