It seems that yet another coalition growth scheme is falling flat on its face: this time, Sir Mervyn King’s ‘Funding for Lending’ brainwave. The theory was that the Bank of England would lend money at below-market rates to the financial institutions: sub-prime loans, in other words. Not without its risks: chiefly, what if the banks just use this cheap cash to lend more to their safest borrowers, rich guys with big deposits? Don’t worry, Sir Mervyn said, the Bank would monitor every month and report back. It just has, and Citi Research has chewed the results (PDF).
Rather than ‘get the banks lending’ the first four weeks of Funding for Lending has seen consumer lending drop by £400 million, and mortgage growth is now the lowest since data began almost 20 years ago. Lending to companies has done no better, falling £2.2
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