White House – Start Lending Money Now!

White house served notice to banks who received bailout packages to start lending money.

It was known that banks did not use the bailout money to lend. They were simply sitting on the cash and only buying out distressed banks. Credit market remained closed even though there were some signs that credit was moving. Wall Street responded in negative way as many Americans could not get a loan. Therefore, white house stepped in.

“What we’re trying to do is get banks to do what they are supposed to do, which is support the system that we have in America. And banks exist to lend money,” White House press secretary Dana Perino said.

Anthony Ryan, Treasury’s acting undersecretary for domestic finance, made the same point in a speech in New York before financial executives.

“As these banks and institutions are reinforced and supported with taxpayer funds, they must meet their responsibility to lend, and support the American people and the U.S. economy,” Ryan told the annual meeting of the Securities Industry and Financial Markets Association. “It is in a strengthened institution’s best financial interest to increase lending once it has received government funding.”

Treasury is buying preferred shares in banks in return for cash infusion, however; about 6,000 banks are not publicly traded and cannot get funding due to restrictions Treasury currently has.

Treasury is currently working on a plan where both banks, publicly traded and private can qualify for the program.

Treasury has pumped up money to help economy get back on its track and avoid national recession. Treasury Department will buy $125 billion of preferred stocks from nine largest banks, which account for 50 percent of all U.S deposits. An additional $125 billion will be passed to banks in upcoming weeks.

Rep. Henry Waxman, D-Calif., chairman of the House Oversight Committee, asked banks who received $125 billion to address executive pay, employee pay and other bonuses.

“I question the appropriateness of depleting the capital that taxpayers just injected into the bank through the payment of billions of dollars in bonuses, especially after one of the financial industry’s worst years on record,” Waxman said.

Many reports were surfacing when news spread out that banks are only buying other banks and have no intension of lending and opening their credit lines. Indeed, the government approved PNC Financial Services Group Inc. to receive $7.7 billion in return for company stock on Friday and, at the same time; PNC said it was acquiring National City Corp. for $5.58 billion.

However, there is no language in bailout plan that would tell banks to use the money for lending. Many officials argue that attaching requirements, banks will discourage to take advantage of this program.

Other efforts have included:

-A Federal Reserve program, to commercial paper or business debts.

-Temporary guarantees by the Federal Deposit Insurance Corp. of new issues of bank debt fully protecting the money, for a fee, even if the institution fails.

-Emergency loans from the Fed for financial institutions.

-A temporary increase in the cap on deposit insurance from $100,000 to $250,000 on interest-bearing accounts, and unlimited deposit insurance for non-interest bearing accounts, which small businesses often use to cover payrolls and other expenses and which frequently exceed $250,000.

-The Fed’s half-point reduction in its target interest rate on Oct. 8, done in conjunction with rate cuts by other central banks around the world.

Are UK House Prices About To Crash?

With the Bank of England raising interest rates in recent months, many investors have started to question the long-term sustainability of the UK housing market. Could there be a housing crash on the horizon?

During 2005 and 2006 the UK saw some very low interest rates, with decisions being taken by the Bank of England’s Monetary Policy Committee to keep the base rate at 4.5%.

By August 2007 the Bank had decided to react to the perceived threat of inflation to the UK economy. Interest rates had risen to 5.75% in an attempt to allow the housing market to cool down and to restrict consumer spending.

With some areas of the UK having seen annual house price inflation running at more than 25% in recent years, it had seemed that the UK was at the centre of a property boom. Now, some investors are questioning whether higher interest rates might lead to a housing crash.

It seems that the UK housing market is at something of a crossroads. Some point out that house prices are unlikely to fall dramatically because there is such a high demand for property in the UK and yet a restricted supply.

Key factors here have included the failure of successive governments to push through any real property building policies, as well as a large influx of immigrants from elsewhere in Europe and beyond.

Those who suggest that a crash is still likely suggest that the housing market has only been propped up because the cost of borrowing has been kept artificially low. Some suggest that banks and other mortgage lenders have been rather too keen to lend money.

There are fears that the UK may go the same route as the United States, where sub-prime mortgage lending has left real problems for the property market.

Whatever the future holds for property in the UK, it’s likely that estate agents in the more affluent towns and cities of the south-east may witness the largest price changes.

Expensive areas such as London, Winchester and Guildford may hold up better than elsewhere, but we’ll all have to wait and see.