blonde poker forum

Watching the news and the Northern Rock fiasco seems to be getting more comical by the day, however who is to blame for the down fall?

Was it the banks Board?

Was it an over active market?

Or was it the British press causing panic withdrawls by sensationalising the bank taking what seems like sensible steps to stay secure by organising an overdraft.


discuss..

do we have to?

I'll only get involved and waste my day...

one easy answer...macro-economic conditions (US credit crunch and the funding conditions for the loan book in the markets) and board's strategy failure to adapt

next answer...once it went wrong the governement's handling of firstly the PR (which caused the queues) and then the exit strategy..has been poor

On this occasion, I don't blame the press at all

I know i can count on Tighty for a good answer.

Now i agree the bank could have acted earlier to avoid the hole the found themselves in, but surely the national, TV, radio and print coverage of "Northern Rock have asked for an overdraft"  seemed to cause panic withdrawls.

Would the bank be in the turmoil it is at the moment if it were not for the press coverage or would the bank have fallen in to decline at a slower rate?

it's Ironsides fault..












proberly

In the example you quote the Press reported the fact. Granted its a fact that is normal in the bsuness world..to operate on loan capital and with debt..but not from the government..that's newsworthy and highly unusual

I think it had no effect on what has happened since..it needed to be reported

One of the problems is the lack of financial education of the average customer...they might read the headline but not understand the nuances underneath. Granted a red-top might not have the nuances but the broadsheets did and still do.

So the public does what a scared herd does, it wants to get out of there asap

Once this started, the PR continued, IMHO, to be sub-standard.

and then Sir Richard Pullover got involved, spotting a chance to be the knight in shining armour. Deep breath while I don't write what I want to write. Settles for the words "media tart"

It's not the press that is to blame for this one.The government failure to act in the first instance is what's caused the massive fuss. They could have stepped in immediatly and avoided all the panic which lead to Northern Rock Collapsing properly.
 Of course now the tax payer can kiss the 25billion good bye. (quite funny, when the pension scheme collapsed a while ago the govt (Tony Blair) refused to bail everybody out because "It would be too expensive and set a precendent" This would have cost the Govt. £15 billion and helped out hundreds f thousands of people) A bank collapses and the govt hands over £25 billion which the tax payer will never see again. There is no doubt in my mind that that 25 billion is gone. there simply isn't a consortium in the worls that will consider buying the debt that Northern Rock has. In Fact it will cost more than £25 billion a the govt. will also pay for the rebranding of Northern Rock according to current proposals (only 500 mill or so so not that much, eh)

First the Northern Govt board and then the Govt (in this case Gordon Brown directly) are to blame for this one. The press is not responsible.

at the time the information broke the bank had not drawn down on the loan, it was there purely as a safety net, now was that good business or should the bank have looked to other sources to keep what was happening a bit more hush hush?

Surely anyone with a brain knew that once the press published or reported the news the onslaught of worried savers would be unstoppable and was bound to lead to this farcical state of affairs we find the bank in?

So again, who's to blame, Is it the PR men?  was it the reporters and editors, knowing the outcome was inevitable?



Btw i am not press bashing, i am impartial here, just trying to stir up some debate that differs from the tarts and royalty thread

Billy

the publicity is an irrelevance, once the government announced it was lender of last resort..even if the facilities were not used...we were on a path to an endgame involving different ownership or nationalisation 

indeed.

maybe, but I do know that the media in this country has spent the last 2 years trying to talk us into recession.

in 2009 they will be right

nothing different from the normal fluctuations in the cycle

I do agree that the Daily Mail "your house price is plummeting" headlines ad nauseam are the worst form of journalism

Just so happens that its more likely than not to come to pass in 2009

so you are saying that everyone who has a NR mortgage has stopped making payments?

the Property forums on the motley fool have been taking the piss out of NR for years, at the height of the housing market they were doing 130% mortgages to the shediest of customers. however the mortgages are backed by property which must have some value although obv not all of the 25 bill, so even if nobody made another payment from today onwards they will still get some back by repossesing and auctioning off the properties.

Whilst we're doing a 'Tightend explains it all' City thread, I read an interesting article in the Sunday Times yesterday about hedge funds which, if my reading of the article is right, plans to guarantee steady profits even in times of global downturn by structuring their bets (which, essentially, is all share trading is) so that not only do they buy what they think will outperform the market, but they sell short everything else.

The sums of money these guys make are properly bonkers - annual salaries in the hundreds of millions of pounds. There is a general perception that hedge funds are shady, high-risk things, but the article seemed at pains to point out that is a misconception. Then, near the end, the writer slips in a 'by the way I've started up a hedge fund but there's no money in it yet, otherwise I wouldn't be allowed to write this article' which made me doubt everything I'd read.

What does Tightend know/think about hedge funds?

stake me for 2/4 Mr ex hedge fund manager End sir. 100% risk free!!!!!!!!!!!1

I thought that NR's mortgage book was basically sound - just the yield it gets is way less than the rate at which anyone would lend to it now. Contrast to the US where the problem was the mortgage books were worthless.

If nationalised I see your point, but if NR is bought up would that still be the case or would the new owners find some way to dodge the debt?

I was a fund manager 1991-2006. Of that I ran Hedge funds 2004-2006.

It did my head in, burnt me out totally..the pressure and the stress.

The general conclusion the writer refers to is correct..they are there to reduce risk and smooth return not create more risk..but, and there is always a but, its an immature industry that sometimes lacks management controls and of course wrong bets can be taken..witness LTCM the most famous example

The main advantage is that you can benefit from falling markets if the fund manager has correctly positioned for such, for example by "shorting" stock/markets or selling futures which you do by finding an investment bank which, for a fee, takes on the position of other side of the trade

I used to manage $425,000,000 of hedge fund assets which I grew from $0 by attracting investors.

My funds acheived c 10% growth pa, but a short term track record because, as I said, its an all consuming thing.

 

Variance - you were just a runhothedgetard. :)

NRK borrowers pay interest at x%

NRK funds the lending by borrowing from other banks at y%

x% is above y%, so NRK makes money, and lends more, and etc etc

The US economy operates in exactly the same way

but, it gets overdone and in mid 2007 the funding rate..y%..rises and credit is crunched..fewer people offer that funding

so no longer does x% exceed y% and NRK is stuffed

NRK's problem is not the assets, its the funding....hence it sought help

but, the effect of the credit crunch can now be seen in the avaialbility of credit in personal and corporate markets..

look at current mortgage or credit card deals, a world away from 2006...

that in turn feeds through to confidence, activity and in the end leads to house price falls (demand lower, supply constant)

Personal borrowing is extremely high too

I am gloomy for 2008-09

I was a hedgenit


could have shot for the moon, settled for much less but more predictability..hence the assets grew and my compnay earned more

potw rotflmfao ;yippee; rotflmfao

                >>>>>>>>>>>>>>>>>>>>>>
       
                                  MY HEAD

no, not at all. but anyone who buys Northern Rock (wooly jumper and co) will never pay that 25 billion back. That money is gone, that debt will be sold to consolidation companies who will aybe pay 50% of that money back..and even than we'd be lucky. This has nothing to do with people who have a Northern Rock mortgage.

http://news.bbc.co.uk/1/hi/business/7199552.stm

ouch

I was wondering why my google finance bit on my homepage was all in red... Now i know.. watch everyone panick sell all their shares etc etc..

Time to by Tighty?

not yet, it will get worse first

but don't panic sell..never panic sell...be long term and patient if you can afford to be

Er no

NR have lent about £100bn in mortgages and personal loans etc.

£50bn of this is "paid for" by a subsidiary in Jersey (which has borrowed long and therefore not suffering finacing problems).

About £25bn came from savings accounts from borrowers off the street and the rest from short term loans from other banks. The other banks decided that they would rather lend money to any bank other than NR so this source of funding dried up, Retail savers heard of problems so they took their money out as well.

The govt / BoE has had to now step in and lend NR £25-30 bn to cover what NR cannot get privately. Obv the govt does not have £25bn lying around in its back pocket so it has borrowed exactly the same money that was going direct to NR, in the govt's name and then forwarded that money to NR.

If we could just let time take its course then the govt could just wait 25 years for all the mortgages to get paid off and its money would be repaid.

The issue is now one of how one of how the govt :

1. retains public confidence in the banking system. (prob by giving a gtee of all bank savings of up to £100k) -(plus banks made £37bn in profit last year so it is not like banks are without capital)
2. Keep house prices up (or at least not fall a lot) so that there is not a problem of negative equity (prob by lowering interest rates and praying inflation does not happen).
3. Avoid state aid problems from the EU, (a real problem but prob going to be overlooked cos of the desire to keep NR alive)
4. Keep '000's of good jobs in the north east alive (if the jobs were in London the result would prob have been different)
5. Get re-elected (the prime job of any govt) - (er can give no hope to this one - just a shame the alternative is almost the same)
6. Get the money back (this is the easiest of them all - most of the mortgages are of good quality and will get paid back - it is just a question of the price paid for it - interest rate and the amount of "face" lost by actually doing it.)
7. The brand NR - (er its dead - i know people in the North East still like it but long term it will need a re-brand)
8. Find someone to blame - the press always need a scapegoat (this is more of a problem, ultimately it is the chancellor that was in charge of noticing that NR was acting like a 19 year old woman who had taken out 14 store cards and was buying too many shoes)

[edit point 8 to make sense]

i don't know much about this but i understand the new plans basically nationalise the potential losses and privatise any profits, thats why it's taking so long for the deal to get done, no private group is going to get involved without guranteeing a profit out of it in some way.

Who does the bank of england borrow the money from? the treasury?

As a novice with regards to this whole affair, my understanding as I read between the lines is BOE have lent NR 26 Billion at an interest rate above base rate. Surely at the worst the interest only is being repaid on this 26 Billion. If the BOE have money sitting in its vaults doing nothing then surely its in the taxpayers interest to loan this money out and earn a yield on it, however I expect in order to lend NR 26 Billion the BOE have in fact literally printed more money although in effect this money has not actually been pulled up as such but just shown in ledgers etc.
As for the other 25 odd billion as guarantees I guess Gordon Brown et al are confident that the assets in NR will more than cover this figure if NR was put into administration/liquidation so we Joe Public shouldnt really have to fret over this amount.
As for Wooly Jumper trying to get on the band wagon, no doubt any deal Virgin do will be their shareholders favour or else why would they want to get involved, however this doesnt neccessarily mean it would be a bad deal for the taxpayers given the other open options.

sorry

i didnt realise that cashing in my isa would have this effect

i will try and let you guys know before hand next time

US Fed cuts rates by 0.75% inter-meeting

they're worried for sure!

yeah I bet they are. I think it'll be a while before the BoE follows though

Dow Jones opens down 280 points.

Twenty minutes later it's down 438 points.

Going well, this.

the bbc plumbed new depths this morning with its reporting on the markets.

Sheer unadulterated glee is the only way to describe it when it was reporting a near 300 point opening fall on the market - "This is surely as bad as black monday" they said excitedly....

20 minutes later when the market had recovered around 200 points of the early losses they almost sounded disappointed.


irresponsible.

Yesterday was worse. When they first mentioned the market dropping the day before (BBC breakfast at 6.45 AM or so) they said "It's of course not the first time the market has dropped a fair few points" (I thought we were going to get a reasonable perspective on the market here but no..) "Though the last time was 9/11 and the time before that everybody remembers as the great stockmarket crash"


Sigh.

That was the same way I felt though - I love a good stock market crash. I lost interest when the markets started going back up as well.

ouch $7.0bn fraud at Soc Gen


it never rains.....

Ed Hollis AKA 88 Percent?

lmao

so it's been nationalised.

Am i wrong in thinking 'bollocks to the shareholders who were saying they would sue, they are lucky to get anything out of it'. Have they got anything out of it?

I could go off and read all about it but i'm sure some of you experts already have and can give me a quick summation of if i should be happy or annoyed about it. thanks.

you effectively paid 50 bill or so for a bank that is worth pennies. I'd be annoyed about the whole thing BUT it's better than selling it to someone like wooly-jumper and you'd never see any money for it again.. I have very little faith that NR will now be run properly though.

And indeed bollocks to the share holders..they can sure however much they want. They put their faith in crooked and bad directors and now want to come crying after you and me paid about 3500£ EACH for the privilige of owning this sodding piece of crap.

On question time last night they went over it for a good section of the program. It seems most people are angry at the government for some odd reason.

But like Boldie outlined it was the people that run Northern rock and took the huge risks that are to blame. The investors took the chance and if didn't pay off. How on earth can you sue anyone for that?

The government have saved peoples jobs and enabled northern rock to be turned around (so it can then be sold back), sure they messed up on when/how this was done but the alternative was to close the company down and all 6000 workers lost their jobs. It's a no win situation, people will whine at anyone.

It also seems that as soon as something is nationalised it must be a really bad thing. Take away the typical stereotypes that surround nationalised companies, strikes blah blah. It does have its advantages, I mean look at British gas how it was sold back to the people that owned it, and now it is allowed to run up 570% increased profits when the customers have to pay huge increases in bills. All those people that bought shares in the sold off government companies can pay for their extra fuel costs by selling their shares, now that would be funny.

Nationalisation can be a good thing, in my opinion..I sure as hell rate it a lot higher than how privatisation has been handled in most cases.