What's likely to have happened with our Northern Rock shares?

dengrainger

Definitely over and out this time.
Sick of the time wasted.

I am tired of the nonsense comments (some have been very good) from some people who evidently don't worry about the facts or reality, but just want to sound off - to make themselves feel 'useful' it seems...

Thank you to the people with sense, who made sensible arguments, even if I don't agree with them.

My only hope, I suppose, is that some people will have learned something of value from the contributions, whether they were for or against.

Sorry, sentiment true, but what I really hoped for was for people to come on-side, in all fairness.

Put that down to fail then.

Never mind, at least I tried.

Den

redux

All this picking of only a few choice facts from certain moments doesn't really work to negate the bad ones.

One problem adds on top of another for a reason. Maybe the rescues didn't work because things turned out to be a lot worse than the interventions could solve.

The government is not to blame for the bank being unable to sustain its loans with new borrowing commercially, or for the other prospects of restructuring failing because nobody would put in enough new money.

cloud_dog

dengrainger wrote: »

And, re Cloud-dog.
Didn't take much predicting, really.
I have banged the drum for over 7 years, unpaid as a volunteer, spending massive hours of time and also loads of my own personal (limited ) cash...much to my wife's disgust I might add.

And, yes, I and my volunteer committee colleagues will go on banging the drum, for as long and as loud as it takes; you see, we believe in fair play.

What has your effort and contribution been, apart from remarks?

And that's fine but.... You have demonstrated by only focussing on certain facts (banging your drum), ignoring counter facts / arguments and being devisive in how you shape and portray those facts that you are not open to accepting others positions.

You speak from a position of hindsight and portray the events as something which was obvious and could have been 'managed'. It could not.

Bowlhead99's post's on this page and the previous page provide a balanced and well laid out position but you will not accept that that may be the reality of the situation.

I've read your's and others posts on this topic. I also know something of the situation but others have posted the info first and more than likely in a far more structured way than I would have so it is poinless me duplicating info. If you are not after comments, feedback, or opinions about the situation why post on a bulletin board?

Mistermeaner

People called it as they see it. Sorry for anyone who lost money but bad things happen to good people.

The bank was unable to stand on its own, no private equity was available to prop it up, no-one was willing or able to provide the capital required to sustain it.

Government could have just let it fail. They took a view that it was in national interest to prop up the bank with tax payers money.

Without government intervention bank is worth zero. Shares are therefore worthless.

I'm sure you could find lots of companies approaching the wall who are worth nothing, but could, with government intervention and financing possibly turn around in years to come but why should any of the owners of these companies benefit from said government backing?

Stop complaining about it not being fair as you have indirectly benefited far more from the government actions re the banks than you have lost (as have we all)

If you want to talk about fair come and speak to some the families of people I've made redundant as a result of factory closures due directly to high energy costs relating to (imo) a poorly thought out energy policy where 'green' taxes are closing down eu based manufacturing and moving to unregulated but lower cost eastern producers.

Governments do what they do in what they see as in the best interests of the nation as a whole.

Don't come on here part moaning, part claiming conspiracy (leaks!) , part claiming unfairness and specifically and non-sensically targeting a guy days before his bid to become primeminster and expect sympathy.

Each person on here calls it as they see it. My view you had some shares in a poorly run company that went belly up. Unlucky.

dengrainger

Redux, Cloud, GGB,
OK

What you all avoid is that you are arguing the Rock's position AFTER the leak....
The leak (from Government, we know who, but we can not say, because we can not prove) reeked havoc..
Before the leak, Rock would have managed OK, without the HMG action to steal...
Just consider that please, properly, and the different treatment the Rock received from HMG...

I am sure somewhere I have a quote from prev secret B of E minutes, that "there were too many mortgage providers" in UK, but will need to check that...

Q:- If the Rock had been in the South of England ( instead of a Northern upstart pinching business from the established providers) would the actions have been the same?

Why was the leak made?

Mistermeaner

dengrainger wrote: »

Redux, Cloud, GGB,


Why was the leak made?

It was a Labour party conspiracy to keep the people of the north poor to ensure they keep voting labour. Back fired as you have rumbled them.

The key to the 7 kingdoms is the north. Providing the wildlings don't get over the wall.

dengrainger

There will be no further responses from me on this comment section.
So, be as nasty and unappreciative as you wish.
I will try to read what you may say, if course, but do not expect a pro-longed defence from me or my volunteer colleagues.

We have to get on with arguing that our unfair treatment was NOT caused by the Rock Management, or the 'global crisis' - as Mr Miliband evidently seems to hide behind. So much for morality then.

I promise to come back on here if he actually responds to my letter (if Nicola lets him do that of course).
Best regards,
Den

bowlhead99

dengrainger wrote: »

I would have a degree of sympathy with your argument s if it weren't for 2 things:-

I know what you're saying and the above is just a figure of speech, so it's childish to imply someone has the wrong viewpoint by playing semantics. However, I'll do it anyway

The two words which appear out of place in your sentence are 'sympathy' and 'argument'.

On the sympathy side - I am not looking for sympathy or for people to fall into line with my viewpoint. Unlike you, I haven't lost anything and am not seeking anything. I don't look for approval or endorsement or for anyone to open up a multimillion pound enquiry to prove my points or respect my simplistic conclusions. Sympathy is reserved for you, who has lost something.

I am sorry for your loss and respect that having lost, you have fought to try to recover it, even though you didn't have (IMHO) much of a case. But in feeling sorry, I have no doubt that it is the fault of the shareholders and the board which they appointed, and not the fault of the taxpayers or the government, which led to the shareholders' own loss. It comes with the territory of owning equity shares: providing risk capital to public or private businesses involves making potential gains while standing to lose up to 100% of your stake.

I don't have an 'argument'. It is not the case that I am taking sides and disagreeing with something contentious; I'm just merrily stating facts as I see them.

A company owned by some shareholders got into a position where it relied upon billions of commercial and retail deposits plus many tens of billions of loans from the money markets in order to finance a book of assets: loans (mostly mortgages) which provided its income stream and the means to, hopefully, ultimately settle the liabilities.

The money market liabilities, not to mention most of the customer deposits, were short term in nature and the assets long term. This is super risky - might appear fine at a quick glance, but profitable and sustainable only in a particular set of market conditions: when the total assets are expanding over time and the liabilities can grow to support that.

Unfortunately, during the credit crunch, when 3 month Libor spiked to 6-7% and short term credit to support long term mortgage finance was non-existent, the liabilities could not be refinanced. So, not only could they not be expanded, they had to actively contract by billions and billions. The loans were due or needed to be topped up and the money to repay them did not exist. At the same time, during the time of global financial nervousness around liquidity and stability of financial institutions, a murmour was passed around that this company was not financially stable.

This caused depositors to not trust it, and yank their deposits. So, as well as being short the billions of money market loans which couldn't be refinanced, it was also short the usual level of deposits on which it had come to rely, in its perilous and unsustainable business plan.

Boom, the company was dead. It owed more there and then than it could get its hands on there and then by offloading its assets. Its predilection for sailing too close to the wind, had become fatal. Its shareholders could not pay off their creditors and have anything left for themselves. If you are a shareholder, that share is worth zero.

The above is not an 'argument'. It is a sample set of facts about how a company can take on excess leverage and overtrade until it kills itself. It happens to all kinds of private and listed businesses of all sizes all the time. Most of them do not make the headlines as they are not individually systemically important and will not risk taking down the whole banking sector or destroy a lot of lives if they crumble.

The people who make at-risk investments into them (such as those becoming equity owners of such businesses) usually lose everything. Equity owners have the least protection of all investors and creditors. There is no reason that an equity owner of a business with a £50-100bn balance sheet should receive a free pass to run the business badly and be able to exit with cash in his hand when it all goes titsup, leaving creditors to 'carry the can', compared to an equity investor in a less famous business with a £1000 or £1m or £100m or £1bn balance sheet which is not allowed to do that.

(1) The Bank Run , caused by a leak from within Government (why?)

I do not know why there was a leak from within government or from within the bank. It is not desirable for such commercially sensitive information to leak. It is quite understandable that if a news organisation heard of the bank's precarious situation, they would consider it newsworthy. So whoever ran with the story was going with it in the public interest; meanwhile whoever leaked it was perhaps naive, perhaps said something off guard or failed to secure their communications, or was perhaps seeking to profit from insider knowledge and shorting the stock. I expect we will never know and it is too late to roll it back now in any case.

Perhaps the shareholders wish to present it as a conspiracy theory of the government wanting to destabilise the business so they could swoop in and take it, to the detriment of the shareholders. I would doubt that is the case, as in times of economic uncertainty it is highly unlikely that the government would have a real desire to destabilising a bank and being on the hook for tens of billions of liabilities itself.

and not helped by the Government's painfully slow action to review and announce protection for savers' deposits

The deposit protection scheme which had existed in its form since 2001 involved an element of co-insurance whereby depositors only had 100% protection on the first few thousand and then 90% on the next amount up to £35k. This lack of total protection offered an incentive to a depositor to join a bank run to safeguard their 10% from a potentially failing institution.

While the government might have been 'painfully slow' in volunteering to cover the amounts fully (providing the guarantee for the 10%), it is not the government's fault that the bank had a failed business model and was going down the pan, and stepping up the level of insurance to help the bank avoid the haemorrhage of further customers was something it did not have to do and the bank should not have planned that it would ever do. The bank had pursued its business plan knowing the potential hazard of a failure to refinance on the money markets and the potential impact of a run on the bank from customers who want to safeguard their deposits over £35k and 10% of the deposits from £2-35k. The rules of the game were well known, and the business plan unsound.

...no Bank can do well after that surely, and the extra huge borrowing needed from the taxpayer (caused by the Taxpayers' representatives?) was to largely to replace the £18 Billion removed by the panicked queues in just 3 weeks.

I had not seen that figure put at 18 billion. Reports were that a billion was withdrawn on the Friday after the news broke, and by end of day Monday it was over 2 billion in the time since NR applied for emergency funding, but by that point the government had announced its guarantee. It is not surprising that other groups beyond small retail customers would continue to take cash out in significant chunks. Not the government's fault though.

This was somewhat different from some theoretical 'runs' on a bank where people wanting all their cash out at once created a liquidity problem and caused a crisis. In this case the bank already had a crisis of a liquidity problem before people went running for their passbooks. Compounding the two together, the government was laying out £25-30bn of emergency funding and a further £25-30bn of guarantees. The shareholders did not have the means to cover this. They were out for the count.

(2) the Government had expensive professional advice as to likely outcome of the expropriation action, including a forecast of a substantial profit - which is now materialising; I don't blame them for taking the action they decided upon - if it was to secure future profits,

The government had put so much support into the bank in the absence of other credible alternatives that it would not have any choice but to consider with the help of professional advice how a 'period of temporary public ownership' would work, what cash would go where and how they could spin off certain palatable parts of the business to recover some value.

If they were able to run the business as a going concern (albeit it was not a going concern without their limitless financial support) then future profits could perhaps be made. There is no reason to presume those profits should accrue to former owners of the business ; those former owners had lost 100% of their equity in being squeezed out by letting their business become insolvent.

Of course the business is not 'insolvent' if someone will provide it with virtual unlimited solvency. but in any fair reading of the facts (i.e., if we don't give you this public money, and you do not have any money yourselves, and you owe money, you are not considered solvent)... they were not solvent. Whether or not something can be salvaged from the carcass by the person that buys the carcass - maybe some scraps of meat or the stock of a hearty soup; the person that turned the prize cow into a carcass is not going to be able to turn it back into a cow and share the uptick in value from it being worthless to being a cow again.

but I do feel that the shareholders who lost everything by the decision - without being able to effect it - were unfairly treated.

Shareholders were powerless to affect the direction of the bank because they could not finance the bank. Finance was what stood between the bank dying (taking the banking sector with it) and the bank living. Without the finance, the bank would have been a goner, because the public capital markets were not willing to give it £50-60bn in cash and guarantees which was what allowed it to continue.

The 'lender of last resort' concept stops a systemically important bank from going under. If all else fails it can stop the bank imploding and ensure that those third parties who are contracted with it or have deposited with it or are employed by it will have some sense of orderly conclusion to their dealing with it, preserving its operations where possible. It is not there to maintain the ownership and control status quo and let the people who hold equity shares escape the consequences of their actions (or perhaps inactions in this case) and ride an 'unlimited finance' gravy train back to financial health and wealth.

Still it was not the first time one section of the populous suffered whilst another got an advantage, nor will it be the last I am sure.

I agree there was a situation where one section stands to gain (or at least not lose tooo heavily) where another suffers. But not for the reason you think / the parties you think.

Owning a company is in some sense a low risk proposition for a shareholder. You were a shareholder in a public limited company. This 'limited' bit means your liability for the debts of the company is limited to the amount of money you have injected into the company or that has been injected on your behalf by the person from whom you acquired your shares.

If you finance a company with £100, that company can go and borrow £1000 in the course of its operations based on future projections and whatever story it can spin its lenders and creditors. When money has been lost and assets are not satisfactory to settle creditors, the company might only be able to clear £8-900 of the borrowings and have net immediate liabilities of £200 with no liquid assets.

As the owner of the company you are not on the hook for the £200. Your liability is limited to the £100 you put in. If the business fails you lose all your £100, but you do not lose your proportionate share of the company's losses too. When the company winds up, owing the creditors £200, the creditors suffer and the owners do not.

In that sense, the owner of a share in a 'public limited company' has strictly limited risk - and if they convince others (creditors, finance providers) to put money into the business it can all be lost without the shareholder needing to make good. They can simply hide behind the 'veil of incorporation' which gives the company its own distinct legal personality separate from the owners.

It could be considered that the bank shareholder, in a failing bank, who is not forced to reach into his pocket to find £20-50bn of liquidity to keep the bank afloat, is "one section of the populous getting an advantage while another suffers". If the government did not bail you out, your bank would have imposed suffering on all the other market participants by being unable to pay them out and stay in business. Meanwhile you would just lose your token few thousand pounds which is way less than your company was borrowing as it geared up its balance sheet.

Fortunately, that did not occur, because the government did step in with its deep pockets. So your bank did not do the damage that it might otherwise have done. Good. But that does not mean we should thank you. We should thank the government and their deep taxpayer-funded pockets.

One just has to hope that we are not really some kind of 'banana republic' and that, sometime somewhere the much espoused 'morality', 'values' and 'fairness' by politicians will eventually be visible in the running of the country.

When you had a role as the co-owner of an insolvent business whose demise threatened the financial stability of a trillion pound economy, you should probably be humble. Instead you seek to characterise the UK as a tinpot dictatorship which confiscates assets and runs off with them for personal gain. Interesting perspective.

Your board borrowed money it couldn't afford to pay back, made profits for your company and grew the value of your shares from £4.50 to £12 while paying a couple of pounds of dividends over the first decade of its listed life. Was that moral and fair? I don't remember receiving a share myself?

Then the economy reversed, favouring companies that were not leveraged to the hilt. Your company could not stay afloat on its own and the equity owners lost whatever money they had chosen to keep on the table, because equity investors should typically take the hit before creditors lose out.

Never mind , we fight on.

Thanks for your contributions

Sorry buddy, you are fighting a losing battle.

We gave your company some support in its hour of need, for the good of the economy in general. The company's shareholders, who each had limited liability on their investment to date, had no further cash that they wished to invest to make up for the company's lack of liquid assets. There was insufficient finance forthcoming in the market. As lender of last resort, billions were advanced or guaranteed. Because the company had no more resorts and it did not seem appropriate to just let the company fail.

The taxpayer is still trying to recover value from that act of kindness. The company did get some support and as a consequence parts of it still exist. We do not need to give you such personal support to compensate you for a poor personal investment decision.

I am sure somewhere I have a quote from prev secret B of E minutes, that "there were too many mortgage providers" in UK, but will need to check that...

Q:- If the Rock had been in the South of England ( instead of a Northern upstart pinching business from the established providers) would the actions have been the same?

Why was the leak made?

While I thought your open letter was misguided as I don't think your case has merit, I can understand why you would want to see if compensation might be available and spent half a decade pursuing it.

However, if the straw you are clutching at is some evidence of a conspiracy theory involving a north/south divide, and that the government drove it into the ground at great potential risk because its depositors and some shareholders were Northerners, and it wanted to reduce competition and preferred to kill a Northern bank instead of a Southern one... well I can see why your wife is disgusted that you are devoting your free time and effort to this cause rather than take up more credible pursuits. Please throw in the towel before it drives you crazy.

Mistermeaner

^ thats what i said just used less words

le_loup

dengrainger wrote: »

I promise to come back on here if he actually responds to my letter (if Nicola lets him do that of course).

So yours is a political rant, not an economic one. What a surprise!