Dear Sir or Madam,

The truth about the causes of the financial crisis is leaking out
slowly. There is still some way to go.

The government said initially:

1. The crisis arose because of sub-prime lending in the US

2. Northern Rock's loan book was fine, but its dependence on
wholesale borrowing was at fault

Subsequently, it has emerged Northern Rock's Together mortgage [1]
was by no means the only bad lending occurring, so that the first
part of [2] was simply not correct.

Speaking at this year’s Council of Mortgage Lender’s annual
conference in London on Tuesday 2nd December, Vince Cable said,
“the admission came after a dinner two years ago from the chief
executive of one of the banks which is now part-nationalised.”

He said: “I had dinner with a chief executive of one of the now
recently part-nationalised banks and we argued for an hour about
his lending practices. Finally he accepted his bank’s lending was
foolish and dangerous, but he would have been sacked by his board
if he didn’t lend these mortgages.”

Cable told delegates that mortgage lenders were not the only ones
to blame for the current financial turmoil.

He said: “It is easy to point fingers, but the political class are
just as responsible for the situation. It has pursued irrational
owner-occupier aspirations with ridiculous religious fervour and
now the dream has burst very painfully.”

What we need to know is in what respect was the lending of the
banks 'foolish and dangerous'?

If the CEO of a large bank was aware of it two years ago, who else
knew?

On Wednesday 26th November 2008, in a debate in the House of Lords,
Lord Myners [Parliamentary Secretary, HM Treasury] said,
"foreclosures are higher in Northern Rock than in other mortgage
lenders because its lending was more irresponsible. It is as simple
as that."

Lord Turner, the FSA Chairman, had previously told the Treasury
Committee of the House of Commons on Monday 3rd November 2008 that,
"looking at the average figures at that time, whether it was loan
to value ratios or whether it was the arrears' experience then
being experienced, you would not necessarily have seen Northern
Rock as an outlier in terms of quality of mortgages."

This seems to be the opposite of what Lord Myners is now saying.

Lord Myners is the first member of the government to admit that
there was an inherent weakness in the Northern Rock loan book,
though the description 'irresponsible' does not explain what the
weakness was.

The Council of Mortgage Lenders Housing Finance Issue [November
2005 "Trends in mortgage borrowers' repayment difficulties"]
explains, 'Married households tend to have the lowest incidence of
repayment difficulties, whereas divorce and separation tend to
increase mortgage repayment problems.'

Earlier research has suggested, 'You're more likely to get into
serious debt because your relationship fails than by
overspending........ A survey by Alliance & Leicester [in 2006]
show[ed] that people who are divorced or separated owe twice as
much as married people. A typical couple owes £5,200 on loans and
credit cards between them - an average £2,600 apiece - while
divorcees owe £5,000 each and the separated £6,300......... A [firm
of] insolvency practitioners ..... found that 30 per cent of people
with debt problems blamed divorce or relationship breakdown."

The financial crisis, both here in the UK and in the US, may well
have been triggered by excessive lending to cohabiting couples
whose relationships are significantly less stable than those of
married couples. The easy credit was a contributory factor, but
'irresponsible' lending which was 'foolish and dangerous' to the
increasing number of couples with unstable relationships was
probably the prime cause.

What is becoming clearer is that the crisis is not just a 'sub
prime' problem emanating from the US – as the government claimed at
first - nor is it caused in the UK simply by over dependence by
Northern Rock on the wholesale money market, nor is primarily the
result of the creation of sophisticated but unstable financial
instruments which have increased the availability of credit.

Since the taxpayer owns Northern Rock and the Bradford and Bingley,
and now has a majority holding in RBS, surely it is only reasonable
that these banks should reveal the marital status of those in
arrears with their mortgage payments?

If we are going to understand the real nature of the crisis, the
full facts should be published, not just a misleading subset of
them.

Yours faithfully,

Nick Gulliford

Dear Sir or Madam,

The Bank of England replied to a similar request as follows:

"Enquiries
Bank of England

22 December 2008

Dear Mr Gulliford

Thank you for your email of 18 December. As we understand it, you
have written to the Bank of England asking us to direct the
financial institutions that you name, ie Northern Rock, Bradford
and Bingley and Royal Bank of Scotland to reveal details of the
aggregated data about marital status of those in arrears on their
mortgage payments. You indicate that you are seeking to invoke the
provisions of the Freedom of Information 2000 ('FoI Act') to secure
this information.

May I explain that the Freedom of Information Act provides right of
access (subject to the provisions of the Act) to recorded
information held by public bodies as defined by the Act. The Bank
of England is defined as a public body for the purposes of the Act
and we respond to specific requests for recorded information that
we hold.

We have no powers to direct commercial banks to publish details of
their commercial lending portfolio.

Finally, in case you are not aware the Bank of England is not
responsible for the prudential supervision of banks in the UK. That
is the responsibility of the Financial Services Authority (FSA).

Yours sincerely

Jackie Keating"

Yours sincerely,

Nick Gulliford

Our Ref: PC40096/ISS00905726

In order that we can deal with this matter as quickly as possible please do not delete the Subject line of this email when you reply. You can add further wording to it but please do not Remove "ISS00905726".

Dear Mr Gulliford

Thank you for your email dated 22 December 2008, addressed to the Freedom of Information team. This has been passed to the Customer Contact Centre as the appropriate department to respond to you. Please accept my apologies for the delay in doing so.

Your email has explained that you believe one of the main causes of the banking crisis to be the number of unmarried couples that take out mortgages, as you believe there is not as great a commitment to paying the loan on the part of these borrowers. You have suggested that the Financial Services Authority (FSA) require mortgage lenders to publish arrears statistics broken down by borrower type, so that it can be seen how many borrowers in arrears are indeed unmarried couples.

We have, as in previous correspondence with you, noted your comments. However, the FSA has no power to require firms to publish such information, and to do so would be a commercial decision on the part of the firms we authorise and regulate.

Thank you for taking the time to prepare and send us your thoughts.

Yours sincerely

N Grady (Miss)
Customer Contact Centre
Financial Services Authority
Consumer Helpline: 0845 602 2185 (call rates may vary)
www.moneymadeclear.fsa.gov.uk
Get clear, impartial information from the UK's financial watchdog.
No selling. No jargon. Just the facts.

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Dear Miss Grady

Thank your your response of 14th January.

You say "the FSA has no power to require firms to publish such
information, and to do so would be a commercial decision on the
part of the firms we authorise and regulate."

The banks have shown that they are not capable of taking commercial
decisions and their actions have brought the country to its knees.
You may like to see Lord Smith of Kelvin's recent maiden speech in
the House of Lords. He is a Scottish Chartered Accountant. The
speech included this:

"Some sophistication and complexity is necessary, but the UK
taxpayer is now suffering because of decisions taken at
institutions where risk was not truly understood. Perhaps I may
give noble Lords an example that baffles me as a banker who cut his
teeth in an earlier era - that of collateralised debt obligations,
and in particular CDOs whose underlying asset is a pool of
sub-prime mortgages. To get a feel for the complexity of CDOs, the
prospectus for a typical mortgage-backed security stretches to 300
pages. To create a CDO, you take a tranche of those mortgage-backed
securities and add 50 more tranches from other mortgage-backed
securities. To understand that CDO, you have to read 50 times 300
pages, which amounts to 15,000 pages. This is not prescribed
reading over the holiday period, but if you look at the notes to
the balance sheets of the 2007 accounts of the major banks in this
country, you will read against some large numbers the legend "CDO
squared". I will leave it to the mathematically minded to decide
how many pages you need in order to understand such an instrument,
yet these products are, in part, what have laid low many of the
world's biggest banks."

Clearly this is a nonsense. The banks are culpable. The credit
rating agencies are culpable and the auditors have allowed
themselves to be duped.

Your reaction, "the FSA has no power" in the circumstances is
utterly feeble. How can you possibly continue to pretend you are in
business to "authorise and regulate" if you have no power to
prevent the continuation of 'foolish and dangerous' lending
practices by the banks?

Yours sincerely,

Nick Gulliford

Thank you for your email, which has been received by the FSA Consumer Contact Centre.

The FSA's published service standard for replying to written correspondence is to answer your question within 12 working days, although more complex queries may take longer.
However you may wish to use our fast track service, where we will telephone you with an answer to your query. If you would like to take advantage of this service, please reply to this email giving a daytime contact telephone number.

In the meantime, please look at our consumer website: http://www.moneymadeclear.fsa.gov.uk, which includes a wealth of helpful information for consumers.

For a summary of the service offered by the FSA, to ensure that you understand what we can do for you, please see http://www.moneymadeclear.fsa.gov.uk/pdf...

If your query specifically relates to any of the subjects below please click on the appropriate link, as you may find the answer to your question there:

Bank accounts:
http://www.moneymadeclear.fsa.gov.uk/pro...

General Insurance: http://www.moneymadeclear.fsa.gov.uk/pro...

Mortgages:
http://www.moneymadeclear.fsa.gov.uk/pro...

Endowments:
http://www.moneymadeclear.fsa.gov.uk/new...

Complaints:
If you wish to complain against a regulated firm, please view the following link which provides information on the complaint procedure that you will need to follow: http://www.moneymadeclear.fsa.gov.uk/pdf...

Thank you for contacting the FSA.

Our Ref: PC40096.ISS00918350

In order that we can deal with this matter as quickly as possible please do not delete the Subject line of this email when you reply. You can add further wording to it but please do not Remove "ISS00918350".

Dear Ms Ngan

Thank you for your email dated 16 January 2009.

You have contacted the Financial Services Authority (FSA) in relation to further comments regarding the banking situation, however we have nothing further to add to our previous comments in relation to why the is a commercial decision of the banks.

The Customer Contact Centre - how we can help

If you have any future questions on financial services and products, you may find it easier to call our Consumer Helpline on 0845 606 1234 (call rates may vary). Before doing so, you can learn about the work we carry out as the point of contact for consumers in our information sheet 'The Customer Contact Centre': http://www.moneymadeclear.fsa.gov.uk/pdf....

Yours sincerely

L Turner (Mr)
Customer Contact Centre
Financial Services Authority
Consumer Helpline: 0845 602 2185 (call rates may vary)
www.moneymadeclear.fsa.gov.uk
Get clear, impartial information from the UK's financial watchdog.
No selling. No jargon. Just the facts.

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Dear Mr Turner,

Your ref: PC40096.ISS00918350

I don't understand why you are writing to Ms Ngan?

The response "we have nothing further to add to our previous
comments in relation to why the is a commercial decision of the
banks" doesn't make sense.

Yours sincerely,

Nick Gulliford

Thank you for your email, which has been received by the FSA Consumer Contact Centre.

The FSA's published service standard for replying to written correspondence is to answer your question within 12 working days, although more complex queries may take longer.
However you may wish to use our fast track service, where we will telephone you with an answer to your query. If you would like to take advantage of this service, please reply to this email giving a daytime contact telephone number.

In the meantime, please look at our consumer website: http://www.moneymadeclear.fsa.gov.uk, which includes a wealth of helpful information for consumers.

For a summary of the service offered by the FSA, to ensure that you understand what we can do for you, please see http://www.moneymadeclear.fsa.gov.uk/pdf...

If your query specifically relates to any of the subjects below please click on the appropriate link, as you may find the answer to your question there:

Bank accounts:
http://www.moneymadeclear.fsa.gov.uk/pro...

General Insurance: http://www.moneymadeclear.fsa.gov.uk/pro...

Mortgages:
http://www.moneymadeclear.fsa.gov.uk/pro...

Endowments:
http://www.moneymadeclear.fsa.gov.uk/new...

Complaints:
If you wish to complain against a regulated firm, please view the following link which provides information on the complaint procedure that you will need to follow: http://www.moneymadeclear.fsa.gov.uk/pdf...

Thank you for contacting the FSA.

Our Ref: .ISS00932380/PC27704

Dear Mr Gulliford

Thank you for your email sent on 31 January 2009.

I would firstly like to apologise that our previous response was addressed fort the attention of Ms Ngan. This was an administrative error on our part.

It is clear from your email that you retain a keen interest in the UK's financial services industry, particularly in relation to consumer interests and wider issues surrounding regulations.

Your email has invited the FSA to consider your comments. As the UK's financial regulator, we welcome information and comments which may highlight concerns within our remit and will continue to do so. Therefore, we have placed the details of your email on record.

Whilst it is beyond the scope of our responses to address in detail the individual analysis and comment which we receive, please be assured we do evaluate this information in light of our responsibilities. As I am certain you are aware, the FSA's consultations and discussions surrounding these issues are publicised throughout the industry, and are also available from our website.

www.fsa.gov.uk/Pages/library/index.shtml

Thank you again for the concerns which you have highlighted.

Yours sincerely

P Jones (Mr)
Customer Contact Centre
Financial Services Authority
Consumer Helpline: 0845 602 2185 (call rates may vary)
www.moneymadeclear.fsa.gov.uk
Get clear, impartial information from the UK's financial watchdog.
No selling. No jargon. Just the facts.

We are interested in finding out about people's views and experiences of the services offered by the Customer Contact Centre. As a result, we employ a research agency to help us, and they may contact you, via the telephone, to see if you would be prepared to take part in a short telephone interview. If you do receive a phone call you are under no obligation to complete the survey. Please rest assured that your details will remain confidential and will not be used for any other purposes; we are not trying to sell you any financial products or service, and no sales call will result from this.

If you do not wish to take part in any of our surveys, please call the Customer Contact Centre on 0845 602 2185 (call rates may vary), or complete the contact us form using the following link http://www.moneymadeclear.fsa.gov.uk/con..., and we will ensure that your details are not passed on to the research agency.

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