Northern Rock - who's to blame?

[Newmanseye]

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..

[TightEnd]

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

[Newmanseye]

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?

[booder]

it's Ironsides fault..












proberly

[TightEnd]

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?

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"

[boldie]

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 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.

[Newmanseye]

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?

In the example you quote the Press reported the fact. Granted its a fact that is normal in the business 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

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

[TightEnd]

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 

[boldie]

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.

[lazaroonie]

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 

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

[TightEnd]

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 

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

[byronkincaid]

There is no doubt in my mind that that 25 billion is gone

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.

[AndrewT]

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?

[byronkincaid]

annual salaries in the hundreds of millions of pounds

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

[Bongo]

There is no doubt in my mind that that 25 billion is gone

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.

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?