Reply to: Northern Rock to be nationalised

[PAH]

Another 'tip of the iceberg' follow up story related to the NR debacle:

http://news.bbc.co.uk/1/hi/business/7252162.stm

Credit Suisse has suspended a "small number" of traders suspected of inflating the value of mortgage-backed bond investments.
The Swiss firm earlier said it would have to cut the value of these securities by $2.85bn (£1.5bn), blaming pricing errors.

It also attributed "adverse market conditions" for the write-down.

Credit Suisse said its first-quarter profit would be $1bn lower than forecast as a result.

The announcement came amid an internal review, which the bank said was continuing.

The revelations stunned many analysts because they came a week after the Zurich-based firm posted its results for the last three months for 2007.

At the time, it reported minimal damage from the US sub-prime crisis, with losses of 2bn Swiss francs last year, less than it originally expected.

"This is a disaster. This could be the tip of the iceberg," said Helvea analyst Peter Thorne.

"According to the presentation they gave a week ago, their exposures to residential mortgages was 8.7bn Swiss francs and collateralised debt obligations was 2.7bn francs, and now they have just written $2.85bn down."

[PAH]

The whole pack would be at risk of crashing down if they had let NR fail.

If that Jon Moulton who was on Channel 4's Dispatches (How the Banks Bet Your Money) last night is right, it may still be.


http://www.channel4.com/news/article...+money/1563152


It was quite a damning report on the government, Bank of England, FSA, and the banks, where the use of sub-prime investments has caused all this turnmoil. He also hinted at future problems due to losses from other financial investments that have yet to fully materialise.

Was he scaremongering? The banks must be defecating themselves if he's not.

[dude69]

So is anyone going to open the NRK business account?

[tim123]

The financial industry needs a meltdown, all the government have done is increased moral hazard and postponed the day of reckoning and made a small recession into a large one (later).

They should have let it go last year. Cost to taxpayer would have been zilch. All the depositors would still have their money.
.

And how do you know that all the depositors would have got their money?

If the NR had been allowed to fail, there would have been an even bigger run on the bank, and then very possibly on another one, and then another one.

The whole pack would be at risk of crashing down if they had let NR fail.

tim

[Troll]

I see they still offer 125% mortgages... fill yer boots

We also offer our together mortgage, which can allow you to borrow up to 125% of your home’s value as a combination of secured and unsecured borrowing.

[bobhope]

To stop a meltdown in the GB financial industry, this looks like money well spent.

tim

The financial industry needs a meltdown, all the government have done is increased moral hazard and postponed the day of reckoning and made a small recession into a large one (later).

They should have let it go last year. Cost to taxpayer would have been zilch. All the depositors would still have their money.

If the you've created a problem because of too much and too easy credit, the last thing you should do to try to solve the problem is create more easy credit.

[Sysman]

It's made my day, week, year, century, millennium... that the bearded twat is upset that he didn't get his sticky fingers on NR...

Agreed. To hear the scruffy bearded one spitting on the radio was quite delightful.

I think a banana is in order here

[Bumfluff]

Northern Rock want to cut there risk by pushing there rates up so customers have to leave. All mortgages companies I have rang last couple of days have been totally overloaded

[tim123]

So that's only between £2.2bn and £3.03bn then.

To stop a meltdown in the GB financial industry, this looks like money well spent.

tim

[Chugnut]

It's made my day, week, year, century, millennium... that the bearded twat is upset that he didn't get his sticky fingers on NR...

ZG, I've noticed that you have a seething hatred for Dickie Branston.

Did he run off with Mrs. ZG or is Virgin Galactic threatening cheap flights to your homeworld?

[realityhack]

So at worst, 2-3% of the money is at risk

So that's only between £2.2bn and £3.03bn then.

[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

[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.

[basshead]

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

[Platypus]

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

Well that was your first mistake!