Reply to: Northern Rock in the public sector

[PAH]

Is it likely those who piled in and bought shares in NR just after the government started offering guarantees, at around £1.80 I think, may end up losing out?

Just asking as I know a guy who bought 10k worth and held onto them when share prices plummeted further, thinking he may be onto a winner in the long term.

Turns out he was sacked a few weeks later. Wondering whether he's screwed big time? Not too bothered though, he was a right dick.

[meridian]

Does anybody know the market value of the government guarantee for NR? I think NR's credit rating is BBB- now...

At a share price of 101p Northern Rock's market cap is £424million.

In other words, the Govt has risked £30bln of taxpayer's cash to protect depositors when they could have spent 1.5% of that and bought the company outright

Don't know the market value of the deposits guaranteed though.

AtW, looks like the debt will end up on the govt's balance sheet - citywire

[bored]

Does anybody know the market value of the government guarantee for NR? I think NR's credit rating is BBB- now...

[Waldorf]

Just more debt to add to the billions labour have got us into so far.

[sappatz]

Blair

in other countries this is called nationalisation and associated socialism, communism or whatever
only in UK can the governement go along with such failings ! The blairites have ****ed this country

[PAH]

What happened to Branson making a bid this week? Has it been rejected, or has he changed his mind?

[Platypus]

He has not avoided anything ... this is likely to go on the books

Sorry what I meant was that he has somehow avoided this going on the books, so I read.

Private Eye says:

'The proposed financing structure envisages Northern Rock raising funds from investors in the financial markets backed by a mixed pool of assets,' explains the Treasury of the proposals dreamt up by Goldman Sachs to save Northern Rock. What’s the best thing about the government’s plan for Northern Rock? Just like PFI, it lets Darling keep his debts off balance sheet!

[AtW]

He's got his fingers crossed behind his back.

Isn't that what they do before hanging?

[AtW]

The savings guaranteed by the Govt are cash. Cash is an asset.

They don't have much cash deposits anymore I reckon - all those who wanted to pull it did.

The Govt also covers lots of guarantees on bonb - NR uses what appears to me a rather dodgy structure (most likely designed to avoid taxes) and they did it in a way that forced them to refinance regularly, which is why they got into problem when they could not refinance - now Govt is covering this refinancing.

If NR was really giving subprime morgages then their share of default should be the highest and since they got market share most in the last couple of years this means their customers bought assets at the peak of their price.

[meridian]

More important would be if (and I can't see this being avoided) the money guaranteed by the Govt will be counted as part of public debt, this would increase debt ratio of GDP considerably.

So much for prudence of Mr Brown.

The savings guaranteed by the Govt are cash. Cash is an asset.
The mortgages outstanding by customers are owed to the Govt and are debtors. Debtors are also assets.
Therefore the £30bln exposure equates to a £60bln increase in govt assets and I am still very prudent.

Hth,

Mr G Brown

(P.s. it's all Darling's fault anyway)

[lilelvis2000]

Make for good press when the government's bank is repossessing homes.

[Andy2]

NR is offering one year bonds with rather good 6.7% interest rate
are they any good

[PAH]

I'm just waiting for the day all those Northern Crock mortgage holders get a knock on the door from the council saying the home is now their property, and they need it to move in a single mother or a family of immigrants.

[Bluebird]

They won't be doing many morgages now - they will offer very high non-competitive rate so that their customers have to take morgage from somewhere else thus repaying amount to the firm, which in turn will repay it back to the taxpayer. The main issue here is that if house prices fall and people get negative equity then they simply won't be able to get another morgage and will have to stay with NR.

my mortgage "fixed rate" period is up in October this year, can't move til then as they want £7k fees....

[AtW]

does this mean they won't do joint mortgages because this would be debt shifting ?

They won't be doing many morgages now - they will offer very high non-competitive rate so that their customers have to take morgage from somewhere else thus repaying amount to the firm, which in turn will repay it back to the taxpayer. The main issue here is that if house prices fall and people get negative equity then they simply won't be able to get another morgage and will have to stay with NR.