Northern on the Rocks ?

[Tankus]

"Banks do have money ... there is not a shortage of money in the system, but ... they're reluctant to lend to each other."

"The decision to provide a liquidity support facility to Northern Rock reflects the difficulties it has had in accessing longer-term funding and the mortgage securitisation market, on which Northern Rock is particularly reliant."

Telegraph

Due to the US sub prime lending collapse theres been a knock on in the UK, as the banks are less liable to loan to each other, due to the difficulty in assessing where the risks lie .

Northern uses a higher proportion of bank loans to fund mortgages , rather than investors deposits (the more traditional way of banking ) so its the first UK bank to show "short term fiscal stress"

If you had any saving's in Northern Rock ....would you pull them ?

Adam Applegarth, the Northern Rock chief executive,"If I was a depositer, knowing I have the Bank of England behind me is probably the safest place to be."

If I had savings there ,I would remove any money in a savings account over £1800 (only the first £2000 is 100% guaranteed, then its 90p in the £ to £30K)

As the shares drop lower It may become ripe to a buy out , methinks , as its assets are in the billions (cash short, asset rich ..bit like a lot of home owners isn't it )

Might be able to bag a carpet , plus Northern may have to put up their interest rate percentage to attract money coming in

BBC news this morning ,queues out the bank's this moring with depositors closing down acconts , and the online banking has crashed exacerbating the problem. A run on the bank is the last thing it needs , but I guess I would be there too.

[CurlyWhirly]

I hope that Northern Rock are not 'on the rocks' as I have a mortgage with them :0

It seems strange that UK banks need emergency loans off the BOE as banks make substantial profits every quarter

I recently read on the BBC website that even Barclays was in this position despite making a pre-tax profit of billions of pounds every quarter.

[CurlyWhirly]

Here's that story about Barclays being in a similar situation and they are a much bigger bank that Northern Rock !

http://news.bbc.co.uk/1/hi/business/6971731.stm

[andsome]

It's all down to corporate greed. They are no longer satisfied with using depositors money to lend and make profit, they are involved in all sorts of get rich quick schemes, and are now getting their fingers burned.

[Tankus]

BOE loan rates are higher ......

Inter bank loans are normal practice apparently , untill a week or two ago , where the London market has stopped completley due to the US problems .

Higher risk morgague (sub prime) deals have been chooped up with other deals and sold as a complete package to investors (like a high risk high return coupled with a low risk low return to give an overall meduim risk meduim return deal to investors (pension funds etc) )

The US housing market collapsed and the high risk ones statred defaulting on their repayments , but these defaults (due to the spreading of these packges) stated turning up in unexpected places ....

So if a bank it not sure of your liabilities ...it will not loan , same goes to lending to other banks .... (I think thats how it goes anyway )

I doubt NR will go under due to the size of its asset's (Curly's house being one of them ...arf ) but Ill bet its loan rates will go higher in the longer term ...

A buy out does look possible though ! and it would inject funds ...

It's all down to corporate greed. They are no longer satisfied with using depositors money to lend and make profit, they are involved in all sorts of get rich quick schemes, and are now getting their fingers burned.

errrr ... It worked untill the US blew banking transaction confidence , apparently NR has very little exposure in the US market , but some of our banks and pensions do ...

It has meant cheaper and more available mortgage packages , andsome.

NR have 18% of the UK market, its a big player ...thats why its unlikely the BOE (read Gordo) will allow it to fail ,unlike Barings , good knows ....tough titty for those on the board though . But it has helped to create the growth of home ownership....

. Is your house yours andsome ?

why exactly ?

Hey Curly ...if you owe them ...its their problem

However, the bank said underlying pre-tax profits this year would be £500m to £540m, down from £588m last year and versus market expectations of £647m. Total loan growth for the year would be 9 per cent, even though net lending was up 43 per cent in the first 8 months of 2007.

[Tankus]

Message from the board of NR

Got to wonder what sort of personal share dealing the board of directors have done in the last 4 months. Just out of curiosity

share price drop rippling out to other banks , the housing and retail sector too

[andsome]

BOE loan rates are higher ......

Inter bank loans are normal practice apparently , untill a week or two ago , where the London market has stopped completley due to the US problems .

Higher risk morgague (sub prime) deals have been chooped up with other deals and sold as a complete package to investors (like a high risk high return coupled with a low risk low return to give an overall meduim risk meduim return deal to investors (pension funds etc) )

The US housing market collapsed and the high risk ones statred defaulting on their repayments , but these defaults (due to the spreading of these packges) stated turning up in unexpected places ....

So if a bank it not sure of your liabilities ...it will not loan , same goes to lending to other banks .... (I think thats how it goes anyway )

I doubt NR will go under due to the size of its asset's (Curly's house being one of them ...arf ) but Ill bet its loan rates will go higher in the longer term ...

A buy out does look possible though ! and it would inject funds ...

It's all down to corporate greed. They are no longer satisfied with using depositors money to lend and make profit, they are involved in all sorts of get rich quick schemes, and are now getting their fingers burned.

errrr ... It worked untill the US blew banking transaction confidence , apparently NR has very little exposure in the US market , but some of our banks and pensions do ...

It has meant cheaper and more available mortgage packages , andsome.

NR have 18% of the UK market, its a big player ...thats why its unlikely the BOE (read Gordo) will allow it to fail ,unlike Barings , good knows ....tough titty for those on the board though . But it has helped to create the growth of home ownership....

. Is your house yours andsome ?

why exactly ?

Hey Curly ...if you owe them ...its their problem

However, the bank said underlying pre-tax profits this year would be £500m to £540m, down from £588m last year and versus market expectations of £647m. Total loan growth for the year would be 9 per cent, even though net lending was up 43 per cent in the first 8 months of 2007.

It's the cheaper lending rates and too high an advance on properties that has helped to fuel this business. YES, our house is now fully owned by us. When we took out the original loan, we were only allowed to borrow sufficient that one weeks pay per month only could be used to pay back the money. That is one weeks pay for the highest earner only, only one pay packet could be taken into account. Now we have people being encouraged to borrow more than the buying price of a house, with the result that prices have rocketed, and people have defaulted on their loans.

Inter bank loans are normal practice apparently , until a week or two ago , where the London market has stopped completely due to the US problems .

Higher risk mortgage (sub prime) deals have been chooped up with other deals and sold as a complete package to investors (like a high risk high return coupled with a low risk low return to give an overall medium risk medium return deal to investors (pension funds etc) )

The US housing market collapsed and the high risk ones started defaulting on their repayments , but these defaults (due to the spreading of these packages) stated turning up in unexpected places ....

You have backed up my point here regarding greed. The old way was that a bank or building society took peoples savings and lent to others to buy a house, with strict limits on the amount borrowed. Now, in an attempt to make higher and higher profits we have had all this sub prime mortgage business, with investors taking more and more risks to extract ever higher dividends, NOW it has all come home to roost. As I approached retirement I could have taken more risk with our investments in order to try to get a bigger return, instead I chose the dull boring way and switched everything into safe corporate bonds. The end result is that we have NOT become rich overnight, but on the other hand, we get a reliable and steady income. You takes your choice, and accept the consequences.

[catgate]

It is a little known , but true, fact that banks are allowed to, and do, lend at least 10x what they have on deposit. This means that 90% of what you borrow does not exist. However you have to pay interest even on that which they have not lent you because they have not got it, and you have to repay them "real" money for the notional money they lent.

All this dishonesty means that there will always be a shortage of money because 90% of the housing market is built of wind. I suppose the builders are also working with borrower"money",

The ultimate outcome can only be one thing, and it looks as though inflation, through not being allowed to grow fast enough to generate sufficient funds to cope with the banks' demands is going to play its part in their demise.

The 2000 year old legend of the money changers in the temple shows that nothing is new, only repackaged.

[CurlyWhirly]

BOE loan rates are higher ......

As I understand it around 1% higher than the current BOE base rate of 5.75% and as it costs the banks more to borrow, they pass these costs on to us.

I doubt NR will go under due to the size of its asset's (Curly's house being one of them ...arf ) but Ill bet its loan rates will go higher in the longer term ...

Fortunately I don't have a large mortgage like some people and I owe around £36,000 which is quite low by todays standards.

I've no other debts like credit cards and loans so will continue to overpay like what I've been doing for the last few years to help counteract any interest rate rises.

The only stumbling block is that in March I am to be made redundant :(

Hey Curly ...if you owe them ...its their problem

Exactly but I'm not sure that if the bank couldn't raise enough money (i.e. the BOE wouldn't help) then they might demand the money that was lent to me or perhaps this can't be done? (I don't know as I'm not into the legal side of things)

[CurlyWhirly]

It is a little known , but true, fact that banks are allowed to, and do, lend at least 10x what they have on deposit. This means that 90% of what you borrow does not exist. However you have to pay interest even on that which they have not lent you because they have not got it, and you have to repay them "real" money for the notional money they lent.

All this dishonesty means that there will always be a shortage of money because 90% of the housing market is built of wind.

I didn't know that :0

So when I took out a mortgage back in 1995, are you saying that 90% of the amount wasn't 'real' ?

[Boris]

Message from the board of NR

Got to wonder what sort of personal share dealing the board of directors have done in the last 4 months.

They're probably just sat back now enjoying one of these

Hic !

........... as their investors react ?

[catgate]

I didn't know that :0

So when I took out a mortgage back in 1995, are you saying that 90% of the amount wasn't 'real' ?

I was sceptical when I first heard this over 40 years ago. I have been assured on a couple of occasions since that it is still so. My last confirmation came only a few years ago from a retired banker. He said it was often referred to as "gearing", although I believe it is only part of that which comprises "gearing".

If you are interested in this you could find much more in the writings of Major C H Douglas the "founder" of Social Credit. (Nothing to do with the Socialist movement or Labour.) He was concerned about the Credit of Society as a whole, and the way the National and International Financial Institutions were robbing society (ably abetted by the government and that was just post WW1).

The ideas of Douglas were used in Alberta in the depression of the 30's and totally transformed the province. His ideas have been attacked and ridiculed by"the establishment" for obvious reasons but there have been some very astounding results where they have been used.

Google will find you both plaudits and brickbats.

[-pops-]

I'm fairly ignorant on things financial but something I can never understand is why these events seem to be treated like "acts of God" - unavoidable natural disasters. They aren't - someone, somewhere was the cause of this. There's no point in stating mollifications like "market forces" and such drivel as these are created by the very same people that created the disaster in the first place.

Someone, somewhere (may be the same someone as above) is having a big laugh at all investors scurrying around like lemmings.

[AlanHo]

I'm fairly ignorant on things financial but something I can never understand is why these events seem to be treated like "acts of God" - unavoidable natural disasters. They aren't - someone, somewhere was the cause of this.

pops - you have made me feel so guilty.

Two weeks ago I moved a significant amount of my savings from Northern Rock to the Coventry Building Society 60 plus saver account. This seems to have been the last straw for them.

[andsome]

I'm fairly ignorant on things financial but something I can never understand is why these events seem to be treated like "acts of God" - unavoidable natural disasters. They aren't - someone, somewhere was the cause of this.

pops - you have made me feel so guilty.

Two weeks ago I moved a significant amount of my savings from Northern Rock to the Coventry Building Society 60 plus saver account. This seems to have been the last straw for them.

Funny that. Last year we moved money from Coventry BS to Birmingham Midshires. :D

[Tankus]

Dont feel guilty at all Aho.... It your's and your future ........ do you think that anyone is concerned over your welfare at NR ...exactly ,do what you feel is right for you ........

Move it... and sleep well at night ..... I would ..... Trust Darling ? .....as if ...! who cares if your actions have taken the whole country to the dogs

Incidently ...if you realy are George Soros , cunningly in disguise ...I would really lurve a new bently for my birthday (must be just a drip in the pond for you )

Larry Elliott and Ashley Seager

Saturday September 15, 2007

The Guardian

Branches of Northern Rock were besieged by savers yesterday as fears grew in the City that the Bank of England rescue package for Britain's fifth-biggest mortgage lender could herald a slide in house prices and further financial collapses.

Amid news that property prices were already falling sharply before the Bank's first use of its lender-of-last-resort facility in more than 30 years, the Newcastle-based Northern Rock was forced to keep branches open late to allow savers access to their money. By last night it was reported a total of £1bn had been withdrawn.

Customers ignored reassurances from the chancellor, Alistair Darling, the British Bankers Association and Northern Rock itself that funds were safe.

In the first real test of internet banking, websites at Northern Rock and many other banks crashed as savers tried to access their accounts. Police had to be called to a branch in Cheltenham, Gloucestershire, when a couple barricaded the manager in her office when she refused to let them withdraw their £1m savings.

[Tankus]

DailyMail

£1.5bn in deposits withdrawn in 24 hours .The continuing run will force a sale

Telegraph

Northern Rock, the crisis-hit bank under siege from thousands of its customers, was preparing itself last night for a sell-off, The Sunday Telegraph can reveal.

However, sources close to the company said that if customers continued to draw their deposits at the same alarming rate, Northern Rock would be forced to break up.

Government and Bank of England officials are understood to be preparing a public statement designed to reassure millions of customers across the banking sector that their savings were safe. Both are anxious to secure a "quick fix" of Northern Rock's woes before the crisis spreads.

"If the run on deposits looks out of control, Northern Rock would effectively be nationalised and put into administration so it could be wound down," said an official.

A source close to Northern Rock said: "Things look really ugly. If the share price falls heavily on Monday, then a fast break-up and sale of the assets looks inevitable."

It is understood that attempts by the Bank of England to find a single buyer for Northern Rock have failed. Instead, it is more likely to be sold off piece-by-piece with possible buyers including HSBC, Lloyds TSB, Barclays, Royal Bank of Scotland and Halifax Bank of Scotland.

Alistar Darling goes on TV and states that there is nothing to worry about , trust us ........the queues double in size

Nobody trusts our politicos anymore

Going to be a tough christmas if your in retail ...methinks ! It will have a knock on

[CurlyWhirly]

Here's that story about Barclays being in a similar situation and they are a much bigger bank that Northern Rock !

http://news.bbc.co.uk/1/hi/business/6971731.stm

I'm just curious as to the reason why Barclays didn't suffer from the same public panic when they had to approach the Bank of England on 2 occasions recently?

Barclays says that a "technical breakdown" in the UK's clearing system forced it to borrow £1.6bn from the Bank of England.

It is the second time this month that the bank has tapped into the central bank's emergency credit line, sparking fears it is facing a cash crisis.

[Tankus]

[catgate]

Looks like a fallacy!

[AlanHo]

Looks like a fallacy!

If not - a phallic sea.

[catgate]

I dared not write that

[Irene]

:0 ........

[Tankus]

Northern Rock bail-out may breach EU laws

The European Commission has requested information from the British authorities over the government bail-out of Northern Rock, concerned that it could violate EU state aid laws if support leads to distortion of the banking market......Telegraph

Interestingly this was cited as one of the problems during the Rover longbridge collapse

Another £10bn injection from the BoE today to stabalise the market

The panic surrounding the future of Northern Rock finally began to subside yesterday as savers took comfort from the Government's promise to underwrite the bank's entire £28bn savings book .......Independent

Intervention too late to save the bank though .... My bet is that it will get chopped up and asset stripped .... just like longbridge !!!

Curleywhirly...I'm just curious as to the reason why Barclays didn't suffer from the same public panic when they had to approach the Bank of England on 2 occasions recently?

Got to wonder if this has been managed ... It all does feel a bit Robert Maxwell

[Tankus]

Merv the swerve ....soon to be unemployed ...methinks

The Bank of England today announced a surprise £10 billion cash injection into the British banking system, signalling a complete U-turn by Governor Mervyn King and his hands-off stance on the global financial turmoil.

Mr King said last week:"The current turmoil, which has at its heart the earlier under-pricing of risk, has disturbed the unusual serenity of recent years, but, managed properly, it should not threaten our long-term economic stability."

He also said: "On the one hand, the provision of greater short-term liquidity against illiquid collateral might ease the process of taking the assets of vehicles back onto bank balance sheets and so reduce term market interest rates.

"But, on the other hand, the provision of such liquidity support undermines the efficient pricing of risk by providing ex post insurance for risky behaviour. That encourages excessive risk-taking, and sows the seeds of a future financial crisis."

Times

Gordo's lent on him ...you think !