Scottish Sunday

Scottish Sunday: Mervyn King warns: I’ll quit over No 10’s mortgage scheme Bank of England governor threatens to resign if Brown forces through state-backed mortgages By James Cusick, Westminster Editor In a surprising turn of events, Mervyn King, the governor of the Bank of England, has privately warned Downing Street that he will resign if Gordon Brown directs the bank to become the key agency in a state-backed mortgage guarantee system. The government's plan to transfer the risk of investing in mortgage-backed bonds from investors to the Treasury is seen as a controversial move by many experts. The proposal is believed to be one of the key recommendations from Sir James Crosby, the former head of HBOS, who was commissioned to examine ways to revive the UK's struggling mortgage market. The Prime Minister sees a temporary guarantee system, with the government refinancing bonds every two or three years, as a potential solution to revive the housing market and improve Labour's political fortunes. However, Treasury economists have criticized the proposal as "unworkable" and "liable to prolong" the credit crunch. Chancellor Alistair Darling has also expressed his opposition, telling Number 10 that burdening the government with such mortgages would not be wise. Mervyn King has been vocal about his opposition to the government artificially supporting the mortgage market. He believes that risk and reward are fundamental aspects of the market, and underwriting mortgages should not be the role of the Bank of England. With Darling and leading figures at the Bank of England backing King's stance, Brown's expected Cabinet reshuffle could have serious implications for the government's credibility. The potential resignation of King, should he follow through on his threat, would be an economic catastrophe for Brown and leave the government in an economic predicament. The housing crisis, which has already escalated, will likely worsen with political indecisiveness over the Crosby recommendations. Organizations like the Home Builders' Federation, which are at the forefront of the housing crisis, have warned that urgent action needs to be taken to improve market conditions. However, any delay or compromise in implementing the recommendations will not be welcomed by these agencies. While readers have expressed mixed opinions on the situation, with some supporting Mervyn King and others blaming the government, it is clear that there is a divide in public sentiment. The potential nationalization of the mortgage market has sparked concerns about the role of the government in bailing out the banks and mortgage companies. Some argue that the government should not be using taxpayer money to support the housing market and that the banks should bear the consequences of their risky practices. As the situation unfolds, it remains to be seen how the government will respond to Mervyn King's ultimatum and whether his resignation would lead to a shift in financial policy and a potential impact on the housing market. It is evident that this issue holds significant importance for the country's economic future and the well-being of its citizens.