northern rock on the news begging for cash

epz_2

just came home and saw northern rock is trying to get cash out of the BOE as they cant raise the cash they have promised, is this time to opt for cash under the matress savings option?

$$$_12

http://news.bbc.co.uk/1/hi/business/6994099.stm

Melissa177

Just saw this on the news - why does this not surprise me?

Generali

That the BoE is acting as lender of last resort is a correct response. It's a part of their job.

The £1,300,000,000,000 question is will they do the same for all those that have borrowed to much (by letting inflation rip) or will they look to maintain CPI within target range?

Did anyone short Northern Rock? I think I suggested it.

Debt_Free_Chick

Generali wrote: »

That the BoE is acting as lender of last resort is a correct response. It's a part of their job.

And it's why NR - or any other properly authorised "bank" - will not default and call in their loans. And why savers will not lose their money.

Any talk of any "bank" (any institution properly authorised, that is) going to the wall is unjustified. It's not happened in "modern times" as far as I know. The plan is ALWAYS that the BoE will step in (as far as banks/lenders are concerned).

Nenen

excuse the very naive question... but is it likely that this bailing out of Northern Rock by the BOE will affect house prices?

$$$_12

Debt_Free_Chick wrote: »

And it's why NR - or any other properly authorised "bank" - will not default and call in their loans. And why savers will not lose their money.

Any talk of any "bank" (any institution properly authorised, that is) going to the wall is unjustified. It's not happened in "modern times" as far as I know. The plan is ALWAYS that the BoE will step in (as far as banks/lenders are concerned).

http://en.wikipedia.org/wiki/Barings_Bank

Generali

Debt_Free_Chick wrote: »

And it's why NR - or any other properly authorised "bank" - will not default and call in their loans. And why savers will not lose their money.

Any talk of any "bank" (any institution properly authorised, that is) going to the wall is unjustified. It's not happened in "modern times" as far as I know. The plan is ALWAYS that the BoE will step in (as far as banks/lenders are concerned).

BCCI, Barings.

It does happen. If NR go bust, the loan book will be sold on by the Official Receiver. Savers will get most of the first £30k odd back.

Chances are, if NR are insolvent that they'll be bought out by someone else before it can all go wrong. Lloyds Bank springs to mind. No idea why.

jubblyjimbo

It is unlikely that NR would have to start calling in loans, or go bankrupt. I don't think we are witnessing a collapse of the banking system.

What is likely is that as NR are borrowing from the BOE at penalty rates they will seek to pass that on to borrowers in the form of higher mortgage rates. And as they're borrowing they havent got oodles of spare cash to lend as mortgages.

It's more upward pressure on rates. It just depends on how long the credit crunch lasts for. And it will last for as long as financial institutions are uncertain about which banks have gone out on a limb by lending too laxly in the sub prime market. Although NR is fairly obviously fairly exposed to sub prime.

Generali

Nenen wrote: »

excuse the very naive question... but is it likely that this bailing out of Northern Rock by the BOE will affect house prices?

Thanked you by mistake. I'll make a point not to thank you next time you make an excellent point!

It could do. NRK are a big lender, especially at the high LTV and x salary end of the market. That will presumably stop people bidding as high as they want to for properties as a source of funds has dried up.

Other similar firms (Bradford and Bingley?) will presumably find it harder to borrow (and thus provide mortgages) as they are found guilty by association. That could have a knock on effect.

Debt_Free_Chick

$$$ wrote: »

http://en.wikipedia.org/wiki/Barings_Bank

:rotfl: :rotfl: :rotfl: :rotfl:

Firstly, Barings was an investment bank. It did not lend money for mortgages; it did not offer savings accounts to the public.

Secondly - and you need to have read the whole of the link you posted - it was bailed out ..... Even (the revered) Wikipedia states ....

"Barings was purchased by the Dutch bank / insurance company ING for the nominal sum of £1 along with assumption of all of Barings liabilities"

Translation? The money owed by Barings Bank was coughed up by ING.

But the main point is that it was an investment bank.

I did wonder how long it would be before someone mentioned Barings .... or BCCI :rotfl: which collapsed due to a well-organised case of fraud, which no amount of regulation can protect. After all, there's a law against murder - but it still happens :rolleyes: