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The Bank of England Says "No Thanks" To MBS Shopping

Written by A Forex View From Afar on Monday, March 24, 2008

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Mervyn King, Bank Of England’s Governor, announced that BoE will not buy mortgage backed securities (MBS) to release the inter-banking pressures. This statement comes after a private meeting between BoE officials and banking system representatives.

Why would someone want to buy such an asset, now? After banks had made bad bets, now they want to shovel it on tax-payers shoulders, and it would seems rightly so that the BoE says; "thanks, but no thanks". Already, the population is effected by falling home values, increasing payment rates and higher gas prices. To make consumers pay for someone else’s bad investments is by far a wrong idea. I can understand (somehow) accepting the top MBS as collateral, but to outright purchase them is another story. If banks want to rebuild public and investors confidence, then write down your bad debt and disclose all the hidden debt files, and possibly do it before regulators force your hand.

The good news is we found out that a Central Bank can withstand the pressures and lobby from private firms, and we would hope that is the way it stays for the long term…

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