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The people to blame

13

Comments

  • StevieJ
    StevieJ Posts: 20,174 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    Generali wrote: »
    The pension fund gained because they received a lending fee. The shares had no value because:

    1. NRK was insolvent
    2. There was a run

    At least the lenders got something out of it.

    Chicken and Egg.
    'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    StevieJ wrote: »
    Chicken and Egg.

    Do you mean that short sellers made NRK insolvent or that they caused the run please?
  • StevieJ
    StevieJ Posts: 20,174 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    Generali wrote: »
    Do you mean that short sellers made NRK insolvent or that they caused the run please?

    The run on the bank.
    'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    StevieJ wrote: »
    The run on the bank.

    How? I don't see what the mechanism is. The run on the bank was caused by people seeing the reports on the BBC that NRK was in trouble. That the bank was in trouble meant that people shorted the shares. Surely both things started because NRK sailed too close to the wind.
  • StevieJ
    StevieJ Posts: 20,174 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    Generali wrote: »
    How? I don't see what the mechanism is. The run on the bank was caused by people seeing the reports on the BBC that NRK was in trouble. That the bank was in trouble meant that people shorted the shares. Surely both things started because NRK sailed too close to the wind.

    The BBC reported a collapse in the share price (due to shorting), people then rushed to extract their funds.
    'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    StevieJ wrote: »
    The BBC reported a collapse in the share price (due to shorting), people then rushed to extract their funds.

    No, Robert Peston reported that NRK had to resort to emergency funding from the BoE. That's what started the run.
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    This is what the Preston Citizen (3rd runner up, Lancashire Local Paper of the Year 1968) had to say at the time:
    Huge queues formed outside the Northern Rock bank in Preston city centre today after news emerged that it had to get emergency funding from the Bank of England

    From the Grauniad reporting Applegarth's words to the Treasury Select Committee:
    Now that was very interesting. Applegarth has just claimed that the widespread panic, and knock-on carnage on its stock price, could have been avoided if the news that it was arranging emergency funding from the Bank of England had not leaked, late on Thursday September 13.

    Finally the Torygraph:
    On September 14, Northern Rock revealed it had sought emergency funding from the Bank of England. The news sparked the first run on a UK bank since the 19th century as queues of people desperate to retrieve their savings formed outside Northern Rock's 76 branches, humbling a proud banking nation. The Rock's stock dived, and it was nationalised in February.
  • StevieJ
    StevieJ Posts: 20,174 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    OK, thanks for that, I can accept when I am wrong.
    'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    StevieJ wrote: »
    OK, thanks for that, I can accept when I am wrong.

    Perhaps I laboured the point a little. At the moment I think a lot of the papers would blame short sellers for the milk running out in the office fridge right now.
  • kennyboy66_2
    kennyboy66_2 Posts: 2,598 Forumite
    Generali wrote: »
    Perhaps I laboured the point a little. At the moment I think a lot of the papers would blame short sellers for the milk running out in the office fridge right now.

    We all want to blame a mysterious "they" for all problems.
    Whether it is speculators, spivs, short sellers, hedge funds or governments foreign & domestic.

    We forget that no one forced any individual to borrow 5 times their income or get a 100% mortgage.

    Sadly the housing boom and bust just appears to be ingrained in the British way of life.
    US housing: it's not a bubble

     Moneyweek, December 2005
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