Some Good News, At Last?

The average price of homes rose 0.9% last month according to Nationwide. Mortgage approvals rose from 32,000 in January to 38,000 in February. It could be signs that the economy has some 'green shoots' at last - or are they?

The measure of Quantitative Easing (QE) as started by the Bank of England last month has yet to take great effect and so the positive movement cannot be put down to that measure. Besides, in a volte face by Mervyn King in the face of unexpected and bad news of a rise in inflation, it seemed this was no longer the vogue idea.

In response, for the first time 14 years, an auction of National Debt failed as the markets got spooked.

As the G20 country leaders get into full swing today, there will be another crucial time in the City as the next debt auction takes place and the markets will be wary of the outcome. To keep the housing market moving, the theory is that some of that cash has to cascade down to house buyers in the form of more liberal lending terms.

The Dangers

While this is generally received as a good thing, we have yet to agree upon a new structure and strategy for the regulator, the FSA. One of the huge problems that we have faced was the crazy and far too easy terms of lending on houses that got us all delving into our mortgage equity to spend. Northern Rock was not the only bank to lend at over the asset value in its 125% Together mortgages and most banks who lent anything over 80% loan to value (LVT) in the last year or so have seen their buyers actually go into negative equity.

Perhaps it is time to set out the rules properly about sensible lending policy at banks like a cap at 80% LVT so that we do not make some of the same mistakes again. It really is time that household disposable income came to the fore as the fuel for lending rather than the hope of equity growth and release.

Or am I asking too much?

Forfar 0 - Dunfermline 1 billion

I have been past Dunfermline a few times at the other end of the Bridge at Queensferry but I mostly know it from my curious fascination of listening to the Alexander Gordons reading out the football results. Much more about the place I cannot tell you other than the fact its building society went belly up with around £1bn of toxic debt.

Fortunately Nationwide has stepped in to buy the good bits but the debt is all ours - we the generous taxpayer. For some time, apparently, the CEO of the Society, Mr. Faulds, has been ranting at what he calls the 'faceless mandarins' at the Treasury to try and get a bail out sorted. As the glorious leader chaired the G20 summit after his rapid worldwide shuttle tour (what a waste of a round the world ticket), the Dunfermline gave up the ghost and went belly up after efforts by the FSA to get things sorted.

And so we end up with another £1bn of liability and another bank down the toilet - the Nationwide picks over the juicy bones and life in 2009 goes on.

Chalking One Up To Experience

The good news is that all savers and mortgage holders plus the staff at the Dunfermline are safe. The bad news is, of course, the taxpayer picks up the tab once again, but we should be used to it by now - I mean, what's one more billion other than a rounding error these days?

It's Mr. Faulds I feel sorry for. He had to shout and scream at the FSA and Treasury to get them, to listen. Presumably his shout was. 'Err, hello guys. Another one down the pan over here. Help me out here, I've spent money I did not have and bought debts I shouldn't have and killed a perfectly decent company and now I want someone else to pick up the tab.'

Ach, I just is a bit embarrassing this happens under our glorious leader's nose just when he is saving the world again. It just had to be his local, didn't it?

Along with Local Authorities investing their balances in foreign banks, quite what the Dunfermline was doing buying £274m of debt from Lehmans and GMAC is a little surprising. Then having around £500m of buy-to-let mortgages and daft business loans adding up to a total liability for dumbness in excess of £900,000 is beyond most of us. The cost of the debt from defunct banks alone was way more than could have been covered by their profits so this was just simply suicidal business practice.

The obvious is howling at me. As most Building Societies don't operate in such risky ways, surely regulators must have seen an exception floating by or were they too busy being 'low touch' as per the PM's asking? And secondly, why on earth are we saving companies from simple gross incompetence?

This may be a microcosm of the RBS situation and maybe we should have applied the same process but once again, the public are shown just how poorly let down we have been by authorities and how they continue to expose us to liabilities we cannot pay for.