Sir, Within the pages and pages of press comment concerning the current turmoil in financial markets no one has answered the question, why?

How can a financial institution be allowed to set the worth of non-liquid assets held on its books, where there is no published value for such an asset and nobody wishing to purchase it? This is the same as a homeowner deciding his house is worth £300,000 when the true market value is only £100,000.

How can the regulatory authorities have allowed increasingly exotic “off-balance sheet instruments” to have grown to a $65 trillion market, when only a few short years ago it was negligible, without taking any steps to regulate this unprecedented growth?

How after the well-documented collapse of the hedge fund Long-Term Capital Management (which nearly brought world financial markets to their knees in 1998, in the main due to “on-balance sheet leverage” and “off-balance sheet leverage”, with an insufficient capital base to support such positions), have so many of our financial institutions been allowed to re-enact the same folly only a decade later?

When will somebody attempt to start telling the truth that this is not a crisis brought about by defaulting homeowners in the US but a problem of accounting standards, off-balance sheet exotica and leverage perpetrated by the majority of the world’s financial institutions so as to benefit their own in-house bonus schemes?

John Betts

Cherhill, Wilts

Sir, Let’s all calm down about the housing market. The national press and broadcasting media have bombarded us with dire warnings of a crash. The facts, however, are as follows.

According to the Land Registry (the only institution with no vested interest), property prices haven’t even started to fall. But it’s only a matter of time before the real issue of demand becomes the dominant factor in the housing market, not the credit crunch.

The press tells us that the banks won’t lend. Of course they will. The vast majority of people who got a mortgage last year will get one this year and, what’s more, at a very affordable rate of interest. Money is still relatively cheap.

The people who are refused a mortgage are those who probably shouldn’t have had one in the first place. Banks have to lend money in order to make a profit.

We are told that first-time buyers are “struggling to get on the housing ladder”. Actually they are choosing not to buy at the moment in the misguided hope that prices will fall off a cliff.

They will probably regret it. To buy now, at a time when vendors’ confidence has been eroded by cavalier journalism, may be the smartest move they could make. A spooked vendor is likely to be more open to offers and there are bargains to be had.

So let’s get things in perspective. A year with no increase does not constitute financial meltdown. Don’t be misled.

Nick Taylor

Norwich

Sir. If we taxpayers are to bail out the imprudent banks by taking on their dodgy mortgage loans, should there not be a quid pro quo? A condition that, during the period of the bailout, no bonuses can be paid to bank directors and dividends must be cut by at least 50 per cent?

Philip Hamilton-Grierson

Inverness

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