northern rocks £14 billion

Cleaver

Cat695 wrote: »

where does it say that?

and according to some acrticles they owe around £33bn not £26bn

http://www.hemscott.com/news/comment-archive/item.do?id=42408

That article is from January 2008.

Northern Rock was an awesomely badly run business from the point of view of risk. But it was still highly profitable when it went under. Okay, they have higher repossession and voids on payments than other banks and lenders, but it's still tiny in comparison to the people paying money in to them.

The whole 'affair' will be cost neutral to the tax payer fairly soon and might even start making them some money if the property market picks up in 2010/11. If of course they haven't sold it for a massive profit by then and invested the money in eyebrow waxing for Darling.

beingjdc

Cleaver wrote: »

Well, that's the rather avant garde conspiracy theory view.

I guess the more mainstream one would be that they 'saved' a bank going bankrupt even though it was a profitable business (albeit risky)

Anyone who still believes Northern Rock was profitable is living in a parallel universe. Its cashflow was jiggered, and more importantly, the value of its assets (a big pile of stinky loans) was collapsing. It was both illiquid and insolvent.

Ironically for the Government, that case is likely to be proven by the Government's own lawyers and accountants, employed to calculate how much compensation shareholders should receive for the nationalisation. I predict 'none'.

FoxtonsRIP

beingjdc wrote: »

Anyone who still believes Northern Rock was profitable is living in a parallel universe.'.

Too true, it wasn't called Northern Crock for nothing. That Adam Applegarth shyster couldn't run a bath.

Cleaver

beingjdc wrote: »

Anyone who still believes Northern Rock was profitable is living in a parallel universe. Its cashflow was jiggered, and more importantly, the value of its assets (a big pile of stinky loans) was collapsing. It was both illiquid and insolvent.

Ironically for the Government, that case is likely to be proven by the Government's own lawyers and accountants, employed to calculate how much compensation shareholders should receive for the nationalisation. I predict 'none'.

Would you not define it as profitable, yet incredibly risky? It made money, right up until the run caused liquidity problems. I obviously agree that that is no way to run a business, but without the credit crunch they would probably still be happily lending cash (albeit without risk assessing correctly).

prowla

Given the reports of the heavy-handedness of its repossessions, who would want to sign up with NR for a mortgage anyway?

Cleaver

Cat695 wrote: »

So how is that NOT money down the drain??

Sorry Cat, I didn't answer this bit did I?

Well it could be 'down the drain'. That's one side of the coin. It could make the taxpayer a shed load of money as people race to get credit to borrow which gets things moving again. Possibly.

I'm half playing devil's advocate because it's impossible for someone to post an interesting link to anything to do with the government without 37 posts all saying:

"Clown's done it now. Our children are in debt."

"What an idiot. I hate Clown. Hope he dies. Taxpayers money wasted again."

Just be interested to hear what people who do if they were him. Forget "I told you so", what would you do with NR right now?

beingjdc

Cleaver wrote: »

Would you not define it as profitable, yet incredibly risky? It made money, right up until the run caused liquidity problems.

Cashflow problems caused by the fact that they were undertaking activity regarding asset values which I will, for legal reasons, refrain from describing as "cooking the books", but...

Let's say I lend you a hundred quid a week, and you repay me £6 per loan per week - £1 in interest and £5 to pay off the debt, then on your definition I have a profitable business.

If I don't account for the fact that if I stopped lending you the money, you wouldn't be able to pay me back, I probably do! Now suppose I you earn £20,000 a year. I lend you £120,000 to buy a house worth £96,000.

What's the fair value of that loan? What, if you were a business, would you pay to buy it off me? If it's much over £120,000, then yeah, Northern Rock was profitable. I'd argue that it is at most about £88,000.

Cleaver

beingjdc wrote: »

Cashflow problems caused by the fact that they were undertaking activity regarding asset values which I will, for legal reasons, refrain from describing as "cooking the books", but...

Let's say I lend you a hundred quid a week, and you repay me £6 per loan per week - £1 in interest and £5 to pay off the debt, then on your definition I have a profitable business.

If I don't account for the fact that if I stopped lending you the money, you wouldn't be able to pay me back, I probably do! Now suppose I you earn £20,000 a year. I lend you £120,000 to buy a house worth £96,000.

What's the fair value of that loan? What, if you were a business, would you pay to buy it off me? If it's much over £120,000, then yeah, Northern Rock was profitable. I'd argue that it is at most about £88,000.

I ask this as you speak sense on this and I'm interested, rather than to start an argument. From a very simplistic point of view then, how come they have brought in so much cash in such a short space of time? The defaults have been very small in relative terms.

Cat695

Cleaver wrote: »

Sorry Cat, I didn't answer this bit did I?

Well it could be 'down the drain'. That's one side of the coin. It could make the taxpayer a shed load of money as people race to get credit to borrow which gets things moving again. Possibly.

I'm half playing devil's advocate because it's impossible for someone to post an interesting link to anything to do with the government without 37 posts all saying:

"Clown's done it now. Our children are in debt."

"What an idiot. I hate Clown. Hope he dies. Taxpayers money wasted again."

Just be interested to hear what people who do if they were him. Forget "I told you so", what would you do with NR right now?

turn every building it has into a greggs and sell cakes and pasties because thats about all the money it can handle.

I couldn't possible know what to do to sort all this mess out. I am but a simpleton who as a tax payer has the right to hate anyone that is going to take more money off me.

Cleaver

Cat695 wrote: »

turn every building it has into a greggs and sell cakes and pasties because thats about all the money it can handle.

I reckon Greggs is pretty recession proof, so that might be a decent plan.

They seem to have handled paying back around £17 billion of loan pretty quickly.

Cat695 wrote: »

I couldn't possible know what to do to sort all this mess out. I am but a simpleton who as a tax payer has the right to hate anyone that is going to take more money off me.

True. But this measure could make 'you' money in the long term. I'm maybe as sceptical as you are, but I have a sneaking suspision that NR will make the government a load of money, yet we won't see it. Well, you might see it in the form of a gold-plated olympic arena for 2012.