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View Full Version : Why should the taxpayer be bailing-out Northern Rock?



Lucy
18th September 2007, 19:49
Doesn't it just encourage more irresponsible lending?

I say let them fall.

bored
18th September 2007, 19:53
Yes.

To be fair though, guaranteeing customer deposits is not the same as bailing out a failing bank. If NR run out of cash, the govt/courts can still dismantle it and sell piece by piece without affecting deposits.

chicane
18th September 2007, 19:53
It said on the BBC that the Government hadn't worked out exactly how they'd get hold of enough money to bail out Northern Rock if it was to collapse.

I think that in saying they'd bail them out, they were aiming towards putting the public's confidence back in NR, therefore preventing a collapse in the first place.

TheFaQQer
18th September 2007, 19:54
They aren't.

The BoE has guaranteed the deposits, if they need to, during the current world-wide financial market crisis.

Up until yesterday, NR hadn't even borrowed from BoE, let alone being bailed out by them.

DBA_bloke
18th September 2007, 19:54
Q: "Why should the taxpayer be bailing-out Northern Rock?"


A: To stop the economy going into a nosedive.

NR have done nothing that the other banks haven't done. NR used to get its cash from its banking world pals - only they are ALL feeling the pressure now, following-on from the Sub Prime thing, and so UK banks (some of them) don't really know what's on their books, and so are relucatnt to loan.

bored
18th September 2007, 20:00
NR have done nothing that the other banks haven't done. NR used to get its cash from its banking world pals - only they are ALL feeling the pressure now, following-on from the Sub Prime thing, and so UK banks (some of them) don't really know what's on their books, and so are relucatnt to loan.

Bollox. A failure of NR does not mean the economy has to go into a nosedive. NR ran out of cash and had to borrow from the BoE but there are plenty of banks who have enough liquidity and who will happily pay for NR's obligations if they can get a good deal.

Moscow Mule
18th September 2007, 21:01
NR ran out of cash because all of the media reported the fact that they had organised a credit line as "NR borrowing cash from BoE"

The fact is that if the story had been reported responsibly, poor little old ladies with millions in NR wouldn't have felt the need to get their money and stuff it under the mattress, and NR wouldn't have had to use the credit line.

Moscow Mule
18th September 2007, 21:04
On the subject of the bail-out, it's not really is it?

The government has said they will guarantee the deposits, what would happen if they had to pay up has not been reported (unless I've missed it). I assume it would involve NL acquiring the 8th biggest mortgage lender in the country.

beaker
18th September 2007, 21:05
The thing is the panic just makes it worse as everyone tries to withdraw their money, making a collapse more likely. Take your money out of the bank before the bank runs out of money! :freaky:

eh?

bored
18th September 2007, 21:09
I assume it would involve NL acquiring the 8th biggest mortgage lender in the country.

I am not sure what exactly the laws say about the situation but I've always assumed that if a bank fails to pay up its obligations are split and sold to the highest bidder or as a a proportion (~90%?) of book value. The government probably can't acquire it because they don't have enough cash anyway...

sasguru
18th September 2007, 21:16
It sets a dangerous precedent - what if every bank had to be bailed out? The govt. doesn't have the cash to do that. You can be sure that further difficulties will be covered up to avoid a loss in confidence.

beaker
18th September 2007, 21:30
It sets a dangerous precedent - what if every bank had to be bailed out? The govt. doesn't have the cash to do that. You can be sure that further difficulties will be covered up to avoid a loss in confidence.

Hello Sas, you're up late

TheFaQQer
18th September 2007, 21:32
Note, the government has not said "we will bail out Northern Rock whatever happens", or that they will bail out anyone else.

What they have said is that during the current financial market uncertainty they are prepared to guarantee the deposits at Northern Rock.

Moscow Mule
18th September 2007, 21:34
It sets a dangerous precedent - what if every bank had to be bailed out? The govt. doesn't have the cash to do that.

Yes they do, they'd just print more. If every bank needed bailing out they'd have a lot more to worry about than a touch of inflation.

Clippy
18th September 2007, 21:40
It said on the BBC that the Government hadn't worked out exactly how they'd get hold of enough money to bail out Northern Rock if it was to collapse.

I believe they have submitted an application to the Lottery Fund.

Lucy
18th September 2007, 21:45
It sets a dangerous precedent - what if every bank had to be bailed out? The govt. doesn't have the cash to do that. You can be sure that further difficulties will be covered up to avoid a loss in confidence.

and I'm feeling ill...i'm agreeing with you, you little frog.

And anyway the CEO of NR gets around a £1M a year to look after this place, so off with his head. TWOT!
(Where do these people come from?) Please don't tell us you didn't see the risk, or it was managable. How long before people who can't manage their money manage to stop paying their mortgages?

OwlHoot
19th September 2007, 06:46
It sets a dangerous precedent - what if every bank had to be bailed out? The govt. doesn't have the cash to do that. You can be sure that further difficulties will be covered up to avoid a loss in confidence.

Damn right, and it's not just the money directly. If the Government takes it upon itself to act as guarantor for banks their incentive to meddle in the banks' affairs and regulate them will greatly increase, and we all know how well the Government is at organising piss ups in breweries..

GreenerGrass
19th September 2007, 07:27
The government and BOE cannot let the UK banking system collapse, but also they cannot be seen to let banks get away with reckless business practises and expect to be "bailed out" if it all goes tits up.
There has to be some kind of punishment (i.e. sacking) of the entire NR board, Darling hinted that this should happen but that it is down to NR shareholders to force it to.

You could argue we needed something of this gravity to happen in the UK now, and for lending rules to get tightened up, rather than something even bigger and worse in the future.

DBA_bloke
19th September 2007, 09:03
Bollox. A failure of NR does not mean the economy has to go into a nosedive. NR ran out of cash and had to borrow from the BoE but there are plenty of banks who have enough liquidity and who will happily pay for NR's obligations if they can get a good deal.

Your comments answered:
"A failure of NR does not mean the economy has to go into a nosedive."
Given that every pundit and his dog was unsure WHAT would happen if NR went belly-up, and given that the financial markets are, above all, based on gossip, gut instinct and base selfishness, I couldn't disagree with you more. If NR had gone pop!, then I doubt very much that the UK's financial markets would have sanguinely carried on as normal. There'd have been a big panic, as per, with the whole pack of pundits and look-at-me LSE dropouts looking for another lender to cast doubt on.

A run on a major high street bank; tales of potential buy-outs; screams of panic on very front page; news positively drowning in "It's the end!!!!" bulletins, etc. Leave it out!

Your comment would have been correct if you'd said: "A failure of NR does not NECESSARILY mean the economy has to go into a nosedive."


"NR ran out of cash and had to borrow from the BoE but there are plenty of banks who have enough liquidity and who will happily pay for NR's obligations if they can get a good deal."
And a good deal would be what? 20p per share? Thanks professor! If NR had been bought-out, following the huge media frenzy there's been since last Friday, then, once again, I doubt very much that such a buy-out would have calmed the market. And, once again, it'd be a case of the Maddy-sated media looking to knock another lender. And so the whole mess would, possibly, get bigger.

Calls for the Markets to look after themselves is fine and dandy, usually; but Government has a duty to protect, and protecting the economy, especially as we've had nasty meltdowns twice in recent times, is simply sane.

It's a one-off correcting touch on the wheel. Not some sort of commie-CIA-Mafia-whatever plot to destroy Capitalism. The spirit of Maggie is still alive.


"Bollox"
Zzzzzzzzzz…..

RightLaugh
19th September 2007, 09:11
NR shares are on the slide again.

AlfredJPruffock
19th September 2007, 09:11
One approach would be to dissolve all Banks and Building societies in the UK ( to all extents and purposes they are a cartel ) and instead have only one Central Government Bank - each bank account would then be indexed by your National Insurance Number.

Which is the worse crime - to rob a bank - or to own one ?

Brecht The Threepenny Opera

DBA_bloke
19th September 2007, 09:14
One approach would be to dissolve all Banks and Building societies in the UK ( to all extents and purposes they are a cartel ) and instead have only one Central Government Bank - each bank account would then indexed by your National Insurance Number.

Which is the worse crime - to rob a bank - or to own one ?

Brecht The Threepenny Opera

Being a complete financial tit, I have no idea if that's stupid, or clever. So, I'll draw all my money out of my accounts now, to be safe. If the Great British public hear of such an idea, there'll be another run, or something.

AlfredJPruffock
19th September 2007, 09:21
Well, in a way NL is actively considering it ... I must say for once I am with them on this one.


Meanwhile, Lambert queried Chancellor Alistair Darling's call for a return to "good, old-fashioned banking", with some of the esoteric, high-risk lending removed in the wake of the current credit crisis triggered by subprime lending in the United States.

Lambert said it was a good thing that the banking industry had become more competitive and innovative compared with a generation ago when he said it was "a cartel, when mortgages were rationed and only the well-heeled could borrow".

He added: "If Alistair Darling, by good, old-fashioned banking, means when people wore top hats and tailcoats I hope we never see that again."

Churchill
19th September 2007, 09:24
He added: "If Alistair Darling, by good, old-fashioned banking, means when people wore top hats and tailcoats I hope we never see that again."

Do you not have an account with Coutts then?

AlfredJPruffock
19th September 2007, 09:53
Perhaps Mr Darling has more in mind cutting out the Theatre of Financiers - the extravagent middle men - from the equation - whose greedy reckless lending to those who could not afford it has got us into this sad state of affairs.

XLMonkey
19th September 2007, 10:15
This whole thing reminds me of "Extraordinary Delusions and the Madness of Crowds" (http://www.amazon.com/Extraordinary-Popular-Delusions-Madness-Crowds/dp/051788433).

I remember vividly the dot-com frenzy and people thinking that if it was an internet stock then it couldn't help but make them a fortune. Then, we had crowds of people falling over themselves to give money to teams with no business plan, no experience and no idea.

Now, crowds of people are falling over themselves to take their money out of a financial institution with a conservative lending policy, stable management, low-risk book of borrowers and a government backed guarantee on their capital.

The only thing I can conclude is that, whatever the crowd is doing, it isn't doing it based on reason.

bored
19th September 2007, 10:34
Now, crowds of people are falling over themselves to take their money out of a financial institution with a conservative lending policy, stable management, low-risk book of borrowers and a government backed guarantee on their capital.

The only thing I can conclude is that, whatever the crowd is doing, it isn't doing it based on reason.

Yup. I would rather worry about Feds and possibly BoE lowering interest rates and thus encouraging excessive borrowing and provoking inflation.

wendigo100
19th September 2007, 11:02
Doesn't this government help go against the European competition laws?

Addanc
19th September 2007, 11:10
++ Source : IPPR Think-Tank Got "Massive" Donations from Northern Rock++

New Labour's favourite think-tank and source of policy ideas has confirmed it received funding from Northern Rock.

IPPR has yet to get back to Guido, so am as yet unable to confirm that they received hundreds of thousands of pounds in donations from Northern Rock. Reminds Guido of how generous Enron was with political donations before the end...

Want a potential reason (http://www.order-order.com/) for bailing out NR; if it smells like it, feels like it then it must be ...

wendigo100
19th September 2007, 11:13
"New Labour's favourite think-tank and source of policy ideas has confirmed it received funding from Northern Rock.

IPPR has yet to get back to Guido, so am as yet unable to confirm that they received hundreds of thousands of pounds in donations from Northern Rock."

If it smells like it, feels like it then it must be ...Not more sleaze, surely?

sappatz
19th September 2007, 11:18
they are afraid of a UK banking system collapse, thats why they are bailing them out ! (for a central banker, queues in front of banks are nightmare)
queues in front of banks in UK like this didnt happen since 1973 or even 1929

King Cnvt
19th September 2007, 11:20
http://news.bbc.co.uk/1/hi/business/7002628.stm

BoE injecting another £10bn of money into the markets and accepting sub-prime derived mortgages as collateral.

Oh Dear ™ ?

DBA_bloke
19th September 2007, 11:33
http://news.bbc.co.uk/1/hi/business/7002628.stm

BoE injecting another £10bn of money into the markets and accepting sub-prime derived mortgages as collateral.

Oh Dear ™ ?

I suspect that a country can play around with seemingly poo "collateral" like Sub-Prime shares, as countries deal in decades, as well as in the now. One day, those poo stocks & shares in Sub-Prime will be worth more. It's the high street lot that can't afford to do this sort of thing. I think... but then, how the fook would I know?

sappatz
19th September 2007, 11:41
http://news.bbc.co.uk/1/hi/business/7002628.stm

BoE injecting another £10bn of money into the markets and accepting sub-prime derived mortgages as collateral.

Oh Dear ™ ?

indeed
the taxpayer will be paying Tony blair reckless management of this country. the guy has now left and is leaving the mess to sort out for the following.

AlfredJPruffock
19th September 2007, 12:33
Not more sleaze, surely?

On behalf of the NL Government I would lile to categorically deny any allegations of sleaze - besides - that was then - this is now.

Hevra
19th September 2007, 13:09
On behalf of the NL Government I would lile to categorically deny any allegations of sleaze - besides - that was then - this is now.

Must lrn2read, I was confused as to why the Dutch government would be sticking their oar in...

Hevra

wendigo100
19th September 2007, 13:26
Must lrn2read, I was confused as to why the Dutch government would be sticking their oar in...

HevraTulips. Another fine mess that was! :sick

Sysman
19th September 2007, 14:42
Yes they do, they'd just print more. If every bank needed bailing out they'd have a lot more to worry about than a touch of inflation.

Wheelbarrows. Lovely nice wheelbarrows. Come and get 'em.

(Plan B is looking good) :)

Sysman
19th September 2007, 14:54
Being a complete financial tit, I have no idea if that's stupid, or clever. So, I'll draw all my money out of my accounts now, to be safe. If the Great British public hear of such an idea, there'll be another run, or something.

Let's just suppose that everything does go tits up, and there's a run on all the banks, and then the pound too.

It wpuld give the government the perfect excuse to go for the Euro. All that mattress money would have to be exchanged at whatever rate is deemed suitable, or become worthless.

Sysman
19th September 2007, 14:58
One approach would be to dissolve all Banks and Building societies in the UK ( to all extents and purposes they are a cartel ) and instead have only one Central Government Bank - each bank account would then be indexed by your National Insurance Number.

Which is the worse crime - to rob a bank - or to own one ?

Brecht The Threepenny Opera

The side effect being that the gubmint is now your mortgagee.

Noun 1. mortgage holder - the person who accepts a mortgage; "the bank became our mortgagee when it accepted our mortgage on our new home"

Joe Black
19th September 2007, 18:47
This whole thing reminds me of "Extraordinary Delusions and the Madness of Crowds" (http://www.amazon.com/Extraordinary-Popular-Delusions-Madness-Crowds/dp/051788433).Don't ask why, but the turn of phrase reminded of "The Unbearable Lightness of Being" (http://www.imdb.com/title/tt0096332/).

beaker
19th September 2007, 19:33
Oh no... now rates might drop again by the end of the year.

http://money.uk.msn.com/specials/interest_rates/article.aspx?cp-documentid=6174313

Just when the market was starting to level out... welcome back house price inflation!

No one wants to let the market sort itself out do they? :mad:

Amateurs...

Joe Black
20th September 2007, 06:41
Sterling seems to correcting itself rather nicely:

http://newsvote.bbc.co.uk/2/shared/fds/hi/business/market_data/currency/11/13/three_month.stm

:banana: