The latest attempt by the government to buy back bonds at auction and to spend up to £150bn doing so sounds like a good idea but if you read the finer detail the government states that it hopes the money it spends will find its way back to home owners and businesses.
This is on the basis that the money it spends buying back its own debt will create liquidity but the first auction suggests that the recipients of this liquidity are again the banks and that does not fill me with confidence at all.
The government should stop hoping that liquidity will find its way to home owners and divert some of the money it is spending to non-bank lenders that have been mothballed until they can find some way of funding mortgage loans.
There are half a dozen lenders in this category that would lend to home owners if they had funding.
The government could guarantee that any money it provided to non-bank lenders would get passed on. There would be no guesswork, there would be no hoarding of cash to repair damaged balance sheets and the money would go exactly where the government dictated.
These lenders are ready to go and between them could distribute billions of pounds. It’s time taxpayers stopped throwing good money after bad.