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Shun ‘smoking gun’ of securitisation

The Social Market Foundation has questioned the recommendations in the Crosby report, saying the securitisation market should not be kept on “life support”.

At the Lansons post-Budget debate, Social Market Foundation director Ian Mulheirn said: “I just cannot see how it is a good idea to keep the securitisation market on life support, given the mess it has got us into.”

LibDem Treasury spokesman Lord Oakeshott said it was “a smoking gun” and called for a return to the old-fashioned way of banks and building societies lending the money that they take in.

Association of Independent Financial Advisers director general Chris Cummings said the Crosby report missed an opportunity to encourage lenders back into the high loan to value market. He called for a reinvention of the mortgage indemnity guarantee scheme.

But Labour Treasury select committee member Andy Love said the market needed securitisation to kickstart the lending market since foreign bank lending and the wholesale market have disappeared completely.

Love said: “I share the caution that has been expressed around the table about securitisation but it seems unlikely that just exhorting existing British banks, especially those that have a significant public sector involvement to lend more will not answer the problem of the dearth of mortgage finance available and therefore, realistically, we have to look to securitisation to help boost that market.”

Lord Oakeshott said: “Northern Rock got into the mess it got in because of securitisation. We have to accept there is a long and painful hangover here.”

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