Why won’t the banks pass on the rate cut? Because there isn’t anything to pass on. And for the life of me, I can’t work out why they don’t point this out. The Bank of England base rate simply doesn’t mean the Bank of England is lending to banks at 2 percent. The plumping doesn’t work that way, not no more. British banks aren’t hoarding anything. They have no net assets. They have to borrow every penny they lend. Once they borrowed from the wholesale market, which has seized up. What cash is available comes at a hefty price. By means of illustration, the banks had to pay 12 percent to for the latest injection of government cash. Barclays went to the Arabs instead and paid 14 percent. Until banks can borrow cheaply, they can’t lend cheaply. Is this really such a difficult message for our banks to explain?
One has to admire Brown’s spinning abilities, though.
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