James Saft

Britain eats (leverages) its young

Nov 22, 2011 21:31 UTC

James Saft is a Reuters columnist. The opinions expressed are his own.

Four years, several failed banks and at least one global recession later, Britain has finally discovered what its young people need: 19-1 leverage.

Britain has announced a new housing initiative, the centerpiece of which is a plan to entice first-time buyers into buying newly-built properties with as little as 5 percent down.

Under the plan both builders and the government would contribute funds to partially indemnify lenders against what I am betting are the inevitable losses. Borrowers, who are almost by definition younger and less well off, will still bear all losses, but will be rewarded with the chance to take out the kind of loan which has proven time and again to be a bad idea.

This is utterly wrongheaded — the best possible thing that can happen for first-time buyers, and arguably for most Britons, is for housing prices to fall to a level commensurate with earnings.

Why are houses in Britain so difficult to afford? Partly because of problems with supply, issues that the housing plan takes some steps, almost certainly insufficient ones, to address. And also because Britons, first out of necessity and then in the fever of greed, borrowed so much money in order to wedge themselves into what little housing was available that they drove prices up to unaffordable levels.

No jam today or tomorrow for Britain

Feb 17, 2011 12:46 UTC

Poor Mervyn King — damned if he doesn’t raise interest rates, futile if he does.

The Bank of England governor is in the unenviable position of having to steer interest rate policy during a period when living standards are being battered, his inflation target is being mocked by even small boys in the street and there is no obvious course of policy which can reconcile the two problems.

The BOE on Wednesday released its quarterly inflation report which judged the chances to be about equal of inflation being above or below its 2 percent target in two years’ time, this despite predicting that it will spike above its current 4 percent rate in the near term.

UK banks and the curse of interesting times

Dec 21, 2010 17:50 UTC

James Saft is a Reuters columnist. The opinions expressed are his own.

HUNTSVILLE, Ala — It is going to be an interesting 2011 for British banks, which face funding hurdles and exposure to troubled sovereign debt and property markets.

After the carnage of 2008, the de-facto nationalizations, and the euro zone exposure scares this year, Britain’s large international banks could be forgiven for hoping at year’s end for a bit of peace.

That may not be the result, at least according to a reading of the Bank of England’s Financial Stability Report released this week.