Monday 14 February 2011

The Economics Of Extraction

Outside the supermarket have you sometimes helped that nice old lady from the retirement flats along the road with her shopping? She now could be in the hole for debts of into six figures through absolutely no fault of her own or her family.

It is an astonishing situation that typifies the sheer scale of the mess in both our economy and the financial sector, allegedly its motor.

Essentially, a major part of our housing stock; that of the leasehold sector is embroiled in the financial turmoil concerning a family of financial speculators.

See the following links for the story, the first about some problems the second about the outcome of the calling in of debts by the banks:

The banks have now steeled themselves to call in the debts and take over the assets pledged as security. It seems that these are not enough to cover the debts and that the banks are likely to attempt recovery from the clients of the companies. The sums involved are huge. The OFT has identified paper of £442 million in one small part of the conglomerate alone dealing with freeholds.

What was once basic work of managing and dealing with the routine of taking care and maintaining flats and similar housing has become an arena of almost gladiatorial contest. The incomes derived from it have been used for major leverage, debt creation and speculation.

It has sparked the creation of The Campaign Against Residential Leasehold Exploitation, a voluntary unsubsidized organization attempting to defend the elderly and vulnerable, which found an astonishing amount of work to be done, see:

Carlex claims over two million searches on Google and a growing rate of hits a day on its site, now said to be 5000 a week and rising rapidly. What some of the cases are uncovering go beyond error or poor management. There are real questions about the stance and attitude some of these companies take to their clients.

Whilst politicians go on about competition and choice there are large numbers of people being denied this and are being subject to charging on a basis where all the tricks of the trade are imposed along with aggressive legal tactics.

This has come about within the last five to ten years notably in the retirement sector. It is the direct product of Government “light touch” regulation and easy going relations with some of the major financiers involved. Which politicians have been entertained on whose yachts? Which parties are being funded by the people in question?

So when taxpayer’s money and that of the Bank of England goes to the banks it has been propping up a small group of oligarchs who have been continuing to extract money without regard for the consequences. This money is not retained in the UK nor does it result in much revenue to the Exchequer.

In the case of the retirement sector this is now a critical part of the care provision for the old. If this collapses as a result of all the mayhem the government’s ideas for care in the community could face catastrophe.

While the leasehold sector descends into turmoil and the scale of the problems begin to escalate with incalculable implications for the housing economy, for the oligarchs the party goes on.

And you are paying for it and are going to pay a lot more.

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