Who'd be a banker?

They can't win. Brown and Darling are gunning for them because we are not yet awash with new credit. Even George Osborne is suggesting remedies because they are not doing what the country needs. On Monday in the PBR, expect Darling to make threats. There is a threat of complete Nationalisation, even.

This morning on the Toady programme we heard the other side of the situation from the banking spokeslady. What she had to say was very interesting:

- The Banks have honoured their commitment and have been lending at the same level as in 2007, as requested by the government.

- There is no question of them taking the government's shilling and then not delivering. They have not yet received the promised money.

- They have to restore their balances in order to pay the government back soon at high rates of interest.

- They have to repay international lenders from whom they borrowed previously.

- Their own cost of borrowing from other banks, etc, - LIBOR, is still at a high level, because of uncertainty and suspicion, and lack of confidence, because of possible weaknesses still not declared in balance sheets. This means that the wholesale price for them is still high.

- Some other non-banks in mortgage and other lending have left the market, so there are fewer lenders than before.

- At least one bank, Barclays, elected not to take the government's shilling. How do the government presume to dictate to them?

- In the present difficult times they have to be very careful about the risks they take on. That is, they must scrutinise more carefully than before the situation of potential borrowers in a time of recession. This may delay response to requests.

It seems to me that the impatience of the government, while understandable, is not actually very reasonable if all the above are true.

George Osborne, in an interview with the Financial Times, spoke of the need to get credit flowing to firms and families, and agreed that the flow is disappointing at the moment. He proposed that confidence could be improved if the government made direct loans, as seems about to happen in the US, or by insuring loans and so increasing banker confidence.

This will involve further government spending and also risk. The latter, he pointed out, could be reduced by charging an insurance premium.

Osborne pointed out that fiscal policies to counter the recession are fraught with uncertainty as to outcome, (See my blog yesterday on "who gets the new spending power and what will they do with it?", but monetary policy is powerful in influencing the situations of ALL in debt, families or firms. The Bank of England, concerned about fiscal diarrhea, has left scope for further reductions in interest rates if the fiscal nostrums do not seem to be working. Osborne and the bank are surely right!