Northern Rock Crisis Article Discussion

tightwadman

Absolute nonsense! No branch will let you withdraw from an online account

Absolute rubbish! I got a cheque for the vast majority of my silver savings from a branch as I explained I could not access the online account in three full days. Staff were very pleasant and I had no problems. You just have to be firm and clear and polite. I certainly would not have left without my money or accepted some daft excuse.

luv_my_brass

[Deleted User] wrote:

Hi,

this is from Martin's news letter this am,

Northern Rock, now the safest place for its existing savers? Northern Rock savers now have safe savings' holy grail: a Government backed product. Interestingly, the Govt’s promise was to protect ‘existing deposits’, meaning those who shift money out of Northern Rock and now redeposit it, mightn't now be protected. I’m checking this as we speak; updates will be in the Northern Rock crisis article.

any idea yet if new deposits are covered by guarantee?

This situation should be a wake up call to NR to do something about the low interest rates they pay on savings. Anyone who has withdrawn money from NR will hopefully now be looking around for a higher return, to re-deposit in NR would be rather short sighted.

mystic_trev

mystic_trev wrote: »

I'm not sure the Government can do this as it seems to breach EU Regulations

I posted this a couple of days ago. Now from todays Torygraph.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/19/cneu119.xml

hudders

Hi i have 1500 shares in NR, should i sell them now or do you all think the share price will go back up? What happens if they are taken over do i loose my shares?

Please help

gt94sss2

hudders wrote: »

Hi i have 1500 shares in NR, should i sell them now or do you all think the share price will go back up? What happens if they are taken over do i loose my shares?

If the company is taken over you will either end up with shares in the acquiring company or cash.

What nobody can tell you is if the price offered per share will be higher or lower than the current market price though and thats the risk you take holding the shares.

Regards
Sunil

baby_boomer

I strongly oppose the government's support of Northern Rock since it will encourage future risky behaviour by bankers and savers i.e. it creates a moral hazard. And it is bound to add to higher future charges on savers and investors to fund future enhanced compensation schemes, while putting taxpayers' money on the line in the short term.

I understand how Martin might support the government's action, since it will encourage sites like MSE which pick out the highest rate but are not qualified to comment on the solvency of the institution it highlights. Martin is better off if the taxpayer underpins all of his recommendations, so he can't be sued for recommending IceSave or whatever.

The government did not encourage people to save with Northern Rock. It did encourage people to save in dodgy company pensions. Yet it is the former who get guaranteed .

dolce_vita

Latest government compensation scheme.

SEE HERE

dunstonh

I strongly oppose the government's support of Northern Rock

The Govt has yet to give any support to NR. This has been one of the most misrepresented bits of information in the media. The BoE put in place a facility for NR should they require it. Northern Rock, to date, have not needed to draw upon it.

And it is bound to add to higher future charges on savers and investors to fund future enhanced compensation schemes, while putting taxpayers' money on the line in the short term.

The FSCS is funded by financial services companies not the taxpayer. Of course, increased levies have to be paid for somehow and the cost will likely go back to the consumer but not all of them will be taxpayers.

NR was never going under. It was solvent and whilst it's business model has been highlighted to be highly flawed it wasnt going under. The BoE offered an overdraft facility should NR need it and if they did, the taxpayer would have done well out of it due to the rate being above LIBOR. You could argue that as NR hasnt drawn on that facility, the taxpayer has lost out.

SussexResearcher

dunstonh wrote: »

The Govt has yet to give any support to NR. This has been one of the most misrepresented bits of information in the media.

Well put. I am frankly appalled at the ill-informed and downright wrong use of terms like 'bail-out' and 'support' on the Northern Rock matter and claims in the media that the cost would all be paid by the 'tax-payers'. The only people who are likely to lose out may be the shareholders in Northern Rock. There is a well written Q&A by Sarah Modlock on Yahoo! Finance on http://uk.biz.yahoo.com/18092007/389/northern-rock-questions-answered.html

The simplest way to understand the problem of Northern Rock is to see the episode something like this.

Mr Smart (perhaps too smart for his own good) has a million pound house with a mortgage, a car loan and other bills to pay. One day, he suddenly loses his job and realises he has not got more than a month's outgoings in his current account. Mr Smart soon finds himself in cash flow problems. The word gets out and his lenders all suddenly turn up asking for their monies back. Mr Smart approaches a few friends (other banks, money markets) for some cash on interest, but they refuse. He is then forced to go to a big bank (BoE) with evidence of a large colateral (his million-pound mansion) and applies for an overdraft, which the bank approves after checking his finances. Mr Smart would have to pay a 1% higher than the usual rate of interest, but he has no choice because of his cash flow problem. He has so far not used the overdraft facility, although he may eventually have to use it.

Magnify the above scenario many many times over and you have the Northern Rock in September 2007.

As long as Northern Rock has not used the BoE overdraft, not a penny of government (tax-payers) money has been spent.

If and when the overdraft is used, it will earn more than the BoE interest rate of 5.75%. The government has also said it would guarantee the savers' deposits with the bank, because (1) it is perfectly feasible in the light of the bank's assets and (2) governments are always the ultimate guarrantors of the monetory system. Nevertheless, when something like this happens, it is unpleasant and this government's credibility for economic competence has taken a knock in people's perception - I believe not entirely fairly since Northern Rock is a private business.

The government was right not to have bailed out Rover as a business and it is right not to attempt to bail out Northern Rock, which would have meant giving Northern Rock subsidies to shore up the shareholders and to keep employees in jobs. That has, however, not happened, nor should it and I do not believe it will happen.

Martin Lewis's guidance on this is entirely responsible and objective and he is, in my view, doing us all a service.

MarkyMarkD

MarkyMarkD wrote: »

FSCS protection is limited to £31,700 (£2,000 + 90% x £33,000 = £31,700) in respect of each FSA registered institution. It's important to express it that way - as some institutions share an FSA registration, such as most members of the HBOS group from this week.

But given that the government are now guaranteeing 100% of all savings in Northern Rock (and any other insitution hit by the present crisis), the point is somewhat academic.

Edited because I posted complete cobblers in my sleep the first time - SORRY!