Nrothern Rock Buying Own Repos

Generali

Link

Northern Rock has lent people silly amounts of money to buy overpriced property. When those people can no longer pay the mortgage they are reposessed and NRK end up buying them out for less than they originally paid using taxpayers' guaranteed funds.

NRK will end up as a massive, state owned buy to let company at this rate. I'm not sure how they'll square this if they are nationalised. Would the Govt be able, politically, to rent people homes on a commercial basis? You can bet that within weeks of nationalisation there'd be a picture on the front page of the newspaper of an unhappy looking woman with her 6 kids complaining that she'd been evicted because 'they'd' increased the rent and she couldn't afford it.

Perhaps this is NRK trying to avoid nationalisation, what is known as a poison pill - a way of setting up a company to make it nearly impossible (or at least very expensive) to take it over. Instead this poison pill is to stop the Govt nationalising them.

KITCHEN1_2

It's only my opinion ,but I think the 'eye' of this storm where the NR might have well have been nationalised has passed.By not taking that option then I think the govt has signalled strongly that they will go to great lengths to make this a private sector transaction.

Generali

KITCHEN1 wrote: »

It's only my opinion ,but I think the 'eye' of this storm where the NR might have well have been nationalised has passed.By not taking that option then I think the govt has signalled strongly that they will go to great lengths to make this a private sector transaction.

Whilst I agree with you, there are still a lot of hurdles to get over, not least of which being able to structure a deal that makes financial sense for the buyer, is politically acceptable and gets around the EU state aid rules.

The first and second things are going to be hard to reconcile with each other. It's not going to look good if someone makes billions off taxpayer guarantees but why would someone risk all that money (not to mention reputation) if the payoff isn't there?

WTF?_2

I believe the current plan is to issue securities, underwritten by the government (ie. us, the taxpayer) for all the NR debt on the books. (ie. Tens of billions of pounds.)

Then a private organisation will take over day to day running with the unlimited borrowing facility still available from the BoE. ie. The taxpayer will still be liable for billions of possibly dodgy debt being generated in the future.


Sounds great - if you're the new private owners who will have the chance to make lots of money for themselves if it all goes well, with all the risk being assumed by the public purse if it goes wrong.

Another total and complete financial disaster from a cretinous government.

There's another aspect to this - since the government stands to directly lose money should the housing market fall this must call into question their impartiality when it comes to a balanced economic policy. There will be tremendous (additional) pressure to shore up the housing market because of the direct debt liability on the Mortgage Backed Securities they will be issuing.

FelOn_2

Generali wrote: »

Link

Perhaps this is NRK trying to avoid nationalisation, what is known as a poison pill - a way of setting up a company to make it nearly impossible (or at least very expensive) to take it over. Instead this poison pill is to stop the Govt nationalising them.

"Kielder (NRK) would buy the property only if it offered the highest price at auction. In the event, the credit crisis meant that only two properties were bought"

A nothing story from The Torygraph :rotfl: