Why won’t the banks pass on the rate cut? Because there isn’t anything to pass on. And for the life of me, I can’t work out why they don’t point this out. The Bank of England base rate simply doesn’t mean the Bank of England is lending to banks at 2 percent. The plumping doesn’t work that way, not no more. British banks aren’t hoarding anything. They have no net assets. They have to borrow every penny they lend. Once they borrowed from the wholesale market, which has seized up. What cash is available comes at a hefty price. By means of illustration, the banks had to pay 12 percent to for the latest injection of government cash. Barclays went to the Arabs instead and paid 14 percent. Until banks can borrow cheaply, they can’t lend cheaply. Is this really such a difficult message for our banks to explain?
One has to admire Brown’s spinning abilities, though. It’s now painfully obvious that his Emergency Budget was an abject failure which has made zero impact on the trajectory of the recession. Every month the Treasury publishes the forecasts of 25 economists. Not a single one has revised their figures upwards as a result of the PBR. The VAT stimulus etc was, ergo, economically irrelevant. Brown’s “dividing line” between “helping people” Labour and “do nothing” Tories can thus be proven to be bogus.
More dangerously for the Prime Minister, his claim to have saved the banks is falling apart. The system is bust despite the laps of honour he has been performing all over the world. Aside from Iceland, no other developed country is having such problems with banks right now. That’s because, aside from Iceland, no other country allowed its banks to slip into such dangerously high leverage ratios. And remind me, who personally designed the UK banking regulation system?
Brown badly needs to divert attention from these two failures, so he starts blaming the bankers. He’s paid good money for the privilege: they are, after all, his bitch now. Blaming banks is a free hit for the media, because bankers don’t defend themselves. Given that five or them are wholly or partly owned by the government, no wonder.
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