Rock: a reverse run?
What is the future of Northern Rock as a state-owned bank?
Well its new chairman, Ron Sandler, has told the existing management of the troubled bank that he likes their rescue plan and intends to nick many of their ideas.
So he's expected to rapidly shrink the Rock's mortgage operation.
That would be achieved by putting up the cost of mortgages - which would encourage borrowers to repay by taking out loans with other banks.
The good news is that the proceeds of these redemptions would reduce the loans to the Rock from taxpayers.
And, on the forecasts of the Rock's existing management, the value of mortgages on the Rock's books could be reduced by up to Β£50bn over four years.
The Rock would become a much smaller business and would need to employ many fewer than the existing 6000 staff - perhaps half that number.
But if the bank is to have a profitable long term future, so that it can be privatised in a few years time, it needs to attract billions more in retail deposits.
The Rock's managers were aiming to almost double these deposits by 2012.
What does it all add up to?
First that banking rivals may cry foul about what they may claim is unfair Government-subsidised competition for savings.
Just think of it: there could be a reverse run, with savers stampeding to put their money into the new gilt-edged Rock, perhaps the safest bank in the world.
However banking competitors will be delighted that one of the most aggressive discounters of mortgages in recent years could be almost out of the market - which would allow them to put up their mortgage rates.
So increases in the Rock's mortgage rates could be painful for millions of homeowners, not just the Rock's customers.
And it would also be a nightmarish prospect for the Government.
Gordon Brown would not like the notion that his decision to nationalise Northern Rock could lead millions of us to pay more for our homeloans.
I'm 
°δ΄Η³Ύ³Ύ±π²Τ³Ω²υΜύΜύ Post your comment
Why is it assumed that a Nationalised Rock will behave in the same way as a privately owned Rock? Without a privately held equity stake in the bank I just don't see how the incentives are there to encourage management to make the hard decisions and to allow them to be made when there are serious political consequences.
There was a reason nationalised companies were privatised.
Doubling the retail deposits puts NR back to where it was before all the screaming headlines and exclusive stories.
The real losers are the British public, not because NR is subsidised (the latest figure you were quoting of Β£3500 assumes NR has no assets which you conveniently ignore all the time). The reason the public are the losers is what you intimate in the end of your article. NR backing down in lending does indeed mean less competition.
Mmm lets all wonder who in the city has benefited from all this?
1. The established cosy lenders who were struggling against NR (despite having similar business models albeit not quite as extreme but extreme non the less)
2. City shorters who have never made anything in their life (other than money off others misery) and have certainly never given 5% of their profits to charity
3. A one story hack who failed to question why someone in the treasury is so prepared to leak the most market sensitive information at every point. Each time this was done to undermine those attempting to manage the crisis in a fair and reasonable way
I think it would be fantastic if the Rock god rid of its lunatic mortgage legacy. This could help not only the troubled bank but the whole country to heal from the debt-junkie status. I think the government should only set the one goal: Return of state money as soon as possible and leave the rest of the job to the bank's management.
Will driving up mortgage costs not lead to all the Rocks best customers leaving?
Leaving it with all the 125%, buy to let and all the mortgages currently in arrears?
Or is that the plan?
I am a bit surprised that this affair is being portrayed as being as "unprecedented" as it has been.
Between 1990 and 1996, Nuclear Electric operated as a state-owned company in the privatised electricity market. There were arrangements in place (a "self-denying ordinance") to prevent that company from abusing its state-owned status. Perhaps something similar could be put in place for NR?
(Of course Nuclear Electric was privatised in 1996 as British Energy, which subsequently ran into trouble and needed government support in 2002-3, and that restructuring was very close to nationalisation in all but name - yet another precedent!)
The other case which comes to mind is the old Trustee Savings Bank (TSB) before its privatisation in 1986. As I understand it this was owned by its depositors, but effectively controlled by the government - certainly the government took the proceeds when it was floated! Might there be any useful precedents from the way TSB was regulated?
Everyone accepts that the quickest and simplest way to improve Northern Rock's finances (as with any other business) is to raise lending rates in order to improve margins and overall profits.
Such a move might encourage other banking competitors to put up their rates but that should not be a nightmarish prospect for the government. That is what the banks were intending to do anyway only then they will have the necessary excuse for doing so.
Whilst such a move might drive away a small proportion of the existing borrowers away from NR it is doubtful if they will depart in sufficient numbers to reduce the Rock's mortgage book down to Β£50 billion fromm Β£110 billion over a four year period, as suggested by Robert Preston. With a corresponding reduction in the number of people employed there.
In that case it is to be hoped that we will see investors stampeding to put their money into what is perhaps the safest bank in the world.
If that were to happen then it would be nice, just to see the smiles wiped off the city smart arses who believe they alone can resolve such matters.
If the rest of the banking industry does cry foul then one of them can always buy NR as a going concern, at the appropriate rate and not at a cut price rate.
Unfortunately there is a cloud on the horizon and that is if we do go into a deep recession and large numbers of people start to default on their loans. That problem of course will present us with a different scenario and this will affect all the banks.
What I would like to know ; why is the new boss of NR being paid Β£90,000 a week , and his deputy Β£70,000 a week ?
I would have thought that there is sufficient competition in the mortgage market for the "nationalisation" of Northern Rock not to give rise to increased mortgage rates. Those borrowers who may be considered to be relatively high risk will have problems in obtaining or re-newing a mortgage but this would have been the situation irrespective of the nationalisation of Northern Rock. It is a given that mortgage providers make a profit through providing mortgages; they will be keen to provide or continue to provide mortgages to those individuals with a good credit history and will be keen to offer competitive rates to attract or retain such business.
This will put the savings side of NR into effectively the same position as National Savings, which for many years has kept its rates relatively uncompetitive to avoid complaints from the banks and b/socs about unfair competition. If NR starts offering high rates for savings it may annoy NSandI as well as the commercial lenders!
Another aspect is that the standard practice for savings accounts is to offer high "teaser" rates to new customers while dropping the rates for old accounts. Similar things happen on the mortgage side. Is NR going to follow that practice and risk complaints that the government is ripping people off?
What's all this safest bank in the world stuff? Last I read it is only gilt edged for depositors of record BEFORE September last year.
Ahh... I get it now. No wonder bank shares went up today.
If NR raises its mortgage interest rates it will drive its customers into the hands of the other banks who of course will make more money.
NR nationalisation is therefore a form of Nu Labour redistribution!
Robert,
I just would like to express my real dislike for your method of reaching your objectives - to see your face on TV surprises me as it is not normaly there...was this the plan in your insight reporting? The devil may know.
The considerable slowing of Mortgage lending from Northern Rock will only turn out to be bad for mortgage customers countrywide. Northern Rock have been a leading light in the mortgage industry over the past few years, providing good products and has helped many take that uncertain step on to property ladder in a some what safer mortgage prodcut than many other offer. If NR isnt in the market place to drive competition then competitors will be able to increase prices and therefore their margin and this will hit the public in their pockets. I have worked with NR professionally and have to say I hope they are back soon as there is none better for customer service or hard work. Long live the ROCK!
Their wouldn't have been a run on Northern Rock if you Robert Preston and the ΒιΆΉΤΌΕΔ hadn't sensationalised the reporting. You lot are a disgrace!
#2 Leet : You are forgetting someone else. Ron Sandler and his Β£90k per month...plus his statement that it will take a long time to sort out. That's a lot of Β£90k's coming his way.
Robert - Completely off-topic but you seem a good person to ask. The ΒιΆΉΤΌΕΔ Business page gives a list of Sterling exchange rates against a big list of currencies including the Thai Bhat and the Turkish Lira.
Why not the Chinese Yuan? Seems like a pretty important one!
Re #12 nd #13
It wasn't Mr Peston who presided over the failure of NR. It was the board who sanctioned Applegarth's dash for growth. A classic case of shooting the messenger.
So all of you out there. - Yes I am speaking to you the UK taxpayer. What does if feel like to be a part owner in one of the biggest disasters this incompetent government has seen fit to burden us with?
Personally I am disgusted, to put it mildly and will never vote for a Labour Government again. It would appear that incompetence runs deep within the Labour Core. In this case the leopard can definitely not change it's spots.
The run on Northern Rock was inevitible. It's business model was fundamentally flawed. All the risk models it employed relied on house price inflation and nothing about what happens when the USA finally came round to realise that students with no incomes of their own, are actually not able to fund their stay at University on house price inlfation alone and make a profit at the end of 4 years!
I leave you with this ditty,
"Because Labour are Red,
Their policies are crock
Incompetence and stupidity mean
'We've Northern Rock!'"
In response to #14 above, I can't believe you can be so naive as to think that the ΒιΆΉΤΌΕΔ (as aided and abetted by one R Peston Esq) caused the run on NR. Given the credit crunch in the US, NR was already holed below the waterline and sinking fast, so regardless of what the ΒιΆΉΤΌΕΔ did the bank was still going to fail. The panic was caused by the Government dithering on guaranteeing deposits and it should be noted that as soon as the Chancellor actually took some action and gave the guarantee that the run stopped.
Trying to blame this fiasco on journalists takes the blame away from the denizens of the financial sector and the ineffective governments both here and in the US that let this mess get out of control.
But never mind, in future Iβm sure the ΒιΆΉΤΌΕΔ will do us all a favour and not bother to report on these piffling little hiccups in the banking sector and weβll all feel a lot happier!
Can't see how you can blame Labour if mortgage rates go up as a result of the NR crisis. Had NR been allowed to go bust it would have had the same effect; one less big player in the marketplace, thus less competition.
Why should NR slow lending? Robbo your assumptions are crazy!
Its funding costs are going down to base, while the margin on its assets are staying constant so its margins are improving vastly!
Why would any company want to scale back production when its profit margins are improving? Why would any taxpayer want a profitable company to scale bank?
Put aside your political biases and realise this is actually a very good deal!
Northern Rock lost the ability to agressively discount mortgages when it's business model failed and the bank went bust - it's patently false to attribute it to the nationalization of the bank. What the competitors will "lose" in terms of savers cash will be balanced by what they gain by mortgagee's interest payments. And they've all survived (and are still making good profits e.g. Barclays) even though we've had government backed National Savings presumabaly operating with the same "unfair" advantage. Oh and perhaps you could remind the other whingers that "shares can go down in price as well as up".
Robert,
Can you please offer or obtain an explanation from your sources.
Why with NR mortgaged property assets of Β£110Billion a Virgin bid shortfall of only Β£40Million was sufficient to crash any deal ?
Thank you
Ben said "Northern Rock have been a leading light in the mortgage industry for the past few years"
Yes, but they did so using an unsustainable business model which caused them to run out of liquidity.
Their business only outperformed its peers in recent years because it was taking unacceptable risks with its shareholders' and depositors money.
Surely it's better for mortgage customers that their lender has a sustainable business model and is lending at rates which will allow them to still be in business in 3 years' time ?
@12
Or maybe Robert has a book out soon... ;-)
Seriously though, enjoy the coverage, but would there be any chance of reducing the proportion of time spent on the Rock?
Maybe there are even some examples of good businesses out there that we might benefit from hearing about?
With regards.
I was particularly interested by Iain's comment:
Will driving up mortgage costs not lead to all the Rocks best customers leaving?
Leaving it with all the 125%, buy to let and all the mortgages currently in arrears?
Or is that the plan?
Or are they going to only up their mortgage rates for all those "sub-prime" borrowers who won't be able to get a new mortgage anywhere else at the moment?
Whatever happens I believe that we are in for a downturn in the economy that will make the 70s look like a mere hiccup.
Let's go back one stage. The bank asked for help as all banks could. The media highlighted the banks plight after it was announced what it had done but at the same time caused panic amongst its savers by saying it was in trouble and only the first Β£2000 of peoples savings were completely safe and only 90% of the next Β£33000. What did the media really expect people to do but to panic and switch money into other banks or several banks and building scoietys and cause long queues which the media then highlighted again and again until the BoE finally stated that all deposits were safe. If the press had said what they did about any other bank as they did about the Rock then they too would of been in the same situation as billions of pounds were switched to other banks exasperating the situation and causing the loans to be made.
Also the Government must still think it is a profitable bank as it is going to pledge Β£15m a year for the next 3 years to the Northern Rock Foundation which in the past has always come from a small percentage of the profits.
After months and months of reading the comments on these blogs i am finally unable to hold back any further.
First of all, the knowledge that people have of the rock's mortgage book is clearly not the best, so please get your facts straight before you comment on such matters. Northern Rock's mortgage book is a good one and always has been, Northern Rock's customers have the least amount of defaults out of all the British financial institutions.
I too agree that the original story that broke was hugely blown out of proportion, in a day and age where all the big banks are struggling it makes me wonder if Barclays (or any of the others) had had such a sensational story broken in such a sensational way, would they have has this problem too? Lets remember, the run on the bank was caused by the media, not by the business model. Clearly there was problems with the business model ... but this didn't make people stand at the doors at 4am to take their money out, we all know who did that, don't we Mr Peston.
And whilst Nationalisation is the current topic this week, may i please remind you of all the people that work for Northern Rock. People that have worked hard, changed their whole job role to support what was always a strong successful company. The levels of stress that these people have come under because of all of this is astonishing and yet they are the people that have been forgotten about. People that are shouted and groaned at for providing information, people that are getting in early and finishing late ... the people that are now worried about losing their jobs, pensions, houses and not just in the North East, but all across the country.
So whilst the shareholders wait for their compensation, the taxpayer is getting the money back ( which lets face it, none of us would have noticed it had gone ), the savers have their guarentees ... seems everyone is happy doesn't it, apart from those that have worked through this.
Other banks in the market place already have more competitive rates than the Rock. Check out the best buy tables in the newspapers and online. The Rocks main savings account rate drops by 1.25% after 12 months unlike other savings accounts witch don't come with such strings.
Putting up the mortgage rate may also cause greater damage to its borrowers than has been thought over, if other banks are unwilling to lend because they demand capital repayments rather than interest only repayments borrowers may find they can't afford the Northern Rock rate increases or find any viable alternative.
The loss if the banks aggressive lending stratergy also means rivals can increase the rates they charge and at a time of higher interbank lending rates those looking to find cheap deals from the rock who has various good offers several months ago now borrowers have to renew the previously cheap deals that they took up.
βputting up the cost of mortgages - which would encourage borrowers to repay by taking out loans with other banksβ? Presumably other banks will only lend to lower risk borrowers whose properties are worth more than the outstanding mortgage, and not those borrowers from Northern Wreck (or Northern Crock?) whose loans were up to 120% of the property value. If so this will leave NR, and therefore the taxpayer, with an even higher proportion of riskier loans. Will the Labour government permit NR to repossess, and will the taxpayer take the hit?
What happens to Granite and its bond programme after nationalisation? Does anyone out there know?
The arrogance that Northern Rock putting up mortgage rates to price business away organically will greatly affect the rates of all other mortgage lenders is breathtaking - just like the arrogance of the bank itself.
The process of sloughing out mortgages organically, rather than selling tranches, will take time - quite possibly a number of years as there are many mortgages priced for 1 to 3 or even 5 years. The staff, retail and admin, should expect some serious levels of redundancy. Whilst we should feel sorry for their plight, they're victims of the bank's aggressive growth plans and many would not have been employed in the first place within a more workable business model.
Nobody should enjoy this process at all, but at least it should serve a small purpose in forcing many of their customers to educate themselves about their finances and shop around.
If the shareholder's legal action is brash, loud and public, this situation is not going to go away any time soon for Darling and Brown. Personally I hope they don't see Β£1 between the lot of them, but this is going to create a legacy for the current government that will likely prove to be one of the many nails being hammered into it's coffin.
Northern Rock needs to shrink this
mortgage book as quick as possible.
Anyone holding onto 100% mortgages
issued in the last few years are going to find themselves owning a lot of depreciating real estate soon.
Once house prices drop, the specuvestors, flippers, FB's, buy to letters, equity locusts, who took out no money down mortgages will be walking and sending Rock the keys.
To all those bemoaning the 'sensationalist coverage' of the entire NR fiasco - I must have missed it when you were moaning about the market-grabbing 125% mortgages and lax lending habits that ensured the business came rolling in and got NR into the whole mess in the first place.
Would those with mountainous piles of sour grapes admit to being shareholders in the soon-to-be 'National Rock'? Go on, admit it...!
Bottom line is don't invest unless you know what you're investing into and you understand the business. That goes for BTL as well as shares. Take some responsibility for your own decisions instead of blaming the press, government or anyone else.
Is this the safest bank for depositors?
I have been in the fortunate position of sitting on a largish sum of cash which since last Sept I have held in NS&I. Safe but only earning 5.2% Gross, whereas Northern Rock Tracker Online offers same flexibility but gives 6.24% Gross.
Post No 10 above seems to say that it is only pre-Sept 07 depositors that are guaranteed - but looking at the Northern Rock website today- it seems to state very clearly that all new depositors (no matter how big the deposit) will also be guaranteed.
So - I am in the process of shifting my NS&I savings to my new Govt Backed bank.
Am I missing something here or is this as crazy as it appears?
There's a topic that the media dare not speak of right now regarding the quality of assets on the books not only of The Crock, but every other UK mortgage bank.
Here are the questions the media SHOULD be asking about the quality:
1. What proportion of the mortgagees have had more than three months' payment "holidays"?
2. What proportion of the mortgagees are either self-certified, 100%+ loans, buy-to-let new build or 5x + salary multiples?
3. What proportion of the mortgagees are officially classified as "subprime"?
4. What proportion of the mortgagees are classified as "non-conforiming" loans?
The truth is that in the UK we have a much much bigger subprime issue than anyone will yet admit.
In response to #19, I am not stating that it was Robert Preston or the ΒιΆΉΤΌΕΔ that caused the NR crisis, but I do believe that without their hysterical level of reporting the average NR depositor would not have taken their money out and we wouldnβt have seen the shocking images of people queuing outside the branches the next day.
The situation at NR is a complicated matter to explain to a layman but the message in the original ΒιΆΉΤΌΕΔ report was effectively βNR doesnβt have enough cash if you are a saver you could be in troubleβ. This caused the run on the bank and that is my issue.
The only thing that the ΒιΆΉΤΌΕΔ could do after the event was to brag about itβs achievement in breaking the story, which some would call insider trading.
#35 Simon
No, you are not crazy but once the Rock's coffers overfloweth with whatever they deem to be 'sufficient' funds, then the attractive rates will be pulled.
And the saving 'rate tarts' will probably move on, commensurate with the perceived risk/reward ratio.
If only I had an avatar that did the donkey-work for me.
Now Northern Rock is to be nationalised, investment in its savings accounts is good strategy
As has been well documented Northern Rock is probably now the safest bank in the UK next to National Savings due to the Government guarantees.
Secondly Northern Rock offers a Fixed Access bond -this is actually a very very attractive product it offers 6.35% guaranteed for a year however it has two key differences from other fixed products in that additional deposits can be made to take advantage of the fixed rate and more importantly you have access to you money. So its heads you win tails you win. Rates go up you hold the fix. Rates go down take the money out and open a variable account or a new fix.
Finally, the very interesting twist - what do governments ultimately do with nationalised businesses - Answer privatise them and offer incentives to the public to buy the shares. It may be just possible that current depositors also get preferential terms, could this also be a long term carpet bagging play?
Does anyone remember a documentary about a couple in Newcastle a few years ago? They were shown going off to exotic holidays on the strength of borrowings on their three-bedroom semi-detached house wihich had gone up tremendously in value. It all sounded marvellous.They didn't come across as particularly sophisticated people just clerks who appeared to have won the lottery.
@35 (Simon) - 100% of your money is government backed. I suggest if the government cannot pay us out at any point we all perhaps have bigger things to worry about! ;-) Check out the fixed rate access bond ... just paid into this, very quick turnaround on the deposit, anyone would think they are desperate for the money ...
Advice from the northern rock to customers to re-mortgage elsewhere should be accompanied by a cancellation of repayment penalties,not threats of rip off interest rates.Better the N/R charge market interest rates or they will end up with bunches of keys and longer waiting lists for council houses.
In my opinion, The Rock are the first to take a hit. All the banks have been cashing in on the SubPrime / higher risk customers for years with their discount rates and cash back offers. I see barclays share prices are 40% down. Could they be next?
Just to clarify, NR has no sub-prime mortgages on its books. The sub-prime deals available through NR are funded by SPML, part of Lehman Brothers.
I also believe NR will not be putting up the rates for existing customers, for the simple reason the huge majority are on fixed rates. When the fixed rates expire, NR will only have uncompetitive deals, so the customer will remortgage elsewhere.
NR is a huge loss to the mortgage industry. No 125% deals means fewer first time buyers, means fewer house sales, a slower market = price stagnation or even deflation. A major player has effectively left the industry, so a less competitive market = higher mortgage rates for all.
To all those who wanted the demise of NR, this is the result.
Okay, all the Rock bashing really needs to stop. There is a frankly childish undercurrent of bitter, half-informed sniping by people whom I can only think are trying to sound clever. The predictable regurgitators of the worn-out clichΓ©s like "rotten bank"; "risky lending"; "borrowing short to lend long"; "taxpayer's money of Β£3,500 per UK resident"; "taxpayer bailout"; "Northern Crock/Wreck"; "greedy bank", and harping on about "125% mortgages", as if they were something only NR did, etc, etc - ad nauseum - need reminding of some pertinent points again, it would seem.
1. BoE was fulfilling its role of lender of last resort, in order to provide stability to the banking sector as a whole. If the consequence of using this facility is a run on the bank then what on earth is the point of LLR? A huge over-reaction by the savers - seeded and grown by today's histrionic media - caused the real damage. Had the attitude been one of "Ouch, huge profit hit for NR and a re-think on strategy" then we wouldn't be here now at all. The run was the real problem and is what caused all the damage. LLR has been used all across the world recently, perhaps not quite on this scale, but the same in kind.
2. The business plan was too aggressive and the funding model short-sighted, this is true. The board responsible for that is no longer in charge. The rest of the business was (and largely still is) very sound indeed. The overwhelming majority of staff there had either no knowledge of the business model, or a vague inkling about it but with no idea of the implications of that - nor does it seem that the FSA nor most other people did. Snide comments at NR now are effectively hitting bystanders. Applegarth et al have now departed: please direct all indignation toward them.
3. NR has always been a very fussy lender. The vilified βTogetherβ mortgage required an excellent credit score, and all of NRβs lending was rigorously stringent about many criteria. This was reflected in a very low default rate. NRβs mortgage book continues to remain sound, and the business is efficient and responsible in very many respects. Credit scoring and behavioural modelling does predict future financial behaviour well, as evidenced by all the companies that go to great lengths to apply it. It is therefore nonsense to say that NR was a risky lender as quite the opposite is in fact the case.
4. What's done is done. Instead of banging on and on about this let's all move on and let NR do what it has to. Let's face it, we all now have a vested interest in NR recovering in time , repaying the loans and not calling-in the guarantees which have been made - and (very probably) in the βtaxpayerβ getting a handsome profit to boot. The only circumstance under which this will not be the case is if the housing market crashes in a spectacular heap, in which case the NR "crisis" will seem like rosy dream of the good old days, and we all will be up that creek of legend, sans paddle. Not even the most rabidly pessimistic (no pun intended, Robert) "expert" is predicting anything of the sort, so all you moaning hand-wringers just give it a rest for a bit and all will be fine.
Had the run not happened the only losers would primarily have been the shareholders and the staff, who may have suffered to a collective lesser degree, with maybe some job losses (but probably not redundancies) and remuneration generosity reined-in. What we have now is a stoked fire that people chuck more fuel on and then complain about the heat. Give it up, itβs not helping anything and just causes more damage.
There is an interesting angle to the current position of NRK which has so far not been mentioned.
75% of NRK staff are shareholders, some with fairly big holdings via bonus and other schemes where shares are locked in for 3 years.
The point is that if the government hope to get this business back on track and return it back to good health and back to the private sector it will have to rely on a demoralised workforce.
Despite what any of you might think of NRK's management and the wisdom of shareholders investing in NRK frankly this state of affairs is of the governments own making because other European Central banks would have got hold of a crisis like this and sorted it in days.
Post 45 : get a grip people, sheesh
I'd agree that there has been a great deal of comment and reaction to the NR predicament that has been uninformed and hysterical; that has caused the public imagination to be filled with understandings that are incorrect; and that have contributed to making the situation more difficult to deal with than could have been the case.
However, in contrast to the poster, I'd suggest that responsibility for this lies fundamentally with an establishment authority that, due to its own behaviour has lost the faith and trust of the people over whom it presumes to rule. And I think the overwhelming reason for this has been authority's assumption of a mindset that believes it is more fruitful, in any situation, to spin, to embellish, to deceive, to misrepresent, to cherry-pick, to lie - to do anything other than to present reality in a fair, balanced and honest way.
In matters that really affect them personally, huge numbers of individuals no longer believe what authority is telling them, and this is the fundamental behind the run on Northern Rock - not unwarranted stoking-up by the media, but a widespread refusal to take at face value anything said by a modern politician, or by any of his cohorts.
The business of pointing fingers and I-told-you-so games will go on for a long time to come, with no useful outcome. The only thing that British taxpayers should consider is their interest in this bank being a success going forward. It isn't silly to say that it's now an act of patriotism to deposit into Northern Rock. The sooner the bank returns to profit, and the bigger the deposits, the sooner the Government can return the bank to the private sector at a profit, with benefit to the whole nation. Any British taxpayer that wants to see this fail is cutting off their nose to spite their face, and as it happens depositing into NR is a no-lose gamble. Their rates are competitive, the money guaranteed, and if the business succeeds, we all win.
Post 34 :
Maybe if you actually thought about things before you engaged your keyboard you may notice that alot of the people who are sticking up for N/Rock are probably existing staff who have a lot more to lose than any shareholder ie Jobs Salary Shares discounted mortgages etc.
for the record i feel that alot of the problems were down to unwise running of the Bank however to spark the massive level of panic that was caused was down to one thing and one thing only dishonest and downright unethical media coverage
Its like a geologist standing next to a volcano shouting that it is Gonna BLOW the entire town around that volcano panic and stampeed causing hugh amounts of damage and death and when the volcano does go it just dribbles out a tiny bit of lava which does nothing but the geologist then says well it could have been bad
That would be achieved by putting up the cost of mortgages - which would encourage borrowers to repay by taking out loans with other banks.
The good news is that the proceeds of these redemptions would reduce the loans to the Rock from taxpayers.
:
:
But if the bank is to have a profitable long term future, so that it can be privatised in a few years time, it needs to attract billions more in retail deposits.
The Rock's managers were aiming to almost double these deposits by 2012.
Well, well, well, what do you know? I was only banging on repeatedly that Northern Rock needed to adopt exactly these policies some 4 months ago on these very blogs. I even tried to speak to Adam Applegarth (ended up speaking to someone in the Marketing department instead) to advise of this very simple solution to their fundamental problem (considerable over-lending). Instead the new Vulture Fund on the Block (aka HM Treasury) will walk away with yet another ill-gotten (stolen?) windfall in a few years' time. Ridiculously low interest rates got this country into the current economic blight. It will take realistic interest rates (8%+) and a lot of pain to get us out of it: the greater that pain, the shorter its duration.
The business of pointing fingers and I-told-you-so games will go on for a long time to come, with no useful outcome. The only thing that British taxpayers should consider is their interest in this bank being a success going forward. It isn't silly to say that it's now an act of patriotism to deposit into Northern Rock. The sooner the bank returns to profit, and the bigger the deposits, the sooner the Government can return the bank to the private sector at a profit, with benefit to the whole nation. Any British taxpayer that wants to see this fail is cutting off their nose to spite their face, and as it happens depositing into NR is a no-lose gamble. Their rates are competitive, the money guaranteed, and if the business succeeds, we all win.
COULD SOMEONE EXPLAIN TO ME THE STORY THAT ALL THE GOOD MORTGAGE BUSINESS ON NORTHERN ROCKS BOOKS HAS BEEN HIVED OFF TO SOME PRIVATE OFF SHORE COMPANY LEAVING TAX PAYERS WITH THE RISKY STUFF?
IS THIS TRUE? IF SO WHO OWNS THIS COMPANY AND WHEN WAS THE TRANSFER ETC?
@ 52 - Ouch, caps...
Your information is incorrect, and the answer to your questions may be found in many places on the internet, should you care to look.
Granite hasn't has any mortgages whatsoever "hived off" to it. They are part of securitisations (Google that if you don't know what it means) that took place over a period of some years, before September last year. The average LTV of those mortgages is greater than the average on NR's book, making the remainder -less- "risky".
Your lament about "taxpayers" is predictable but misguided. I think you will find that the long-suffering British taxpayer has not had to stump up a single penny directly (the money loaned was the BoE's, there for precisely that purpose), and that there is very little chance that "we" will lose anything at all.
Many people would do well to take the little time needed to get a few facts straight before posting things like that. Unfortunately they seem not to understand even when things are spelled out for them...
BAA (Ferrovial), do you not think they have not thought about going bankrupt? or letting the government yet again picking up the pieces from another mighty debtor!*Β£9 Billion*, they will never be able to repay that! But while the big boys (A)are still operating like that, they are still earning big bucks!