Reptiles and lenders

In the natural world species that can adapt to change thrive.

Charles Darwin called it natural selection and explained how the theory worked in The Origins of the Species which he published around this time of the year 149 years ago.

Now, as we are approaching the 150 anniversary of that truly groundbreaking book we may be well witnessing the same process in UK banking and unsurprisingly it is the strong and adaptable who want it to happen.

True the government has played God and given the kiss of life to the Dinosaur of the Rock which nearly rolled over and died when the era of easy credit came to an end but since then divine intervention has been conspicuous by its absence.

That’s why the Council of Mortgage Lenders, the Intermediary Mortgage Lenders Association and the Association of Mortgage Intermediaries have all been calling on the government to take a more proactive role to save the mortgage market and, ditto, the economy.

Indeed, to that worthy end they have been submitting learned papers to the Crosby Review which has been charged with resurrecting the securitisation market.

The problem for this liberal lobby is that Sir James Crosby has not been overenthusiastic in his response and in his interim report even expressed the view that intervention might be inappropriate and artificially prolong the crisis.

It was against this backdrop that last month Cicero Consulting invited the great and the good of the mortgage lending fraternity to a symposium at which it proposed a strategy to nudge the government into intervention.

The idea was to commission Oxford Economics to research the economic and social consequences of doing nothing to help mortgage lenders. Securitisation, after all, accounted for around 40% of mortgage funding in the UK and that was a big chunk of money to take out of the economy.

The research, it was assumed, would show that economic Armageddon was just around the corner. Thus the news of an impending doomsday would be spun in the media and fed into the political party conferences this autumn and so create a climate for action.

It was an exciting idea but required a budget of £100,000 and that wasn’t forthcoming. Lenders were reluctant to dip into their vaults to the tune of £3,000 apiece, though we know that one big high street lender and one sub-prime operator wanted to help.

But should we be surprised by their reluctance to support the initiative? The demise of the Rock has seen one aggressive competitor fall by the wayside and the drying up of the credit stream has seen many of the aggressive sub-prime lizards (Reptilians Americanus) disappear into history.

Institutions with a more robust funding model, the big high street banks, the large mortgage banks and the building societies, can afford to slow down their metabolism until the economic climate changes and then emerge into a brave new world where there’s less competition and where they can price for risk accordingly.

Besides, there is always that thought that anything this government does, has the kiss of death anyhow so why try to buck the market?