Northern Rock sold to Virgin Money

pqrdef

Gideon says the new bank will get the economy moving by lending to people. So perhaps the Treasury is going to underwrite sub-prime credit cards as well as dodgy mortgages.

Of course all the right-thinking people are paying off their debts.

Road_Hog

Thrugelmir wrote: »

What do Politicians know about running banks?

Days are gone of when MP's had career experience of anything useful.

Yep, most of them do a PPE degree and straight into politics.

Thrugelmir

kabayiri wrote: »

The considered wisdom spouted forth on here was that the state investment in our banks would show profit. Was this just more spin ?

With hindsight clearly, yes. Banks are shrinking their balance sheets. Profitability therefore will take many many many years to return the boom years, if ever.

michaels

Yep - with negative real interest rates I can't think of a worse time to have borrowed money.

pqrdef wrote: »

Of course all the right-thinking people are paying off their debts.

IronWolf

Even if it had been sold for £2bn, we still wouldn't have made a profit. Yes we bought it for like £1.3bn but we've bailout it out to the tune of over £20bn already.

The government was never going to make money on the whole from the bailout, that wasn't the point though.

Thrugelmir

IronWolf wrote: »

Even if it had been sold for £2bn, we still wouldn't have made a profit. Yes we bought it for like £1.3bn but we've bailout it out to the tune of over £20bn already.

You are confusing good and bad Northern Rock.

The part that is being sold isn't even projected to come back into profit until the end of 2012.

Backbiter

Maybe I'm being naive, but why sell it now if it will become profitable by next year? Won't that make it a more attractive purchase that would bring more money into the Government's coffers?

Or maybe I'm missing something.

crash123

Backbiter wrote: »

Maybe I'm being naive, but why sell it now if it will become profitable by next year? Won't that make it a more attractive purchase that would bring more money into the Government's coffers?

Or maybe I'm missing something.

They think things are going to get worse.

sabretoothtigger

Companies are always sold on projected earnings. Obviously at pure face value something which loses money now isnt worth so much beyond its fire sale value, the price paid involves the positive projection coming true.

Government doesnt need a savings bank so much when they are able to finance themselves for ten years at close to 2% cost only, we are benefiting from the euro debt crisis inversely.
A private bank will pay taxes on profits, the other scenario would have been consolidation and job cutting. Let Virgin sort out what works

Road_Hog

michaels wrote: »

Yep - with negative real interest rates I can't think of a worse time to have borrowed money.

That's rubbish. I've borrowed a lot of money, I have two mortgages, I think that low interest rates are very profitable.

People keep harping back to the '70s when you could take out a fixed interest load and inflation would rocket and your debt would be inflated away. But that relies on the 'old days' where your salary went up by more than inflation every year. Right nor, real inflation is probably about 6 - 8% and most people are probably getting 2% pay rises.

If the economy was in better shape, interest rates would rocket, but wage increases would nowhere near enough keep pace.

People have to remember that we're are globalised now and it isn't a good thing and old economics no longer apply. For example, if we had a boom, it wouldn't be like the '70s where the employee would be king and offer himself to the highest bidder. Nope, with globalisation and unfettered immigration, employers will just import workers happy work fro whatever the pay is.