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Chancellor wants to help stupid borrowers as well as reckless lenders (with your money)

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Chancellor Alistair Darling has told mortgage lenders that they should be more lenient to homeowners* who fall behind with their repayments. The meeting was called by the chancellor this morning to let the banks know that taxpayers would expect to see benefits in return for the £50bn+ of their money which Darling has used to bail out poorly managed financial institutions which are currently suffering from serious cash-flow problems.

Assuming that the bankers didn’t just laugh in the chancellor’s face before strolling out of the meeting with their pockets stuffed full of taxpayer’s cash (which, if we’re honest, is almost certainly what they really did), and assuming the banks really do decide to go easy on people who are struggling with their mortgages, where does this leave us?

The government has shown that it’s more than willing to use taxpayer’s money to prop up failing banks, regardless of how recklessly they’ve behaved in pursuit of unsustainably high profits. If the chancellor somehow manages to convince the banks to treat mortgage defaulters with greater leniency, the government will have created an environment where not only is it ‘safe’ for banks to make risky loans, it’s also ‘safe’ for consumers to recklessly borrow more than they can afford to repay. (But only so they can buy property at artificially inflated prices).

In the short term the only people who lose out are taxpayers who can’t afford to own their own homes – their taxes are being used to prop up irresponsible banks, bale out foolish borrowers, and keep housing bubble inflated just long enough to improve the Labour party’s chances of re-election. But the whole thing is clearly unsustainable and the longer this charade continues, the more it’ll hurt when everything collapses, so in the long term the only people who lose out will be, well, everybody.

*Although “homeowner” is a bit of a misnomer – as long as the bank can reposes your home, you don’t own it.

  1. The term ‘loan-owner’ is probably more appropriate than ‘home-owner’. Or perhaps not, as it’s the banks that really own the loan. ‘Debt-slave’, then?

    It’s not just banks that can repossess. As Henry Fonda once said, “If you think you own your house, try not paying your taxes.”