Northern Rock has borrowed 10 Billion quid

WTF?_2

According to Reuters, NR has just borrowed another 2.9 billion pounds from the Bank of England (ie. us, the taxpayer) taking borrowings to over 10 billion since they applied for emergency loans and that may go as high as 20 billion....

http://uk.reuters.com/article/businessNews/idUKWLB285420071004


and yet they're still offering their ridiculous 125% LTV mortgages:

http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=151459&d=340&h=341&f=342

“The general trend is the removal of the lower LTV products and exclusive intermediary and direct deals, but still retains its full range of percentage fee products (ranging up to 3.5%), and its fixed rate Together deals at 125% LTV.

Great, the government is having the taxpayer underwrite the sort of lax lending behaviour that has inflated the house price bubble. Why on earth should a financial institution behave responsibly when those that hand out money like it's about to go out of fashion get bailed out?

ManAtHome

But isn't the taxpayer getting 6.75% interest for their underwriting..?

Could start a whole new trend - forget about offering joe public decent savings rates, just borrow the lot from BoE (only snag seems to be around losing 80% of directors bunce from bonuses and share options - shame).

Would agree that there will be hefty dose of politics involved in the assessment of the quality of the loans - maybe they brought S&P in to do the valuations?

kingkano

They are dumping extended income multiples though.... so some responsibility returning.

They will start becoming a lender of last resort now anyways. Very high fees on their mortgages, they won't be able to offer good rates based on these borrowings, and they have cut all their incentives away....

Generali

It looks like they're going to be bought up by a private equity firm.

The government can't keep the guarantees in place indefinitely. They breach EU Competition Law.

Toto

I wonder if northern rock had to self cert?

free4440273

to me, it smacks of hypocrisy: if another institution, say, for example another BS, had difficulties and I had my monies (say, for example, £100K) tied up in there, would the BofE then bail them out?? Of course not: it's just one rule for some...the BofE are simply throwing money at a problem that they cannot solve.

Moorepart

!!!!!!? wrote: »

According to Reuters, NR has just borrowed another 2.9 billion pounds from the Bank of England (ie. us, the taxpayer) taking borrowings to over 10 billion since they applied for emergency loans and that may go as high as 20 billion....

.

Great, the government is having the taxpayer underwrite the sort of lax lending behaviour that has inflated the house price bubble. Why on earth should a financial institution behave responsibly when those that hand out money like it's about to go out of fashion get bailed out?

Northern Rock is being propped up solely for political purposes, as it is known as the bank of the Labour Party.

It is a misappropriation of of public assets, the company should now be wound up and the receivers called in to pick over the remains and sell off what little assets remain, before the public find themselves funding yet another New Labour Party disaster, funded from the back of hard working British Families.


New Labour who refuse to provide housing for the needy, yet spend 10Bn of tax payers money on their cronies failed business activities. :mad:

Imagine how manyy new social houses could be built for 10Bn pounds, alternatively that is 10 new hospitals!

Brown and Darling really are a pair of fools - drunk with power. Ar*eholes!!!

Generali

Moorepart wrote: »

Northern Rock is being propped up solely for political purposes, as it is known as the bank of the Labour Party.

It is a misappropriation of of public assets, the company should now be wound up and the receivers called in to pick over the remains and sell off what little assets remain, before the public find themselves funding yet another New Labour Party disaster, funded from the back of hard working British Families.


New Labour who refuse to provide housing for the needy, yet spend 10Bn of tax payers money on their cronies failed business activities. :mad:

Imagine how manyy new social houses could be built for 10Bn pounds, alternatively that is 10 new hospitals!

Brown and Darling really are a pair of fools - drunk with power. Ar*eholes!!!

The Government has no choice but to prop up banks on which there is a run. Bank runs have a horrible habit of spreading and really messing things up.

The guarantee hasn't actually cost anything yet.

You are much more complimentary about B&D than I.

Debt_Free_Chick

Northern Rock has always borrowed money, to lend on to those with mortgages.

It's just that there is less money in the market now (as everyone is lending less) so they're borrowing from the BoE instead.

This what NR savers failed to appreciate when they rushed to take their money out - NR don't lend money from savers' accounts - they borrow to match what they lend.

Moorepart

Generali wrote: »

The Government has no choice but to prop up banks on which there is a run. Bank runs have a horrible habit of spreading and really messing things up.

The guarantee hasn't actually cost anything yet.

You are much more complimentary about B&D than I.

you assumption is that Northern Rock has the ability to pay the money back.

You have obviously studied economics in a Labour controlled Comprehensive School.

The simple fact is, if an organisation needs to borrow 10bn from the Government, because other banks who are educated in finance refuse to lend to them because the risk is too high and they rate that company as a dead duck, then it is highly unlikely that the money will be repaid.

When Northern Rock fold in three weeks time,(I hope they do) how will the Bank of England get the 10bn back ?

Or will Defr, or the NHS lend it to the Bank of England ? Who in turn borrows it from the Taxpayer.

Would you lend 10bn to a company with such strong affiliation to the Labour Party that it has acted so irresponsibly over the past yearss, confident that their cronies will bail them out.:huh:

Debt_Free_Chick

Moorepart wrote: »

you assumption is that Northern Rock has the ability to pay the money back.

The assumption is that those who have borrowed from NR have the ability to pay it back. The money borrowed from the BoE is then lent to those who want a mortgage.