Northern Rock to be nationalised

[BrilloPad]

Northern rock was a crappy british bank with a flawed financial model (all the refinancing via the interbanking market)
It should have gone BUST
now the taxpayer will pay for this mess !

Allowing NR to go bust COULD have bought down the western financial system.

What gets me is why the SFA did not spot this coming. They are so concerned about dotting is and crossing ts that they miss the bigger picture.

[realityhack]

Just think of those 5,000 call centre jobs up in Newcastle that will now be safe.

And at £25bn it's a bargain...

Far from it - they'll be 'slimming' the business down to make it a viable sale.
And £55bn of taxpayers' cash has already been thrown in.
And BBC News 24 just said our exposure with this nationalisation is now around £110bn - several thousand pounds per person.

[Archangel]

don't forget that their company account is the best on the market, and now the risks associated have dropped dramatically.

I do hope the shareholders will get nothing.

I think Diver bought £20k worth a couple of weeks ago

[Platypus]

exposure with this nationalisation is now around £110bn - several thousand pounds per person

That's outrageous

[DimPrawn]

And BBC News 24 just said our exposure with this nationalisation is now around £110bn - several thousand pounds per person.

I don't see the problem there, surely the New Lie will just put up taxes by a few thousand pounds per person? It has done every year since 97.

[lukemg]

Usual level of ignorance concerning this situation. NR is not bust, or anywhere near it. Caught by a short-term lack of liquidity in the financial markets, it has more than sufficient revenue from mortgage holders paying their monthly bills. NR is not reliant on the money from deposits to finance these mortgages but it is reliant on the availability of credit from the money markets. So - regardless of the source of the money, NR has the revenue from mortgages to finance the repayments.
There are 2 issues to consider:
1 - The business will very likely be static now, and not growing aggresively (similar to a closed life book that many insurance companies now have). Costs incurred by the business need to reflect this move to administration and be cut drastically.
2 - A significant drop in house prices would leave the assets they currently have in a shambles and then we are talking 'house of cards'
If 2 does happen there will be plenty more feeling the hurt.
Please try to see the full picture people, I expect you lot to be a bit smarter than Jeremy Kyle's guests.

[Platypus]

I expect you lot to be a bit smarter than Jeremy Kyle's guests.

Well that was your first mistake!

[basshead]

Thanks for loaning me the money for a car everyone, appreciated.

[The Lone Gunman]

The public is now exposed to 3500 quid per tax payer should the worst happen.
As I understood it NR is an asset rich company with a short term cash flow problem so should be an easy recovery. The offers to buy have very much undervalued the assets and were looking to make a killing.

The issue here (for me any way) is that 4 months ago when the Liberals were demanding nationalisation NL savaged the idea and said it could not work and would kill the business. Yet now nationalisation is the best solution! Maybe NL should cede the running of the country to the Lib Dems.

Next. How many companies have NL let go to the wall when some small govt. support could have rescued them. MG, Marconi and others. How many people have lost their pensions due to those companies going bang.

Next. Why should NR shareholders be protected and continue to enjoy being paid divvies by virtue that they gambled some money yet my shareholders are under the threat of IR35 even though mine have gambled everything based on my ability to produce the goods.

Good joined up consistant government would be nice.


Sorry, sorry. Rant over. Promise.

[tim123]

The public is now exposed to 3500 quid per tax payer should the worst happen..

But the theoretical "worst" isn't going to happen is it? (because, as Luke pointed out, if it did HMG would have bigger problems than NR).

Most of the people with NR mortgages will continue to pay them quite happily, until they either pay them off, or remortgage with another lender.

It seems resaonable to assume that less that 10% of NR mortgage customers will default, and of those that do, the average shortfall is going to be of the order of 20-30%.

So at worst, 2-3% of the money is at risk, at best HMG will get all its money back having made a profit in the interim.

tim