Panorama rubbish

[ItsMrAlex2u]

A better link
http://www.moneyfacts.co.uk/Banking/guides/credit-crunch-explained.aspx

[ItsMrAlex2u]

Yes you're right the credit crunch is a figment of the medias imagination.  Northern Rock would have run out of money anyway and all the big banks are using the opportunity to slash their profits and share prices and are drastically reducing the amount they lend because at heart they are b4astards.

ps agree that the panorama prog was shit

This isnt accurate either. Basically Northern Rock bought in their product for one price (in their case, borrowed from banks) and sold it on at another price (in their case fixed rate mortgages).

If they borrow at 5% and charge 7% (for example) to their mortgage holders then happy days they make 2% (very simplistic I know).
When the banks stopped lending so freely to each other and liquidity dried up, the interbank rates (Libor) increased sharply. This caused Northern rock to run out of money when they couldnt afford to borrow at the higher rates, or in some cases couldnt even get banks to lend to them. Hence the Bank of England emergency lending and the inevitable collapse.

They would not have run out of money had they been able to continue to borrow to fund their balance sheet as they always had

[ItsMrAlex2u]

One interesting question with regard to the Banks, and in fact companies such as Tesco's, Sainsbury's etc is at what point do their profit levels have to get to before it just gets to the point where they are bleeding the british public dry?

In 2007 the UK main banks made around £50bn between them. That is a rediculous sum of money to be made from services that everyone has no choice but to use.

It is obviously impossible though for the government to tell the banks they cant make their profits as the banks answer to their shareholders.

Its the same for the huge supermarket chains who provide a service that everyone has to use but at what point to the profits simply become unethical?

(P.S. most of the banks will report hugely reduced profits in 2008 but not because the public isnt still paying the same for their servcies, but because they are having to right off billions in bad debt provisions)

[StuartHopkin]

They can make as much money as they want for me. Ive only dealt with HSBC but i find them amazingly helpful, and all charges and rates are very reasonable.

Its the same with supermarkets none of the food in a supermarket is unreasonably priced. I like tesco's myself, they have their fingers in so many pots, they are incredibly cheap on EVERYTHING they do from bread to car insurance. If they can make a mint doing it why shouldnt they?

Of course the banks are going to report reduced profits but there still going to be profits.

I agree with some of your other points, but I honestly think one of the main factors in Northern Rocks problems was the way it was portrayed in the media. Things were obviously bad, but the worst thing that could possibly happen was for someone to wind everyone up and blow it out of all proportion causing everyone to rush and withdraw every penny they have!

[doubleup]

Yes you're right the credit crunch is a figment of the medias imagination.  Northern Rock would have run out of money anyway and all the big banks are using the opportunity to slash their profits and share prices and are drastically reducing the amount they lend because at heart they are b4astards.

ps agree that the panorama prog was shit

Oh please !
The media clearly dont help in with things like this and yes Panorama is utter rubbish but the credit crunch is very real in terms of what that teram actually means.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/07/22/cccredit222.xml

This link provides a good explanation of what is actually meant by the credit crunch and it has f all to do with a bored editor creating a headline.

did you know that you can buy a new sarcasm meter with pokerstars fpps?

[Grier78]

In 2007 the UK main banks made around £50bn between them. That is a rediculous sum of money to be made from services that everyone has no choice but to use.

Most of that £50bn was not made from providing Personal Financial Services to everyday retail customers, the actual retail market in the UK is very competitive and banks struggle to make a decent return. Where the money is being made is in Private Equity Funds, Commercial Banking and Global Investments. Also one of those companies is HSBC which although based in the UK operates in 50+ countries and only makes about 5% of its profits from UK retial banking.