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firehawk

Govt to boost RMBS by $4bn

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Govt to boost RMBS by $4bn

The federal government will spend another $4 billion on residential mortgaged-back securities to help smaller lenders, taking to $20 billion its investment in non-bank players since the onset of the global financial crisis.

As part of a long-awaited package of banking reforms, the government also said credit unons and building societies will for the first time be allowed to issue covered bonds, in a bid to boost competition in the lending market.

Oh well, delay the housing crash another few weeks...

edit:formatting

Edited by firehawk

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on abc news this morning they had some lib talking head , they where talking about the deal with banks and he had to put in that if the gov handnt squandered $13B on spending we wouldnt have such high interest rates.

hehehe i spose they could have not spent $20B on mortgage backing, and he woulda been complaining about the crashed housing market.

r is this backing not actually spent, and just promised incase of things going pear shaped?

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"The importance of covered bonds is it will secure investment from Australian superannuation funds directly in to our banking system in a way which has not really occurred before," Mr Swan said.

"It will enable us to enhance investment by Australian savers back into our country for the development of our nation."

What a crock of sh*t.

Development of our nation; buying and selling homes and allowing yet more funds for this purpose...

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I have to admire the quality of the spin, adopting one of the major culprits of the economic eff-ups overseas and then wrapping the steaming turd in a "banking competition" bow is special.

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I don't reckon consumers have an appetite for even more mortgage debt. It will be interesting to see if this 4bn makes any difference this time round. The media's general view towards housing has almost done a u turn in the last 12 months and the interest rate cycle is on the up, consumers know this.

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Reading between the lines ol' Glenny is not a fan of the Goose's proposals:

http://www.abc.net.au/news/stories/2010/12/13/3091658.htm

He knows as does anyone with any kind of perspective of history what government guarantees brings and what the future will look like.

This will not likely be a problem for the next few years, but in 5 or so years this will be reflected on as a shocking government policy. The likes of Glen should be doing more than just distancing himself a bit he and more importantly those in treasury should be speaking out if they have this countries best interests at heart. As a minimum I would expect them to be doing there jobs (not Glen - treasury) and at least giving the government the what for in line with their responsibilities as public servants in this domain. If they are than are government are bloody clowns for pursuing this. If they are not then what the hell are they thinking this will lead us except to more debt and more debt backed by the government on an asset class which is clearly at unsustainable levels.

Hopefully one or two within treasury blow the whistle on this or perhaps freedom of information sees some of the counter arguments come to light in the next few months.

Of course by then it is all too late.

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I don't reckon consumers have an appetite for even more mortgage debt. It will be interesting to see if this 4bn makes any difference this time round. The media's general view towards housing has almost done a u turn in the last 12 months and the interest rate cycle is on the up, consumers know this.

The 4bn will have some effect. Again it is brand new funds which will then see deposits increase or at least see deposits sustained at levels they otherwise would not be. It is likely to have a bigger effect than just 4bn of new lending for houses.

Even if most people don't want it we can see from the last 10 years if credit is made available some mug in Australia will get hold of it and buy houses whether they be investment homes or paying over the odds for PPOR's.

I dont think in isolation it is enough though to stop the rot in Australia and neither does the government.

so;

They have also introduced covered bonds. This gives people access in effect to the government guarantee on deposits efectively of any size. i.e. we are in effect moving back to a time when the government guaranteed all deposits because by allowing covered bonds the bonds are covered by the gov guaranteed deposits which even in armegedon scenario will not be worthless, i.e. the bond holders will be safe in front of these deposits.

This will give the credit unions access to funds at the kind of rates only the government with its rating (which it is doing everything to piss up against the wall!) should be able to get.

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I don't reckon consumers have an appetite for even more mortgage debt.

+1 :thumbsup:

The last bull, IP collector at my work has turned. He admits its just dumb to throw good money at a falling market.

The OCR may come down as Swan says. As a desperation measure as the slide gathers pace.

Whats really dumb is that all this sh*t was tried in the USA and Ireland all it did was put the tax payer on the hook. It saved SFA.

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+1 :thumbsup:

The last bull, IP collector at my work has turned. He admits its just dumb to throw good money at a falling market.

The OCR may come down as Swan says. As a desperation measure as the slide gathers pace.

Whats really dumb is that all this sh*t was tried in the USA and Ireland all it did was put the tax payer on the hook. It saved SFA.

I recently read somewhere on one of the forums/blogs that the increased mortgage debt we've seen recently is in fact down to people remortgaging and not necessarily buying or improving housing stock. The view was that people are borrowing against their house to keep up mortgage repayments or perhaps paying off exisitng credit cards.

As Steve Keen and others say, the world is on a deleveraging path and we're seeing many signs of this now and a poxy $4bn in tthe great scheme of things is peanuts.

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+1 :thumbsup:

The last bull, IP collector at my work has turned. He admits its just dumb to throw good money at a falling market.

The OCR may come down as Swan says. As a desperation measure as the slide gathers pace.

Whats really dumb is that all this sh*t was tried in the USA and Ireland all it did was put the tax payer on the hook. It saved SFA.

Except we are moving before sentiment has changed. Sentiment has started to change but that feeling of desperation among sellers is not really here yet as evidenced by the philosophy of taking things off the market to wait for better times.

Bubbles burst when sentiment changes. After this happens their will be nothing the government can do. If they continue to stay ahead of the curve than the eventual carnage will be far far worse when sentiment does change and we lose that part of our total demand there but for a change in sentiment. I do fear this change will occur later by pumping supply of funds and any yet to be seen demand side measures....

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Whats really dumb is that all this sh*t was tried in the USA and Ireland all it did was put the tax payer on the hook. It saved SFA.

And it seems that Iceland is a precedent for what happens when insolvent banks are tossed to the wolves and so far it seems to have worked.

Good to learn from others' mistakes, bloody stupid to repeat them.

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The OCR may come down as Swan says. As a desperation measure as the slide gathers pace.

Do you mean that the bank's mortgage rates will come down due to the increased competiton? Not the OCR?

I don't think so, the that banks have costs when entering and exiting mortgages and will look for ways to recoup that lost revenue.

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I recently read somewhere on one of the forums/blogs that the increased mortgage debt we've seen recently is in fact down to people remortgaging and not necessarily buying or improving housing stock. The view was that people are borrowing against their house to keep up mortgage repayments or perhaps paying off exisitng credit cards.

As Steve Keen and others say, the world is on a deleveraging path and we're seeing many signs of this now and a poxy $4bn in tthe great scheme of things is peanuts.

or just buying 3D tvs and new cars as most of my indebted friends have recently done with their 'equity'. They should really be spending it on their half-finished renos or leaving it the hell alone.

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Do you mean that the bank's mortgage rates will come down due to the increased competiton? Not the OCR?

I don't think so, the that banks have costs when entering and exiting mortgages and will look for ways to recoup that lost revenue.

I think he meant that the (OCR) RBAs IR may decrease, not bank mortgage rates.

I still think that the OCR lowering is a likely measure to try and avoid too steep a downturn but agree that bank mortgage rates are on the way up regardless now. The banks have to cover their asses, the RBA has to try and cover the countries ass. Either way, its gonna get shafted:)

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Except we are moving before sentiment has changed. Sentiment has started to change but that feeling of desperation among sellers is not really here yet as evidenced by the philosophy of taking things off the market to wait for better times.

i think you're spot on there Tom. sentiment has changed to it's tough times, but things will get better. when the current round of people who've taken their properties off the market re list them in say 6 months at a reduced price and still can't sell them, then the sentiment will really start to change imo.

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I think he meant that the (OCR) RBAs IR may decrease, not bank mortgage rates.

I still think that the OCR lowering is a likely measure to try and avoid too steep a downturn but agree that bank mortgage rates are on the way up regardless now. The banks have to cover their asses, the RBA has to try and cover the countries ass. Either way, its gonna get shafted:)

Nailed it in 1. :thumbsup:

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Question is, will bank savings be guaranteed...?

I do have concerns, although have been reluctant to pile it all into precious metals...

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Banks are / were up, I think. All in all, the big 4 don't lose from the reforms.

Saul Eslake was on ABC Radio this morning, pretty much saying the reforms would do nothing. He doubted that credit unions, etc even really wanted to take on the banks / be considered like the banks, and that Westpac buying St George was a major f*ckup on behalf of the ACCC and government. He also said that if IRs move, the RBA would simply adjust them to compensate.

Not much mentioned on NAB claims that banks should be removed from the RBA interest rate - he side stepped that one beautifully. That one's dangerous, as if the RBA loses their main level, what happens?

BTW, I saw the $4bn and chuckled, as $4bn is a drop in the funding ocean for mortgages. It will make little impact. But the door is always open for the government to buy more and more and more.

The impact of covered bonds will be much greater, if they can allow the smaller players to tap the institutional investor market.

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Big Bear; the deposit guarantees will be extended, and supposedly exactly which deposit accounts will have the government guarantee will be clearly marked. Details are light, though. Some reports implied that not all deposits will carry the guarantee, and it's not clear what instituions will get the guarantee, and if all types of deposit taking accounts can get it as well. If high interest accounts at places like Ubank lose the guarantee, yet credit unions get the guarantee and covered bonds, I will be mightily pissed.

What I want to know is what happened to the tax break for interest earnings on deposits? The bloody government has skipped that bit of reform yet again, by the looks.

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There are a lot of better ways to spend money than the pink bat fiasco but the government lending it out for people to buy existing houses does not in my view constitute one of them!

When it came to politics, Mr Symond was happier to hint at how he voted and why government spending on residential mortgage-backed securities was a good idea.

‘‘It’s a very good investment. It isn’t something where they are spending it on pink batts or whatever,’’ he said.

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There are a lot of better ways to spend money than the pink bat fiasco but the government lending it out for people to buy existing houses does not in my view constitute one of them!

Oh, agree completely. How about $4bn worth of infrastructure, like mass transit systems? Incentives for growing satellite cities or developing regional centres? Future productivity enablers? Grants to Australians citizens to encourage them to take on ever increasing debt loads that places each passing generation in a more precarious position? Oh, wait, I think they already did the last one...

Regarding John Symond, ABC news radio was reporting that the Goose has directly intervened and blocked the AOFM from buying any Aussie Home Loans RMBS issues. Classy.

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