From Andrew Neil to Mervyn King
written by Angela Knight on 18/03/2009Spring sprung at the weekend, the sun came out, the daffodils bloomed, the birds tweeted and the G something or other of finance ministers quietly got on with their work in deepest Sussex, and mobile Sky outside broadcast van or similar backed its way up the drive. Could this last I ask myself, and on Monday the answer was no. But interesting is the tone and temper of the commentary and views seems now to have shifted a little. Banks are at last able to get on with doing their job and whilst we will no doubt have a few more turns around the subject of bonuses (in particular individual's pensions, plus did or did not ministries or ministers really know about pension pots) the tension is now moving to the real economy and what we do about the increasing number of people who are now both over indebted in the one hand and are losing their job on the other. The figures paint a mixed picture. On the one hand people are doing what they need to do and that is paying back their debts, not using their credit cards so much and not spending. On the other hand, although arrears and repossessions have gone up in the housing market, the banks have honoured their commitments and, whilst their share is over three quarters of the market, their repossessions are the lowest of all types of lenders. Tuesday and it's back to normal. I was asked on The Daily Politics as to why did I defend the pariahs instead of going and being say, an organic farmer! But that's Andrew Neil doing his usual questioning and actually the show is good fun. More serious is that the major part of the discussion â€“ or interrogation I should really say â€“ was about a leak regarding the Turner Review on how we change regulation for banking. The leak, or trail, was that Turner was going to say that a mortgage lender could only lend three times the salary of a borrower. The proposition by the Politics programme and indeed by others was that if this was right it would bring prudence into the market and banks should be limited in this way. However, they clearly hadn't done the maths. Three times the average salary is somewhere between £75,000 and £80,000 and the average house price is £150,000. So limiting mortgage lending in this way would have three dramatic effects. The first is that some people who have got mortgages would fall into the â€œbadâ€ group. Secondly it would destroy house values. Thirdly you would remove from a generation their opportunity to get on the housing ladder. The reality is that lending has got to be truly affordable for mortgages, as elsewhere, and not based on some formula or interpretation that self evidently does not, when scrutinised, stand the test of common sense. I live in hope that common sense will still prevail in this and in other areas. More opaque but of equal importance, Tuesday also began the serious discussion about the de LarosiÃ¨re changes for financial regulation across Europe. Dry in one respect it may be, but the impetus for change in legislation in Europe is unstoppable and the UK has lost a lot of respect and ability to influence. Engaging now in every direction and in every respect to achieve the right de LarosiÃ¨re result is essential, otherwise we will see a gravitation of power towards the eurozone and a consequent marginalisation of the UK. Interestingly, at lunchtime the Centre for the Study of Financial Innovation was discussing some of these issues in a completely packed hall down a side street in the City. CSFI is an excellent ginger group (I would say that because I am on its council) but in that packed hall many of the contributors fought old battles and made comments that ranged from inappropriate to barking. I except from that my two excellent colleagues, Bill Eldridge of Credit Suisse and Nick Collier of Morgan Stanley. And then the international bankers had their dinner with Mervyn King at the Mansion House. A much more subdued occasion than would normally be the case, as we are a subdued industry, but it is equally one of the few place where one can go and be among friends. This time it was not the industry that the Governor was commenting about but rather it was the FSA and Government. We filed in, we did our bit, we applauded at the right place, we went home. I look forward to the days when these occasions truly are more cheerful and happy events.