Good grief - Fifty Seven Billion pounds of aid for Northern Rock

free4440273

Alias_Omega wrote: »

I think this time im going to vote 'BNP'..

They cant do any worse than these fools we have in power.

^Be careful what you wish for...

Rick62

Gorgeous_George wrote: »

NR shares have plummeted to less than 10% of their value. Exactly how have they been bailed out? What was the better option?

GG

They have been bailed out in the form of direct loans of 25 to 30 £billion and the same again in guarantees.

Yes, they could, and I believe should, have let them go into administration. Shareholders take a speculative risk, and you can't get much more speculative than a business model lending long and borrowing short over £100 billion on an asset base of about £2 billion.

If it went into administration then that would have provided a proper process for restructering the business, and if that meant shareholders losing their investment and depositors losing, maybe, 5 to 10% of their deposits then so be it. It would have made everyone, banks and shareholders and depositors more aware of the need for proper risk assessment and thus help prevent the same things happening again, I think the BOE term is 'moral risk', i.e. taking responsibility for your decisions.

I don't believe it would have had a huge knock on effect on banking confidence, everyone knew that NR was a one trick pony, with all their assets in UK property and absurdly geared. It might have helped deflate the property bubble, but that was overdue and is happening anyway.

Why should I, as a taxpayer, bail out a private company who were quite happy taking £1million plus salaries when times were good?

wolvoman

Curious_Moose wrote: »

So he bails out NR shareholders but left the poor sods who lost their final salary pensions to rot for years. Oh yes, and he helped screw them up in the first place with his £5 billion a year tax grab.

Ironically many pension funds will have been hit by the huge loss in the NR share price.

Naturally though as soon as mention of the word 'shareholders' is made, people assume it is just pin-striped, Porsche-driving city boys and not the rest of us with our pension funds invested in the stock market.

hgllgh

I would have thought that new savers and borrowers would be shunning NR so how exactly are NR going to pay back the huge loans that have been made to them?

WTF?_2

Generali wrote: »

What is different in this case is that Northern Rock have been allowed to use lower quality assets to secure their borrowing. This means that they have given the Bank of England mortgages and other debts that are owed to them in return for being able to borrow.

Here's a nice little example of just how much even AAA debt obligations can be worth (article about Morgan Stanley predicting the sub-prime mess and still managing to lose $7.8 billion)

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2007/12/morgans_hedge_howler.html#commentsanchor

Here’s the terrifying statistic.
Morgan Stanley has now valued the super-senior AAA securities at between 30 and 35 cents in the dollar.
That’s a two thirds write-down for an investment which was supposed to be investment grade.
Will be interesting to see how much the NR assets are worth should they ever be tested. There's a reason why no commercial bank will touch mortgage backed securities with a bargepole right now. Just as well the taxpayer-backed central bank is there to step in, huh?

WTF?_2

wolvoman wrote: »

Ironically many pension funds will have been hit by the huge loss in the NR share price.

Naturally though as soon as mention of the word 'shareholders' is made, people assume it is just pin-striped, Porsche-driving city boys and not the rest of us with our pension funds invested in the stock market.

If you think that's bad you're going to have a heart attack when you see how much sub-prime 'toxic waste' has ended up in pension funds. If that gets out there'll be a national outcry.

nelly_2

I just emailed there governing party with this


Dear Norway is there any chance you can run for election in our country please?

We hate all our leaders and we would much prefer you to do it thanks Neil

I'll post their reply when I get it

dannyboycey

As far as voting goes.... there is no choice at all. For the first time in history, every party seems just as pathetic as each other!!

I hear Jose Mourinho is looking for a job....

mutley74

at least the money has not gone to fund Afghanistan or Iraq, or pay towards the asylum seekers looking for free meal tickets and more.

hgllgh

hgllgh wrote: »

I would have thought that new savers and borrowers would be shunning NR so how exactly are NR going to pay back the huge loans that have been made to them?

Actually, does the above sound familiar ?? :rolleyes:

Who is going to bail the Bank of England out when their debtors default ? :rolleyes:

ok, being sarcastic but is there a serious question in there?
Even if they are eventually nationalised will their assets at that point cover the taxpayers loaned billions?