tygerland.net

Northern Rock proved that “irresponsible” lending is dangerous game for banks to play. If a bank has too many debtors who are over-extended, then it leaves itself wide open to punishment if suddenly the economic climate cools. In America, where mortgages are traded between banks and investors like coffee beans, bad debts have created a financial crisis on a gargantuan scale, with the entire US economy peering over the precipice of a long and painful recession. It’s now very easy for all and sundry to point at the banks and crow that their chickens have finally come home to roost. Everyone, it seems, is desperate to see the first banker throw himself 34-floors to his splatterriffic death.

But is this fair, and is this a progressive position to take?

We live in a capitalist society. There are few mainstream Western politicians who still promote a truly socialist economic model. We are now, is seems, locked into market economics. So surely now our aim as progressives, is to make the system as open and as equal as possible? And this is just what the banks, with their reckless lending, have done. I know, shocking, but please stay with me…

Lenders have empowered people to buy into a growing economy. We have seen astonishing growth over the last decade, and house prices have rocketed. What could be more progressive than enabling every hard-working person to enjoy the good-times? Why should people without ready access to capital be denied the opportunity to invest?

The reality is, as banks tighten their belts, young families and professional singles will be forced to rent their homes. They’ll be paying rent to landlords, rather than investing in a property. Large scale property investors will get richer, while their tenants will be cut out of the housing market for the foreseeable future.

Also, I’m not convinced we’ll see a considerable fall in prices. There are plenty of investors willing to pick up empty properties, especially when they know more and more people are looking to rent. And as the economic outlook grows more precarious, home owners will sit tight to see how the situation plays out, so reducing the number of houses on the market and stabilising prices. There are too many factors, including a national shortage of homes, that suggest a collapse in prices is unlikely. So if the predicted dramatic fall in prices doesn’t materialise, and banks are unwilling to take risks, what chance do wannabe homeowners have?

Easy access to capital is the greatest liberator in a capitalist society, and what our so-called reckless banking system has actually done, is enabled people to get onto the housing market and enjoy the growing equity in their properties. Why should it just be the rich who benefit from an economic boom? As progressives we should celebrate cheap capital, and prey that our banks don’t become so “responsible” that they deny hope to so many aspirational families.