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

Generali

!!!!!!? wrote: »

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.

What these bonds of various sorts are 'worth' is an interesting question - how do you value something which has no secondary market but which you still expect to pay you an income?

I suspect that someone is going to make a fortune by doing some proper due dilligence and buying dollars for 10c each.

hgllgh wrote: »

Even if they are eventually nationalised will their assets at that point cover the taxpayers loaned billions?

Your guess is as good as mine as it depends on so many variables. From what I've read it appears that, at the moment, assets just cover liabilities. That implies that if the quality of their loan book deteriorates (that is more people start to default on their debts they have with NRK) then their assets don't cover their liabilities at which point the Govt is subsidising NRK.

That's where it gets interesting (to me anyway) because AFAIK, it's illegal for a Govt to subsidise a bank under EU law. What happens then? That's the point at which I suspect that the Govt will try to start up some kind of Governmental (or quasi-governmental to keep it off the books) mortgage guarantee corporation or some such.

nelly_2

!!!!!!? wrote: »

57bn so far, and still counting:

http://news.bbc.co.uk/1/hi/business/7149405.stm

About 2000 quid of 'support' from each taxpayer in the country.

.

Personally I think it would have been better for people, better for the economy, and better full stop...... to have given every one a 2 grand xmas prezzy and 'eff' northern rock.

And another thing if I ran my company in such a p1ss poor way that I had to borrow money

A - they'd have saif eff off

and

B - I'd have binned it anyway and gone work at mcdonalds

Does anyone know the BoE email? I'm gonna mither them for some money just to see what they say

Generali

nelly wrote: »

Does anyone know the BoE email? I'm gonna mither them for some money just to see what they say

Well officially it's [EMAIL="enquiries@bankofengland.co.uk"]enquiries@bankofengland.co.uk[/EMAIL] but I'd try [EMAIL="mervyn.king@bankofengland.co.uk"]mervyn.king@bankofengland.co.uk[/EMAIL] - please post any responses you get.

hgllgh

Generali wrote: »

Your guess is as good as mine as it depends on so many variables. From what I've read it appears that, at the moment, assets just cover liabilities. That implies that if the quality of their loan book deteriorates (that is more people start to default on their debts they have with NRK) then their assets don't cover their liabilities at which point the Govt is subsidising NRK.

That's where it gets interesting (to me anyway) because AFAIK, it's illegal for a Govt to subsidise a bank under EU law. What happens then? That's the point at which I suspect that the Govt will try to start up some kind of Governmental (or quasi-governmental to keep it off the books) mortgage guarantee corporation or some such.

But defaulting debts are probably not as big a problem as withdrawl of assets from NR? I as far as I'm aware a lot of savers are still withdrawing their savings from NR. So I would have thought that at some point in the near future their liabilites will take over?

joolsybools

!!!!!!? wrote: »

57bn so far, and still counting:

http://news.bbc.co.uk/1/hi/business/7149405.stm

About 2000 quid of 'support' from each taxpayer in the country.

How much longer is this tragi-comedy going to be allowed to run for - the government must be really desperate to see 125% LTV and 6x salary loans continue.

I am so angry about this, how dare the government just bail out a bank which has behaved completely irresponsibly WITH OUR MONEY AND NO CONSULTATION- it doesn't really send out a message to all of the other banks to get their acts together. :mad:

WTF?_2

hgllgh wrote: »

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?

If we see house price falls and a recession, almost certainly not as Brown implicitly admitted when he was asked if he could guarantee Taxpayer's money was safe:

http://politics.guardian.co.uk/economics/story/0,,2229742,00.html

Asked what promises he could make that the money lent to the bank would be returned, he said he could "guarantee ... that the loans we have made available for liquidity to Northern Rock are backed by the assets of Northern Rock".

In other words "No we will not guarantee to get everything back - just what the assets will be worth when time comes to repay"

WTF?_2

Generali wrote: »

What these bonds of various sorts are 'worth' is an interesting question - how do you value something which has no secondary market but which you still expect to pay you an income?

You trade it on the open market and see what people will pay - not really likely to happen though.

Generali wrote: »

I suspect that someone is going to make a fortune by doing some proper due dilligence and buying dollars for 10c each.

Fine in theory but the name of the game right now is to keep those assets off of the market precisely to avoid their price being determined by the market. And those efforts are being facilitated with hundreds of billions of dollars worth of public cash from the central banks.

free4440273

Meanwhile, Libor holding steady: the drain (on public and private finances) continues. Retail sales up also. This 'Boom' is unprecedented in both duration and scale; what WILL pri*k it I wonder. Quite unbelievable....and the stock markets are rejoicing today. A Merry Xmas indeed:rolleyes:

Generali

!!!!!!? wrote: »

Fine in theory but the name of the game right now is to keep those assets off of the market precisely to avoid their price being determined by the market. And those efforts are being facilitated with hundreds of billions of dollars worth of public cash from the central banks.

I'm not sure it is any more. The banks seem increasingly to want to recapitalise. The fact that Citi have taken $43,000,000,000(?) of debt back on to their balance sheet and that other investment banks are going to the biggest sources of cash around - government investment funds - and diluting the investment of their equity holders to gain cash suggests that the big banks are facing up to their losses and dealing with them.

If you've written down the potential losses and got you're capital up straight then you can start to sell your assets that nobody else wants to sell and it becomes an advantage to you as you can weaken your competitors.

It wouldn't surprise me to see someone like UBS try to pull a trick like that.

Generali