Should the northern rock been allowed to go bust?
Discussion
I am beginning to wonder if this would not have been the best idea? Yes i know it would have damaged the banking industries reputation but the whole credit crisis is giving that a good kicking anyway.
Savers money was in most cases protected, the mortage debt would have just been sold off.
Now the government/bank of england have a massive problem on its hands, its basically done another Rover. Its bailed out a business that is basically all but bust. It can't keep the loans as that would be illegal under EU law (state aid)
There is also the whole arguement that bailing out a bank this way just encourages other banks to take more risk as its ok, the british tax payer will be along side saddle to bail em out!
Just an idea....discuss....
Savers money was in most cases protected, the mortage debt would have just been sold off.
Now the government/bank of england have a massive problem on its hands, its basically done another Rover. Its bailed out a business that is basically all but bust. It can't keep the loans as that would be illegal under EU law (state aid)
There is also the whole arguement that bailing out a bank this way just encourages other banks to take more risk as its ok, the british tax payer will be along side saddle to bail em out!
Just an idea....discuss....
So far it has cost the government >£20bn of their (our) money and there is no signs of NR's demand for funding ending. That's several hundred pounds for every household in the country.
Meanwhile the defence budget (~£30B p.a.) is in complete mely down because the beancounters didn't factor in fighting two hot wars in their calcs and the Govt won't allocate any more of their (our) money.
You couldn't make this stuff up.
SS7
Meanwhile the defence budget (~£30B p.a.) is in complete mely down because the beancounters didn't factor in fighting two hot wars in their calcs and the Govt won't allocate any more of their (our) money.
You couldn't make this stuff up.
SS7
Agree with the comments here, they sould be made an example of, yet the peopl who invested in the company need to have their monies protected. This will mean the government dipping its hands into their deep, deep pockets and compensating thse who have lost funds, but NOT the share holders.
Everyone knows the stock market is fickle, they took th risk, lost, so deal with it.
It's the "ordinary people" who need protection.
Everyone knows the stock market is fickle, they took th risk, lost, so deal with it.
It's the "ordinary people" who need protection.
crazypav said:
Agree with the comments here, they sould be made an example of, yet the peopl who invested in the company need to have their monies protected. This will mean the government dipping its hands into OUR deep, deep pockets and compensating thse who have lost funds, but NOT the share holders.
Everyone knows the stock market is fickle, they took th risk, lost, so deal with it.
It's the "ordinary people" who need protection.
EFAEveryone knows the stock market is fickle, they took th risk, lost, so deal with it.
It's the "ordinary people" who need protection.
One wonders whether the fact that most of NR depositors are in the North East...i.e. Labour heartland, has anything to do with the Governments blank cheque for NR?
Well that and the fact that two of Gordon Browns closest advisors are NR board members.
If only the doom and gloom press hadnt got hold of it in the 1st place then there would not have been a run on the BoE and we the taxpayers wouldnt be supporting NR ... And NR would still have a business even if they had still sold out, which would have been at a higher price, therefore also protecting the shareholders
TV News and Newspapers should be given the bill
TV News and Newspapers should be given the bill
arfur said:
TV News and Newspapers should be given the bill
It's an interesting point. Changes made when Gordo gave the BOE independance, and the FSA alot of the BOE's former powers, require the disclosure that made the public aware of the problems at NR. Under the old regieme the BOE would have quietly arranged for a takeover of NR ( if that had been required at all ) and the public would have been none the wiser.
The bill however should be sent to Gordon Brown IMO. You can't blame the media for reporting what was made public.
meanwhile the old lady is bailing out the sinking ship 
You also forget that the former NR chairman was a massive contributor to the IPPR think tank which Brown takes most of his advice from.
Effectively Labour have done what they said they wouldn't - nationalise industry.
NR's whole business model way beyond the usual bank/building society. That's the real scandal for me, what the hell were the FSA doing when NR were at full tilt borrowing and lending money all over the place effectively buying market share?
As for the current situation, NR owe the BoE £23bn, that's taxpayers money, it's DOUBLE the primary school budget and over the annual defence budget. Ok, over the lending period of the loan book, we will get our money back but as a short-term financial proposition, there's no profit to be had UNLESS the bank is undervalued.
Which is exactly what the prospective buyers are doing.
In terms of letting MR go bust. Not a great idea, the sentiment to the wider savings/mortgage community would only engender more panic on other lenders. Not a perfect circumstance to be in with an economy already slowing down.
Effectively Labour have done what they said they wouldn't - nationalise industry.
NR's whole business model way beyond the usual bank/building society. That's the real scandal for me, what the hell were the FSA doing when NR were at full tilt borrowing and lending money all over the place effectively buying market share?
As for the current situation, NR owe the BoE £23bn, that's taxpayers money, it's DOUBLE the primary school budget and over the annual defence budget. Ok, over the lending period of the loan book, we will get our money back but as a short-term financial proposition, there's no profit to be had UNLESS the bank is undervalued.
Which is exactly what the prospective buyers are doing.
In terms of letting MR go bust. Not a great idea, the sentiment to the wider savings/mortgage community would only engender more panic on other lenders. Not a perfect circumstance to be in with an economy already slowing down.
shoestring7 said:
So far it has cost the government >£20bn of their (our) money and there is no signs of NR's demand for funding ending. That's several hundred pounds for every household in the country.
Meanwhile the defence budget (~£30B p.a.) is in complete mely down because the beancounters didn't factor in fighting two hot wars in their calcs and the Govt won't allocate any more of their (our) money.
Hasn't cost the British taxpayer a penny yet.Meanwhile the defence budget (~£30B p.a.) is in complete mely down because the beancounters didn't factor in fighting two hot wars in their calcs and the Govt won't allocate any more of their (our) money.
Northern Rock's problem is that it was unable to find the money to refinance its mortgage business. It was lending money over a long term, but borrowing over a short term. Once the short term lenders reigned in their lending, it left NR with a problem. The Bank of England has merely stepped into that position.
The Bank of England is also taking large securities against NR defaulting. So all of NR best securities (eg prime mortgages) are being held by the BoE.
So quite simply, it hasn't cost the British taxpayer a penny yet. The real question is whether the BoE will get paid back at 6.75% which is their emergency lending rate, or at a lower rate.
Thats my reading of the situation.
The big question is whether the BoE will get its money back anytime soon.
tinman0 said:
shoestring7 said:
So far it has cost the government >£20bn of their (our) money and there is no signs of NR's demand for funding ending. That's several hundred pounds for every household in the country.
Meanwhile the defence budget (~£30B p.a.) is in complete mely down because the beancounters didn't factor in fighting two hot wars in their calcs and the Govt won't allocate any more of their (our) money.
Hasn't cost the British taxpayer a penny yet.Meanwhile the defence budget (~£30B p.a.) is in complete mely down because the beancounters didn't factor in fighting two hot wars in their calcs and the Govt won't allocate any more of their (our) money.
Northern Rock's problem is that it was unable to find the money to refinance its mortgage business. It was lending money over a long term, but borrowing over a short term. Once the short term lenders reigned in their lending, it left NR with a problem. The Bank of England has merely stepped into that position.
The Bank of England is also taking large securities against NR defaulting. So all of NR best securities (eg prime mortgages) are being held by the BoE.
So quite simply, it hasn't cost the British taxpayer a penny yet. The real question is whether the BoE will get paid back at 6.75% which is their emergency lending rate, or at a lower rate.
Thats my reading of the situation.
The big question is whether the BoE will get its money back anytime soon.
No bank will give the full value of the business for NR. The tax-payer is bent over, lubed up and waiting for the shafting. 'Poor Government Decision Costs Tax Payer Billions" doesn't get the same coveraage as "First Run on British Bank for 100 years, millions of Old dears about to lose their shirts" and that is the only thing that is driving Brown's decisions here.
SS7
crazypav said:
Agree with the comments here, they sould be made an example of, yet the peopl who invested in the company need to have their monies protected. This will mean the government dipping its hands into their deep, deep pockets and compensating thse who have lost funds, but NOT the share holders.
Everyone knows the stock market is fickle, they took th risk, lost, so deal with it.
It's the "ordinary people" who need protection.
noEveryone knows the stock market is fickle, they took th risk, lost, so deal with it.
It's the "ordinary people" who need protection.
the depositors money protected.
NOT shareholders...
they were not complaining of risky strategy, when shares at an all time high.
when strategy fails, don't go whining for the boe to bail them out...
that is the risk of buying shares.
B
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