Corporatism Generali Style

Wookster

abaxas wrote: »

What about dixons?

They are more f'ed than f'ed thing.

Yes they are - but their impeding bankruptcy (if it happens) is more like a slow train than a Concorde flying past.

michaels

First my thoughts on the N&P situation.

Low interest rates are supposedly saving the financial system as they are allowing banks (who borrow short and lend long) to coin it in on the turn. However different capital and funding structures are clouding the issue - yes if you can fund your mortgages at 3m libor then even legacy trackers at +115bps can be profitable but if your funding needs to come from the competitive retail savings sector then you need to offer a least 3% to hold on to investor funds (in the low rate environment savers are probably much more likely to swap around for the best rates) accompanied by the double whammy of a 0% savings interest rate floor. For example with 5% bbr N&P were earning 6.15% on these mortgages and probably paying savers on average about 3.5% over some probably fairly competitive newly launched accounts and some instant cash / legacy product dogs paying next to nothing now with 0.5% bbr mortgages are paying 1.65% but average savings rate is probably 1.5% as 3% is needed to hang on to funds for new accounts and even the dodgiest legacy account won't be paying less than 0%. The recent Nationwide results (with their 2% over BBR svr promise) highlighted this rather nicely.

On your more general point I am very much in agreement - there is a very unhealthy relationship between big corporates and the Govt - the LTSB HBOS merger being a prime example of the mutual back-scratching mindset. A few months back Sky started making a lot of noises about the BBC dominating markets, no doubt in reality part of an auction for news corps political allegiance in return for favourable corporate treatment...

Thrugelmir

the LTSB HBOS merger being a prime example of the mutual back-scratching mindset

and the alternative was ?

Degenerate

Generali wrote: »

I've had a bee in my bonnet for a while about the modern corporatism that has replaced Capitalism.

Basically my argument boils down to the fact that if you introduce expensive obligations for companies to follow then only big firms can afford the compliance costs, smaller firms are driven out of business.

The advantages are great: the party of Government gets to show how they are tough enough to force through tough stuff to bring Fat Cat Business to heel; small companies are driven out of business allowing big companies to push up their margins at the expense of customers.

Here's an example:

http://forums.moneysavingexpert.com/showthread.html?t=2151795

On the face of it, the small BS is the villain of the piece - jacking up rates and tearing up contracts.

And that's all there is to it. Taking that case at face value, the BS is 100% in the wrong, and their size has nothing to do with it. They failed in their risk management by offering products that were unsustainable under certain market conditions that have now transpired.

I really don't see how this has anything to do with compliance costs, unless you consider honouring the terms of a contract as an expensive government-enforced obligation that's unfair to small fry.

The reality is that the Government has decided to screw the little solvent guys in favour of the big insolvent ones and force the little firms towards insolvency by their actions.

Cobblers.

Thrugelmir

Degenerate wrote: »

And that's all there is to it. Taking that case at face value, the BS is 100% in the wrong, and their size has nothing to do with it. They failed in their risk management by offering products that were unsustainable under certain market conditions that have now transpired.

Thats why in contractual terms there is normally "exceptional circumstance clauses" in any contract.

Its not possible to cover every eventuality in precise detail.

So the N&P has covered their risk.

Its borrowers that haven't read the small print of their indvidual mortgage contracts and assumed (maybe as the outcome is not certain) that their interest rate was "guaranteed" for the term of the mortgage.

Wookster

Thrugelmir wrote: »

Its borrowers that haven't read the small print of their indvidual mortgage contracts and assumed (maybe as the outcome is not certain) that their interest rate was "guaranteed" for the term of the mortgage.

From the thread it seems that N & P are acting entirely in line with the terms of their contract. This is a case of caveat emptor if you don't know the small print.

Edit: It seems that people take it for granted that credit should be cheap. I hate to say it but those days are pretty much gone.

The_White_Horse

when I was a child, my mother used to buy me a pizza

now I am an adult, I buy my own pizza

i think we can all learn something from this story, and that is that i ate pizza as a child and I still eat it as an adult.

If we cross reference this to GDP you will see that I now have jalepeno peppers on my pizza which I didn't really like as a child.

due to this change in my taste over the years, I would say that it is catergorical proof, if proof be needed, that house prices are on the rise. The only thing that goes against the evidence of house price rises, is house price drops.

Still, I never liked the stuffed crust style, and really, this just proves beyond any doubt that unemployment will peak at 3.4m but the real figure will be about 7m.

you know it makes sense.

Degenerate

Thrugelmir wrote: »

Thats why in contractual terms there is normally "exceptional circumstance clauses" in any contract.

Its not possible to cover every eventuality in precise detail.

Changes in the base rate are not "exceptional circumstances" for a tracker mortgage, they're the fundamental point, and it's perfectly possible to cover the risk in the contract. It's not unforeseeable - the second largest economy in the world had them for a over decade prior to this. That's why some mortgage providers had the sense to implement floors (or "collars") in their tracker mortgage contracts. The N&P were incompetent in their risk management and failed to do so. Now instead they are attempting to use a vague, "we can do what we like if we deem it necessary" clause (a fundamentally unfair contract term which is surely unenforceable) to move the goalposts on their trackers.

I suspect they are in serious trouble, because this reeks of desperation.

So the N&P has covered their risk.

Nope.

Thrugelmir

Now instead they are attempting to use a vague, "we can do what we like if we deem it necessary" clause (a fundamentally unfair contract term which is surely unenforceable)

So the N&P offer their depositors low interest rates on their savings. Causing a mass withdrawl of funds from the society. Then how does the N&P funds its mortgage book. It cannot lend money that it doesn't have.

The N&P like any financial institution is accountable to the FSA under capital requirement regulations. So "we can do as we like" clause is not unfair if it protects the society. Its not as if the proposed increase in interest rates is excessive or uncompetitive.

If the N&P were to go under. The cost of levies imposed by the FSA would increase further and be burdened onto other mortgage holders with other lenders.

I'm not suggesting what they are doing is ethical. But survival requires difficult decisions.

purch

i think we can all learn something from this story, and that is that i ate pizza as a child and I still eat it as an adult

What are we supposed to be learning ?

That you are fat and spotty :eek: