We must be careful in discussing events that look odd but have not, as yet, been shown to be anything illegal.
So, as this newspaper points out, it is merely interesting that there is a link between the overseas property empire of Saifuzzaman Chowdhury, the former land minister, and the now in administration mortgage lender, Market Financial Institutions.
What actually happened to MFI was not a regulatory problem, it was one of those “interesting” problems.
MFI was not a bank, it was an intermediary. People looking for non-standard mortgages -- and there's no problem with that, at all -- would not go directly to a major bank. Because they were looking for something non-standard.
In every industry, everywhere, there are specialists who deal with the non-standard. They have the industry knowledge to be able to grasp who is good for the money, who is not.
These specialists then do the deal and take the risks. But in order to fund the deals, they then pair up with one of the standard major banks. The bank provides the finance itself, taking control of the assets pledged against the loan.
To repeat, this is entirely normal and this happens a lot.
What doesn't happen -- or at least everyone hopes it doesn't happen a lot -- is that the specialist is less than clear with the major banks about how much has been lent to whom. Or even, starts to allow more than one bank to take control of the assets pledged against a loan.
This is when these arrangements start to go wrong.
Or, perhaps, when people do this, it will go wrong, eventually.
The specialist, the broker, signs the one deal with a borrower for a property. But then uses that security, that property, to borrow twice from the financing banks.
This we could describe as interesting -- even the allegation would be that.
Proof that it was happening would be criminal, of course. Evidence that it has been happening would mean two or more banks trying to get their money back from the same one loan and asset and that is not a regulatory problem -- that is the specialist being bankrupt.
This is also something that happens. It's almost part of the business, or credit, cycle. Every number of years, perhaps decades, we get another series of such stories.
People who started out being specialists and then ended up double pledging that security and, well, it's been going on for centuries actually.
At some point, a couple will go bust, everyone who has been lending into the sector stops, and many go bust.
Then the cycle starts again.
It's the sort of thing that led to Warren Buffett's comment that it's only in a recession that you find out who has been swimming without bathing trunks on.
The property empire of the former land minister is interesting in that simple “oh, this is interesting” sense. Rising from some 50 properties in the UK before 2019 to some 300 and change in 2024 is definitely an interesting investment strategy.
There is no connection, at all, to whatever was being done wrong at MFI about this. Someone following an “unconventional investment strategy” is going to end up with a financier of unconventional investment strategies. Obviously, that's the whole point of having these specialists.
What interests me far more is this. Now, obviously, if you don't have to pay for the money you're using to invest, then most investments are profitable.
But if you do have to pay -- and if you're borrowing from a mortgage specialist, you do -- then it's necessary to be making good investments in order to make a profit. And there's the thing.
Because between 2019 and 2024, British property has not been a good investment.
Commercial property -- other than the very finest, prime, sites -- has been declining in value as the internet eats both retail and the requirement for office space.
Domestic properties - houses, flats -- have been declining in price in real terms (after inflation) over this period. Rising interest rates after the Covid lockdowns will do this to a property market.
Which I think is much more interesting -- in, again, that “oh, isn't that interesting” sense.
Because, assuming that Mr Chowdhury has in fact been paying the usual mortgage rates, there's no evidence at all that he's been making a profit out of this.
In fact, I'd suggest that it's likely he'd made a loss. Buying in 2019, selling in 2024/5? In UK property? I think a profit on the portfolio is unlikely.
Perhaps that's just me but that's something I really do find interesting. A land minister goes on a property investment splurge and loses money? That's so interesting, I might even laugh.
Tim Worstall is a senior fellow at the Adam Smith Institute in London.
