The Toxic Twosome
Reportedly the Prime Minister Gordon Brown & his chancellor Alistair Darling are flummoxed & irate at the UK banking sector.
They seem to expect the banks to pass on the refinancing of the banking system directly to borrowers.
So really they look to reflate the economy by asking those who are already in so much debt they are sinking from sight, but the dynamic duo feel the debt ladened UK population should borrow even more then nip out onto the high street and drive the UK economy over the abyss into a chasm so deep it almost mirrors the impossibility of funding the public sector pension.
It is also reported the two fiscally challenged are asking, indeed almost demanding the banks begin lending to small & medium size businesses, at the same time as demanding the very same banks apply more due diligence to loan applications. I am not sure which the ‘Contrite Couple’ actually want the bank to do? It can only be one or the other
Given that Gordon Brown’s chancellorship did so much damage to small businesses as did the governments constant need to legislate & apply new laws on the hour every hour or so it seemed, small & medium sized businesses are in such despair their profit & loss/balance sheets show them to be so weak that anyone lending to them would expose themselves to serious risk of default with the failed business’s value being below even recuperating the basic liability, never mind the costs of administration.
Would this mean more bank refinancing Gordon?
Who would the PM blame, the chancellor? the government? himself, of course not, once again the banks would stand accused by him of inappropriate behavior with Brown’s bouts of momentary Alzheimer ensuring his ability to remember the very large role he plays in the creation of this disarray is easily forgotten.
If Brown & Darling want to empower & encourage the banks to assist small businesses then ask them to put together a package that would help the business world with its present debt. Demand the premium % rate ALWAYS applied to business loans over & above the normal lending rates be removed immediately with agreement they will not be reapplied later.
Cut the costs of overdraft facilities to business but allow banks to consolidate their interest in this area of their client partnership, perhaps by identifying how the overdraft is being utilised, this is in the business owners best interest as the banks have a number of ways they can assist businesses with their liquidity problems, whereas & quite often small businesses use their overdraft facility in ways that are really improper and then complain about the % applied to their overdraft facility, it is these very reasons why banks tend to put larger % points to this form of capitalisation as it is relatively high risk. By encouraging the business & the bank to work closer together in theses areas the less likely foreclosure becomes, the bank then has to accept that such agreement reduces the risk thereby the reduction of overdraft charges.
Bank charges in the running of business accounts are by comparison to individual accounts an expensive item, with a charge for every & all transactions from cheques, cards, movement of cash, paying in cash etc etc all attracting individual costs with either a monthl/quarterly management account charge on top, if the bank can offer ‘free’ banking to the individual perhaps they could offer a similar product to the small & medium business, even if there is an agreed ceiling in monthly transactions before charges are applied. Some banks & perhaps all should offer far better interest rates to the business deposit accounts.
All of which would greatly assist those already struggling to repay their debt whilst increasing their cashflow and assisting to balance their books it could also stem the growth in unemployment as businesses manage to avert closure & hopefully keep their workforce intact.
It should also mean that any of the yet to be received taxpayer recapitalisation to the banks would be kept to a minimum as much of the suggested changes to banks charges etc to business is more a matter of tweaking the client/bank relationship & would allow both the bank & the economy to ‘take it in their stride’ whilst the loan affordability programme (cutting business loan rates to normal rates) would aid in the continuity of business & loan repayment & would in the short/medium term fund itself.
The cut in business premium % loan rates & bank overdraft/charges with a more fluid approach between both bank & client is a logical move, it ensures:
- Existing loans/debt are more likely to be serviceable
- The likelihood of foreclosure from bad debt is minimised.
- Banks exposure to any future UK ‘toxic debt’ becomes unlikely.
- The impact from unemployment in the small/medium sector from closure or redundancy is diluted.
- Confidence & growth return progressively bringing stability to the economy.
- Banks would stabilise their business account sector & could recoup some of the lost income by looking at a sensible structured & a fluid loan system that release the funds as required & at agreed rates whilst only charging for the total funds injected at any given time, with the bank having an advantage in overseeing the loan’s use & effectiveness & being able to reduce its/shareholder liability to a business that may have run it’s course in any cycle of the UK economy.
Brown & Darling prove their lack of understanding not only to how business generally operates but also the underlying problems between business & banking with their assumption & demand that banks lend in what would seem an indiscriminately, inappropriate and imprudent manner.
Correct me if I am wrong was this not the very accusations lain against the banks by the very same Brown & Darling some 2/3 months ago.
Brown seems to have little clue in what are the problems to the internal UK economy as he prances about the globe lecturing all on their problems. Lets face it he’s never been in business and at 5 years old on entering school began his institutionalisation and has been in one institution or another ever since, the real world & Gordon Brown have never really crossed paths, perhaps this is the reason for his inability to grasp reality, one has to have lived it, not lectured on it. |
