David Stevenson (MoneyWeek, UK):

It’s not been a great week for British bankers.

There’s the ongoing spat between RBS and HM Government over how much the former’s heavy hitters can pay themselves in bonuses. Then there’s the embarrassing yet somehow inevitable revelation that our banks are the ones most exposed to Dubai – with RBS top of the pile, naturally.

Meanwhile, French President Nicolas Sarkozy has been unable to disguise his glee that Europe’s new finance minister is a Frenchman, who he clearly believes will take the City down a peg or two.

But these are just niggles compared to the real dangers the banking system faces.

The cheap money that the UK’s lenders have been enjoying is about to dry up, for one thing. But worse still, while central banks have been flooding the world with money, a dangerous imbalance has been building up in the banking sector…

Click here for the rest of Mr. Stevenson’s insightful article at MoneyWeek, UK.

The NAR pending home pending home sales index, a leading indicator of existing home sales, dropped 1.9% in February. The index is down 21.4% from the February 2007 level.

There has been plenty of shrill calls for government to intervene in the housing crisis, but what can – or should – government do?

“All through the boom, the bulls were claiming that the super-sized house price growth was based on fundamentals, and had nothing to do with slack lending practices,” says John Stepek in MoneyWeek.

“If they’re right, then prices shouldn’t fall very far before the fundamentals pick them back up again. If they were wrong, then house price gains were a bubble based on rampant speculation. Those bubbles need to be allowed to pop, so that people don’t keep throwing good money after bad.

“Of course, the reality is that many of the bulls knew this was a bubble. They just thought it was too big to blow. More than a few people used to argue that “the government will never let the housing boom end. It’s too important to voters.

“They will soon be reminded that there are few things less worthy of your faith than governments. For all its efforts, the Federal Reserve still hasn’t prevented US house prices from diving by more than 10%. Our leaders can’t hope to do any better.”