Why should the taxpayer be bailing-out Northern Rock? Why should the taxpayer be bailing-out Northern Rock?
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    Default Why should the taxpayer be bailing-out Northern Rock?

    Doesn't it just encourage more irresponsible lending?

    I say let them fall.

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    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.

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    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.

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    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.
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    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.

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    Quote Originally Posted by DBA_bloke View Post
    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.

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    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.
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    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.
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    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!

    eh?

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    Quote Originally Posted by Moscow Mule View Post
    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...

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