Northern Rock going bust question

aah

oh well - I do need a degree in financial gobbledegook.

I dont understand much of the previous pages but am sticking until redemption time (wayy hayy) for my NR mortgage unless the company is sold to predators before that.

If that happens I will try and move to the Newcastle. It is important to keep a significant finance outfit up here.

inmypocketnottheirs

knowledgeman wrote: »

Northern rock will not go bust

Id actually suggest that buying shares today would be a good long term money maker

There assets are high and its a cash flow problem which the BOE will assist them through

It may take a few months, maybe even years but they will recover and the shares will recover making anyone who invests now a fortune

The same could be said for all banks as the shares are low at the moment and will recover

As said even if they did go bust which they wont another one of the banks would buy the business from the creditors and streamline all the products with their own which could be bad for you

I thought at the time you were talking a load of ********, and now it looks like you were. NR is perilously close to insolvency, with the interest on their crisis loans mounting daily and investors withdrawing their cash. I wonder if you took your own advice and bought shares, as it looks like none of the interested parties will be giving anything to shareholders.I woulkd consider a change of user name if I were you!

danm

!!!!!!? wrote: »

Their business model has proven to be unworkable except in a very specific set of market circumstances.

The notion that somehow they are just unfortunate victims of bad circumstances is bunkum. They chose a business model that relied on super-cheap, super-lax money market credit and a market that would happily gobble up mortgage based security products and embarked on a course of rapid expansion on this premise.

this is about as inverse from the actual case as could be.

The business model proved to be workable in all but a very specific set of market cicumstances (i.e the one we currently find ourselves in)

In a way NR are the victim of an unfortunate circumstance. Namely the US sub-prime crisis. Their mortgage book performance is as good as any of its peers. Unfortunately the current environment prevents them from issuing securities

sarkin

I think nortgage rock mortgagees will be leaving by the shed load when thier deals are up regardless of what happens to the bank. The banks name has been trashed people dont care, they dont understand and dont want to understand they just wan to know they are with a bank they can trust.

Dylanwing

In a way NR are the victim of an unfortunate circumstance.

I am just an average layman, and if a Bank needs £24 Billion to prop up it's business, it seems to be a bit more than just 'unfortunate circumstances'. In a free market economy, is that not bankruptcy? My prediction - A buyer gets the business on the cheap, Darling announces a 'Great deal for the taxpayer', but it later transpires that it has actually cost a few billion, staff get shafted, customers all pay a bit extra, and a few individuals get very wealthy. And the Muppets who caused it all get further lucrative Directorships! Cynical I know... But I will probably be proved right over time.

huggy45

i've read all the previous posts with interest, but am still confused about whether the fixed mortgage i have for another three & half yrs will be honoured by who ever buys nr as that looks like happening, if it does happen, would nr be forced to pay a penalty clause to its customers ??????? i seem to think if i changed my mortgage i'd have to pay an early settlement fee. Or is this me being very silly??

MiserlyMartin

danm wrote: »

The business model proved to be workable in all but a very specific set of market cicumstances (i.e the one we currently find ourselves in)

Well, no. It worked for a while. The circumstances in which they carved their business model were unique. The days of cheap credit, lax money markets, repackaging of cheap loans are now over. This is what they based their business on. It had to end eventually. The government should not bail them out. Let them go under otherwise no lessons will be learnt and nobody and anyone trying to run a bank like that will ever think twice if nobody is held to account.

I had to laugh rather loudly at Knowledgeman's post saying NR will not go bust and to buy shares.... Oh dear, I hope he didn't take his own advice!!!
I saw this all coming. I saw the run coming after they put themselves up for sale but it happened quicker than I predicted. Well now its pay back time for all these years of easy money and cheap credit and Gordon Brown must be having restless nights worried that ordinary people will see his miracle economy was nothing but a sham.

danm

MiserlyMartin wrote: »

Well, no. It worked for a while. The circumstances in which they carved their business model were unique. The days of cheap credit, lax money markets, repackaging of cheap loans are now over. This is what they based their business on. It had to end eventually. The government should not bail them out. Let them go under otherwise no lessons will be learnt and nobody and anyone trying to run a bank like that will ever think twice if nobody is held to account.
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i think that the current stress the credit markets are going through are in there own right more unique that the debt markets of the previous 3/4 years.

days of cheap credit will return, issuers are returning to the RMBS and ABS markets, obviously at greater cost.

the cost to a large extent isn't the issue, (this can be passed on or hedged against). the issue is that no mortgage financing is available in the market as participants are concerned about where the next losses due to the US sub-prime markets are. balance sheets are closed and the lending banks have shut up shop. This is the problem (i.e liquidity).

should NR have safeguarded against this? possibly, but no-one could have forseen the circumstances that the markets currently face. The liquidity crunch happened virually overnight and to a degree that stress testing did not forcast....it is a unique set of circumstances

MiserlyMartin

Lots of people saw this coming, forseen for months. Its the result of unregulated lending, sub prime mainly. We have it here too, dodgy mortgage brokers espeically the self cert lot. The FSA is supposed to regulate it but they are pretty much as effective a regulator as the idiots are in running our present government.

Dylanwing

What about the brokers who packaged the US rubbish mortgages, and the Bank mugs who bought them without really knowing what they were buying? If somebody bought a heap of disguised over-priced junk on E Bay, you'd think they were stupid and that the seller was a con artist. These Bankers probably got huge bonusses for this, and the Banks still haven't really worked out what they actually bought.
The common themes seem to be greed and lack of caution.