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emgee
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Northern Rock. Christ on a bike!

A £40 billion public liability. Forty thousand* million sovs.

Seven billion quid more than the entire defence budget. About £1300 for every taxpayer. And rumours of another bank in the poo. And Alastair "Eyebrows" Darling in charge.

We're doomed, Cap'n Mainwaring, doomed I tell you.



*Sadly everybody uses the US definition of 'billion' these days.
 
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Re: Northern Rock. Christ on a bike!

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A £40 billion public liability. Forty thousand* million sovs.

Seven billion quid more than the entire defence budget. About £1300 for every taxpayer. And rumours of another bank in the poo. And Alastair "Eyebrows" Darling in charge.

We're doomed, Cap'n Mainwaring, doomed I tell you.



*Sadly everybody uses the US definition of 'billion' these days.
Quite: A Billion, when I went to school, was a million x a million Not a thousand x a million. I'm gettin old
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Re: Northern Rock. Christ on a bike!

No, No, No we are not all doomed. Adam Applegarth, the 'outgoing' chief of Northern Rock still gets his pension....around £300,000 per year and the accountants PWC managed to bill around a £1,000,000 since last August. So its not all doom and gloom, that is as long as you are not a tax payer!
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*Sadly everybody uses the US definition of 'billion' these days.


Yes, and it's not like it's a little
out if someone gets it wrong,
is it!!
 
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Re: Northern Rock. Christ on a bike!

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Yes, and it's not like it's a little
out if someone gets it wrong,
is it!!
Cool, I've got a 2-for-the-price-of-1 rant in here.

I'm kind of reassured that we still care so deeply about such things as we take our last few circuits of the drain.
 
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Re: Northern Rock. Christ on a bike!

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Cool, I've got a 2-for-the-price-of-1 rant in here.

I'm kind of reassured that we still care so deeply about such things as we take our last few circuits of the drain.
Many a true word in jest,Emgee

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Re: Northern Rock. Christ on a bike!

perhaps they wouldn't be in so much trouble if they hadn't wasted millions on sponsoring a crap football team......
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Re: Northern Rock. Christ on a bike!

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perhaps they wouldn't be in so much trouble if they hadn't wasted millions on sponsoring a crap football team......
Is that millions or thousands of thousands?



Or Trillions?
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Re: Northern Rock. Christ on a bike!

It sucks (the Northern Rock issue and us using our taxes to bail them out) and the million billion definition
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Re: Northern Rock. Christ on a bike!

Yet another tale of incompetence I raise eyebrows at the time when it was announced that the government were bailing them out, and I don't even claim to know anything about economics.
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Re: Northern Rock. Christ on a bike!

I believe all the loans from the BoE are secured by the mortgages Northern Rock has issued on homes. So, not sure the UK taxpayer is in a major financial risky position.
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Re: Northern Rock. Christ on a bike!

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I believe all the loans from the BoE are secured by the mortgages Northern Rock has issued on homes. So, not sure the UK taxpayer is in a major financial risky position.
'tis true BF. northern rock have done phenomenally well in the uk on mortgages in the last 10 or so years, but not quite so well on the savings side. certainly not as well as the big boys like halifax, abbey, nationwide etc. so they have a very strong mortgage book but don't have huge amounts of savers' money to fall back on when obtaining money becomes tight. the rest has largely been caused by daily mail readers panicking and withdrawing all their money from the rock amidst false fears they were about to go bump.
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Re: Northern Rock. Christ on a bike!

Well, the papers do have to sell stories
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Re: Northern Rock. Christ on a bike!

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I believe all the loans from the BoE are secured by the mortgages Northern Rock has issued on homes. So, not sure the UK taxpayer is in a major financial risky position.
NRK have been loaning money at >100% of LTV for FTB and people who are less attractive to other lenders (not soft sub prime but not far off).

This model is fine so long as

1. very few people fail to pay their monthly repayments,
2. property values keep rising
3. there's a ready supply of cheap debt.

Now

1. the numbers of people failing to meet payments / in arrears and repos are rising
2. values are falling in many areas
3. the credit crung is going to get worse

and suddenly there's a lot of brown smelly stuff about.

Although I'm a lawyer I don't do insolvnecy or land/trust etc law, so do take this with a pinch of salt BUT if NR does go into liquidation the liquidator will have to realise the best value from the available assets , including debts: so if you're a NR borrower and can remortgage you might approach the liquidator and say offer 46p in the £ to clear your mortgage. If this is the best offer going for your debt (their asset) you may just be able to reduce your indebtedness by >50%.

Personally I think the BoE i.e. us taxpayers will take about a £20BN hit on this fiasco. I'd say that unless there's a strong treaury and board backed bid within the next 10 days NR shares will be worth 20p by mid jan.
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Re: Northern Rock. Christ on a bike!

there have already been 2 proposals from buyers to take on all NR's liabilities (including the BoE loans) but NR's board rejected them as undervaluing the company. i see those as just first "toe in the water" tests, no doubt there will be better offers.

NR do indeed have a lot of >100% LTV mortgages on their books which suddenly look a bit risky for the reasons you mention, but as far as i'm aware those types of loans don't actually make up a huge segment of their business. their mortgage book is very strong and there's plenty of companies out there who would pay very very good money to take it on. one thing's for sure though, i think the NR brand will disappear. whoever buys NR will ditch it like a hot potato and rebadge the mortgage operation under their own name.

and the biggest losers of all? northern rock employees. jobs sold down the river by the daily mail and it's readers eager to find another thing to panic about

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Re: Northern Rock. Christ on a bike!

One thing to note is that the problems faced by NR at the moment (though this may change) are not because their mortgage loan portfolio is underperforming or experiencing defaults. It is because most of their funding (cash) is raised through the capital markets rather than through deposits, and in the last few months, the capital markets have been very illiquid and quite expensive so NR had to tap alternative source of financing to ensure their ability to hold the assets (mortgage portfolio) in their books.


I'd be a lot more worried if NR or other lenders starting seeing higher delinquency rates and defaults.

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Re: Northern Rock. Christ on a bike!

can you tell i don't like the daily mail?
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Re: Northern Rock. Christ on a bike!

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One thing to note is that the problems faced by NR at the moment (though this may change) are not because their mortgage loan portfolio is underperforming or experiencing defaults. It is because most of their funding (cash) is raised through the capital markets rather than through deposits, and in the last few months, the capital markets have been very illiquid and quite expensive so NR had to tap alternative source of financing to ensure their ability to hold the assets (mortgage portfolio) in their books.


I'd be a lot more worried if NR or other lenders starting seeing higher delinquency rates and defaults.
absolutely. but you can hardly expect a daily mail reader to be able to understand that
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Re: Northern Rock. Christ on a bike!

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Originally Posted by Squadrone Rosso View Post
It sucks (the Northern Rock issue and us using our taxes to bail them out) and the million billion definition
What do you do though, if a bank is likely to fail? If you let one bank fail, you can end up with a run, where one failing banks leads to another, which leads to another. Sometimes the government has to step in to uphold the system...

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I believe all the loans from the BoE are secured by the mortgages Northern Rock has issued on homes. So, not sure the UK taxpayer is in a major financial risky position.
Problem with a mortgage is that its not a liquid asset, you can't just demand the money back if you happen to need it, which is why banks normally have a good ratio of savings to lendings, Northern Rock lent many times more than it had in savings..

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'tis true BF. northern rock have done phenomenally well in the uk on mortgages in the last 10 or so years, but not quite so well on the savings side. certainly not as well as the big boys like halifax, abbey, nationwide etc. so they have a very strong mortgage book but don't have huge amounts of savers' money to fall back on when obtaining money becomes tight. the rest has largely been caused by daily mail readers panicking and withdrawing all their money from the rock amidst false fears they were about to go bump.
Where does the USA and the risky credit situation over there fit into all this?

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Re: Northern Rock. Christ on a bike!

The market doesn't agree with you I'm afraid.

As far as I read it and from the chatter I've heard the best offers are talking about deferred payback of interest on not just the penal rate but the bulk of the BoE exposure and a staged repayment of capital as and when conditions allow.

As for there being better offers in the wings, maybe but only as a pre liquidation fire sale or worse.

The BoE can only support NRK until something like the 10 February which when you consider the Christmas period will take 12 days out of there isn't much time to compete due dilligence or indeed run any proposal by the board and within the restrictions of PLC structures.

If there is any value in NRK, it's absorbtion into another institution creaming off the people who are better than BBB and tied in for periods whereby rates can be ramped. The problem with this is the wasteage of loans / write downs and that it will involve numerous redundancies in the NE which has a number of marginal seats. (think May 2009 Gordon vs Dave).

Remember this government was prepared to **** £50m against the wall in April / May 2005 to save 2 seats in Birmingham, what will they do for 6 seats in the North East and to mantain stability in the banking sector?
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Re: Northern Rock. Christ on a bike!

The US credit issues have caused a domino effect throughout the capital markets and banking industry, hence its effects on the UK market.
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Re: Northern Rock. Christ on a bike!

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The market doesn't agree with you I'm afraid.

As far as I read it and from the chatter I've heard the best offers are talking about deferred payback of interest on not just the penal rate but the bulk of the BoE exposure and a staged repayment of capital as and when conditions allow.

As for there being better offers in the wings, maybe but only as a pre liquidation fire sale or worse.

The BoE can only support NRK until something like the 10 February which when you consider the Christmas period will take 12 days out of there isn't much time to compete due dilligence or indeed run any proposal by the board and within the restrictions of PLC structures.

If there is any value in NRK, it's absorbtion into another institution creaming off the people who are better than BBB and tied in for periods whereby rates can be ramped. The problem with this is the wasteage of loans / write downs and that it will involve numerous redundancies in the NE which has a number of marginal seats. (think May 2009 Gordon vs Dave).

Remember this government was prepared to **** £50m against the wall in April / May 2005 to save 2 seats in Birmingham, what will they do for 6 seats in the North East and to mantain stability in the banking sector?

what's your background sloper, if you don't mind my asking. you seem quite financially savvy (for a lawyer )
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Re: Northern Rock. Christ on a bike!

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I'd be a lot more worried if NR or other lenders starting seeing higher delinquency rates and defaults.
Deliquancy rates have been rising for 18 months and the CML predicts a big increase in repos next year. With inflationary pressures building the wriggle room for Merve King to cut rates is limited and I think the chances of another couple of 1/4 point rises by June are about 50/50.

Remember the price of crude always goes up at around this time and after a bad hurricane season in the gulf of mexico, instability in venezuala and the low US$ causing concern re margins in OPEC oil may continue to rise by maybe another 15 -30$pb.

So increased delinquancy, rates rising, banks like HFC and buy-to-let lenders like paragon getting par boiled, I doubt we'll be able to take stock until probably July 2008.

PS LIBOR is on the up again.
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Re: Northern Rock. Christ on a bike!

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The US credit issues have caused a domino effect throughout the capital markets and banking industry, hence its effects on the UK market.
many uk lenders are backed by the big US finance houses. it's mainly the niche lenders such as paragon, infinity, victoria mortages, advantage etc who have been used to getting easy funding from merrill lynch, investec etc but suddenly the big US players have put the brakes on lending money, particularly where there's higher than average risk.
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Re: Northern Rock. Christ on a bike!

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what's your background sloper, if you don't mind my asking. you seem quite financially savvy (for a lawyer )
I'm currently having a break from dealing with death and destruction (mainly death) and setting up a Ltd Co (not law related) and getting involved with a couple of other non law projects (oh and sh*tty nappies too).

I've always been a causal observer of economics and the markets and know a few traders, from hedge funds to oil / metals (mining etc) and bond dealers (think History of Arts at Durham not bright but awfully decent sorts, yah).

Personally I'd say that if I was having a punt on stocks at the mo. it would be in some of the smaller firms in the mining exploration sector, genetic modifications and biofuels developers and in stage 1 food processing.

However be aware that you've got to be prepared and able to lose every penny you invest. When dealers are moving out of the market into cash investments and protected secure liquidity it's time to keep your coat on let alone think og taking your shirt off.
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