The problem with rhetorical questions is that their obvious answers are usually impossible to implement. We might as well ask what more we could be doing to eliminate poverty across the globe.
The answer to such a question could be simple – the richest 2% of humanity could redistribute their wealth evenly across the planet.
Unfortunately such an undertaking is unlikely to happen but the fact that the task is Herculean shouldn’t stop us from attempting it.
The obvious answer to Crawshaw’s question is that liquidity levels must be increased. His observation that the Bank of England has diagnosed the overhang of assets as the disease but the CML sees it as a symptom is perceptive. Lenders are more concerned about funding tomorrow than credit risks today.
But appealing for more liquidity will not make it happen. Something needs to be done and there’s the rub. Nothing will be done quickly enough to alleviate the suffering of lenders, brokers and borrowers.
The tripartite authority is slowly moving towards making a statement about its intentions to increase liquidity in the market.
The ponderousness of its action is excusable. Chaos theory links the beating of a butterfly’s wings to a hurricane on the other side of the globe.
Clearly it behoves the government, the BoE and the Financial Services Authority to look before it leaps into what could be the most significant financial intervention since chancellor Norman Lamont withdrew the UK from the exchange rate mechanism in 1992.
Unfortunately every business in the mortgage industry has targets and relies on market growth to achieve them.
Lenders, packagers and brokers are clamouring for a sufficiently large cake to feed their operations.
But there isn’t a great deal of cake on the table and a portion of what’s left is likely to disappear down HSBC’s gullet as hordes of fixed rate borrowers are enticed by its Rate Matcher product.
As with any adverse stimulus, the most sensitive react the most rapidly. It’s no surprise to see the lenders most closely linked to the capital markets showing signs of distress. It’s only a matter of time before we see major casualties in the intermediary sector too as I fear the liquidity needed to restart the market will be a long time coming.