Trout

iTrader: (1)

I am intrigued by this statement - can you give a breakdown of how this money is lost? Where has it gone?

Trout

iTrader: (1)

Fast bloke - you have failed the Scoobynet rule of spin and bs. Your post is far too sensible and as such is worthy on an infraction against the king of Spin himself Mr GOLDMAN.

I reckon he is actually angling for a job with Brownie himself

GOLDMAN 555

All this trouble in the financial markets was started by mortgage-backed securities(banks in America lending money based on the properties they had issued mortgages on) the American property market fell the loans became worthless and banks took huge losses $100 billion so far and it is not over.

The new "deal" by the government announced yesterday issues more mortgage-backed securities based on the mortgages Northern Rock have given out. However the government have guaranteed the securities. So if they fail WE lose the money.

The long-term trend for property puts the average house price at around £120,000 therefore based on the long-term trend house prices are likely to fall beneath this before recovering.

Northern rock were one of the main companies involved in reckless lending therefore it is likely they will get the worst of the downturn.

The reason Northern Rock are in this position is because nobody wanted to lend them money because of their loan book.

Whichever way you look it the government and we are going to lose billions of pounds over this.

Brown is trying to cook the books so that you can't point the finger squarely at him.

In simplistic terms the government are doing the equivalent of going to Ocean Finance and getting a consolidation loan. They still given the same loan and liability/risk it is just a different loan than before.


All will go well if the housing market doesn't tank. With the stock market doing so well there is no worry of that is there.......

Trout

iTrader: (1)

So back to your first point - we have not 'lost £10 billion". There may be some risk of loss which is at yet undetermined.

You are also mixing two mortgage market issues which are pretty much unrelated. The losses in the US are defaults in a poorly secured mortgage marketplace.

Can you demonstrate that Northern Rock is suffering from similar levels of default - I doubt it.

The primary (many would argue, only) issue with Northern Rock is that it's business model is based on securitising their loan book in the capital markets. So they borrow money from other banks at wholesale lending rates to lend out to their customers. These loans are typically five or ten years and are 'rolled' over or renewed as and when necessary.

Becauase of the disaster in the US, banks stopped lending each other money and gathered in their debts to reduce ANY exposures. There was nothing special about the loans to Northern Rock - EXCEPT that they were critically dependent on them, unlike HBoS or Barclays for example.

There have been no bulk loan write downs at Northern Rock - it was simply than any interbank lending was either unavailable or at extremely punitive rates. And that was true of any bank wanting bulk capital which is why BoE had to put £10bn into the markets in the UK.

However I realise that you are only spinning your own hysterical yarn and so I have probably wasted five minutes of my life typing this.

PS Did you know that house prices in London rose 3.6% over the past month

fast bloke

Don't forget to add that in order to lose your estimated 20 billion, the housing market would need to drop by the 25% covered by MIG, plus 40% (40% of the 50 billion BoE loan), so 65%, and then every single Northern Rock client would need to default and be repossesed. Given an average house price today of 188k, the average price would need to drop to £66500 before the 20 billion is even at risk. That calculation is based on the assumption that no houses have increased in value since they were purchased.


So yes, the govt could potentially have lost 20 billion of our money

Leslie

Thanks for the info from all, helps to put it into perspective as far as I am concerned.

Les

GOLDMAN 555

Fair enough you are all entitled your opinion as I'm entitled to mine......

Fundamentally it is my belief that the government will lose billions of pounds on the whole northern rock thing in thousand market goes down that really P1sses me off. As I would much rather they let northern rock go out of business and punish the idiots that running the company/the investors who were invested in it.

lozgti

The only thing that really ,really gets me is......we are helping a bank!!

The whole thing is incredible.They have come unstuck through greed and yet it is so important for the government to encourage this sector/avoid it going down the pan that they have jumped through a million hoops.

Never has there been a more blatant admission(IMO) of how fragile the economy is

Leslie

Rather like PFI, it looks as though the taxpayer will lose out over it for years in the future when this lot are no longer in power so the responsibilty for it all appears to be hidden at the moment.

Les

AllanB

I'd rather we pay a bit to help stabilise the economy but it is another prime example of continual mis management by this incompetent government.

The clued up of you will know of the countless mistakes they have made worst being the selling of of a big chunk of our gold reserves at the bottom of the gold market, sheer class !


AllanB

Martin2005

Historically we'd of been moaning about economic mismanagement of a government after about 5 years when we would normally tipped into recession. So some credit must surely be due to this lot for the relative stability, and long period of growth we've enjoyed.

I'll get my coat

Leslie

Its what is stored up for the future that matters though. Haven't got the reserves as we used to have to tide us over now! All that governmental borrowing has to be paid back too.

Les

lozgti

So,down to Virgin,an internal job or nationalise.

Is anyone ever going to make a flipping decision on this.Thought the final bids should have been start of this week.

What is going on???

GOLDMAN 555

Typical Labore my guess would be that they are waiting for the correct time to break the news.

I'm no expert on this but I would also imagine the longer this takes the better from the bidders perspective to see if there will be further degradation in the credit markets.

Most of the long-term debt on the Northern Rock loan book is apparently pretty good however in the last few years they were one of the companies that were going crazy with 5X earnings mortgages and 125% mortgages.