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

le_loup

bowlhead99 wrote: »

Please throw in the towel before it drives you crazy.

Too late!
Otherwise, another perfect exposition. Thank you. Now get some sleep.

antrobus

ggb1979 wrote: »

frauds

pining for the frauds

Not bad at all.:)

Or there is this;

It is at this point that some of us feel that we have experienced a Monty Python Moment and feel under an obligation to refer to the Northern Rock as being deceased, dead, and pining for whatever dead banks pine for. (Perhaps the good old days of Minimum Lending Rate and the Building Society Cartel.)

http://everything2.com/user/aneurin/writeups/Northern+Rock

redux

Castles made of sand will fall into the sea, eventually.

Jimi Hendrix

cosmicobserver

Dear Bowlhead


I totally disagree with the chronology and analysis you have put forward for the confiscation of Northern Rock. Clearly you have considerable prejudice against the shareholders who lost a profitable, solvent bank through no fault of their own. You present a highly selective set of events to support your views.


The facts are as follows:


Yes on the last trading day before Confiscation the shares were at 96 pence. This reflected the "death of a thousand cuts" inflicted by inept Tripartite policy execution with regard to NR specifically and the Banking crisis in general. Exactly a year earlier in February 2007 the shares were above £ 12 (as you acknowledge). The real damage was done by the "tripartite leak" to the BBC regarding the provision of LOLR. The shares were at 645 pence before the leak -- way below analyst estimates.


No bank can survive a Run. The Central Bank has a statutory and Fiduciary Duty to support approved financial institutions in these situations. What was a £ 5 Billion funding problem due to the freeze in global wholesale markets became a £ 20 Billion problem by Christmas 2007 -- this was totally the fault of the Tripartite, not NR.


You say other banks were less reliant on wholesale funding. This is true BUT not by the ratios you state! NR relied on markets to fund 71% of requirements -- other major UK banks were dependent for over 50%/ 55%. Certainly the NR management were wrong -- in retrospect-- not to more quickly adapt their business model months earlier as early signs of the credit squeeze emerged. I wrote several letters and emails to the Tripartite and the Labour Government before they understood global economics and the Financial Tsunami that was coming in summer 2007.


You say it was worth nothing at nationalisation. This is wrong! Net assets were over £ 3 Billion. Yes toxic debts were there but nothing in comparison with the gigantic sums at Barclays, RBS and other larger banks. The £ 25 Billion of loans provided to NR fade into insignificance when the £ 1,5 Trillion total support given to UK banks is considered. The reluctance of potential bidders was due to wrong assumptions about the quality of the NR asset book, lack of confidence in the Tripartite still suffering from "moral hazard " up to April 2008, and TIMING1 You never sell an enterprise at the bottom of a market. In summer 2007 the Bank of England blocked a £ 3 per share offer from Lloyds because it was considered far below fair value. Lloyds, HBOS, RBS, etc were all close to zero value until the Tripartite woke up and launched the huge support package in April 2008, augmented heavily by interest rate cuts and a year later by massive QE. All we seek is that NR be valued like other UK banks who were able to survive with the £ 1,5 Trillion support over 2008/ 2012 period and more.


The estimate of £ 12 Billion SURPLUS over 15 years is an official UKFI/UKAR projection. This equates to a NPV of £ 10 Billion or so. We would never argue that we should get all this huge bounty. The Government deserves not only repayment of loans, capital, interest , tax but alsp Profit for the State Aid provided to a critical patient. We simply seek to SHARE some of this huge "unjust enrichment" with the taxpayer. It is sheer nonsense to argue that the Government wanted all its help of £25 Billion returned instantly at nationalisation! The very purpose of State Aid is to assist profitable, solvent enterprises rehabilitate and return to normal commercial trading as soon as possible -- NR met all the State Aid criteria. Instant return od State Aid is "unreal" and is like asking a critical care patient in hospital to immediately give back all blood transfusions, life support facilities and medication so that a stand alone "value" can be assessed. No other bank was asked to return State Aid instantly -- they have enjoyed seven years of support recovering varying degrees of value for shareholders. NR would have done much better with the lowes toxic debts, lowest misconduct fines!

redux

I'm thinking of a couple of those very extreme house restoration projects that have been on the telly.

Buying house improvements with credit cards may work for a few months, but becomes very risky when the credit limits or monthly repayments have been breached, the owner has given up a job to work on the project full time, the existing suppliers haven't all been paid and new ones are turning down credit, and the new mortgage contingent on the result is still not available.

This analogy comes to mind while reading about Northern Rock's position as it came to need those liquidity loans after being turned down commercially, the mismatch of short and long term money.

The house might have some residual value after all the loans are repaid, but maybe not much if work stopped at the most inopportune moment, with all the insides stripped out, much more work (including some unforeseen repairs) is needed to get the place habitable again, it will all cost more than twice what was originally hoped, and that's not recoverable in the final value. It's worth something, but there are still loans on it, and no profit made.

dengrainger

Bowlhead,
Phew, took some reading; you SHOULD join our group!
Understand what you say, will give it my fullest consideration; however, I and others still fight on for what we see as a righting of a wrong.

When I used the word 'sympathy' I of course was using the word not in any pity sense, but merely to show my support, alignment or commendation for much of what you have said; the 'arguments' being the views you expressed in support of your position in suggesting that we have an unsound case etc.

I still believe that the difference in treatment of the Rock compared with other banks, is a valid concern, and that the shareholders are entitled -in this case- to a share of the 'upside', if only as restitution .

Glen_Clark

dengrainger wrote: »

I still believe that the difference in treatment of the Rock compared with other banks, is a valid concern.

Maybe the Scottish Banks shareholders were (partially) bailed out because Brown and Darling had Scottish constituencies or whatever, I don't know. What I do know is the long suffering taxpayer certainly can't afford to bail everyone else out like the Scottish banks, although as a Bradford and Bingley shareholder I wouldn't turn it down if offered - who would?

dengrainger wrote: »

I and others still fight on for what we see as a righting of a wrong.

I think you have already tried everything. Frankly, presenting this as a righteous moral crusade on behalf of the 'little people' is crossing the line of insanity. How could politicians present another bank shareholder bailout to the electorate now, most of whom are struggling between paydays and rent/loan repayments without any savings, let alone bank shares?

dengrainger

Glen Clark
Understood, not easy for any party.

However, the point we make is that some of the 'profit' (estimated at £10 Billion upwards) coming to HMG emanates from the embedded value of the company , value which belonged to the shareholders who were deprived of ANY payment thanks to the Valuer being 'obliged' to find a Nil value via unfair assumptions he had to follow..

The share of the profit, however big or small it is, represents the money reaching HMG which rightfully belongs to the shareholders; in that sense it is not shareholders being paid by the taxpayer, it is a return of monies 'borrowed' from the shareholders during the 'temporary public ownership'.

I guess we will agree to differ on this, but, I have your opinion, thanks.

There was something strange about the Scottish banks getting the treatment they did. And I believe that Bradford & Bingley had similar Valuer restrictions applied, which I would also argue were invalid; but, I don't know the ins and outs of the B&B affair.

As regards whether the taxpayer could give similar support to other banks, as someone posted earlier the taxpayer put well over a £ trillion into the whole sector only a few weeks after grabbing the Rock.

Mistermeaner

Thanks for raising all of this because it has been an interesting debate. Not sure you got the responses you were looking for but hopefully you have a variety of opinions on the matter to shape your future actions.

I think any further expenditure on your part of time or money pursuing this will be wasted.

dengrainger

GGB
Thanks
Fair point
I really have to finish on this site, anyway, because I am involved with this sort of action on I think it is 4 or 5 sites currently, and am absolutely exhausted!

Some negativity, as ever, expressed, but some worthwhile and interesting posts of value.

Thanks to all.
Den