Essay Example on Secondary Banking Crisis of 1973-1975

Secondary Banking Crisis of 1973 1975 A financial crisis is any of a broad form of things within which some financial assets suddenly lose an oversized a part of their par value within the nineteenth and early twentieth centuries several money crises were associated with banking panics and many recessions coincided with these panics different things that are typically known as money crises include stock market crashes and the bursting of different financial bubbles currency crisis and sovereign default money crises directly lead to a loss of paper wealth The secondary banking crisis of 1973 75 was a dramatic crash in British property prices that caused dozens of small secondary lending banks to be threatened with bankruptcy The secondary banks just like the larger establishments had been lending heavily supported by previous rising housing costs of the late 1960's and early 1970 s borrowing in excess to carry the loan assets the increase in housing costs was the impact of British post war The secondary banks were competitive against the prestigious and heavily regulated clearing banks that were more and more subject to government imposed ceilings on their lending 

The Conservatives came back to power in June 1970 committed to injecting competition into the economy partially as a prelude to membership of the EEC European Economic Community Three specific measures breathed gas into a property boom that had been current since 1968 First the Heath government abolished the Land Commission set up by the previous Labour government The Conservatives argued that the Commission with its powers of mandatory purchase and levies on development had no place in a very free society Second and in accordance with another declaration pledge Chancellor Anthony Barber created interest payments higher than 35 tax deductible for people Senior Treasury officers warned against this within the strongest terms predicting an outsized increase in bank lending for consumer spending significantly for the best rate taxpayers for whom the value of pairing a loan was instantly reduced by 90 The third and most vital issue was Heath s dash for growth Heath s dash for growth In December 1971 the economy entered a stall and unemployment was about to reach one million mark for the first time since 1930s the Prime Minister called a meeting of ministers civil servants and businessmen At this meeting Heath inclined himself towards the Civil Service s suggestion that we ought to think big and build up our industry on a large scale this could mean a lot of public spending We must ask the corporations what they required in terms of monetary and alternative facilities and provides it to them The result was the dash for growth launched in March 1972 Budget when the Chancellor estimated 2 GDP in the economy with tax cuts and better public spending The aim was to attain gross domestic product growth of 5 each year over following 2 years roughly double Britain's long average Heath hoped that loose monetary and fiscal policy would stimulate industrial investment increase output and generate productivity growth