[Archived] Global Recession Looming

[Flopsy]

£50bn could build a complete high speed rail network for the UK and any number of other highly desirable projects. It could also have rescued Rover and put in enough cash to make it bigger than Toyota or enabled us to buy the whole of Airbus and relocate all production to the UK!

This one?

Too be fair it took a while to find it

[jim mk2]

After all, what was at stake was teh prestige of the bankiing system, the banks' reputations were on the line.

But Mr Broon decided to bail them out instead, nothing to do with the North East being a labour heartland or anything.

You silly billy.

What was at stake if Northern Rock had gone bust was the savings, homes and livelihoods of hundreds of thousands of people, the economic stability of the country, the reputation of the City of London as the world's leading financial centre and the reputation of Great Britain plc.

The government had no choice but to step in and save a mess created by an arrogant NR board and overseen by an incompetant regulatory body, the FSA.

[cletus]

Global recession.....i doubt it will affect me, i`m skint as it is so i can hardly be any more skint.

[Bazzanotsogreat]

post

Happy now?

No not really , are you proclaiming that you wrote the telegraph article? from which I directly lifted those quotes . You have made yourself look very silly by indicating that I have lifted information from your post, which I have not even read.

As strange as it may seem to you, but people are actually capable of writing a post without copying from your posts.

[Flopsy]

Wind your neck in.

Phil was pointing out he'd posted something similar earlier in the thread.

[Bazzanotsogreat]

Wind your neck in.

Phil was pointing out he'd posted something similar earlier in the thread.

"Phils" response to my post

Actually bazza, a great deal of that was taken from my e-mail a few pages back.

.

He dosent point out something similar at all does he flopsy? he is saying that i copied from his post. Oh but im sorry he is a protected species on here

[Flopsy]

Oh chin up, I didnt meant to hurt your feelings.

Still, I heard that telegraph quote on FiveLive on a week last Wednesday night from their economic/political bod (cant remember which) So maybe the torygraph nicked it off him.

Therefore you both owe me a grovelling appology.

Tris whats 4 Billion euro's between friends?

Its mind boggling when you actually start thinking about the amount of cash we're talking about isnt it?

[rover6]

Shouldn't the other banks have bailed out their own?

After all, what was at stake was teh prestige of the bankiing system, the banks' reputations were on the line.

I believe there was some sort of precedent in teh seventies for this.

But Mr Broon decided to bail them out instead, nothing to do with the North East being a labour heartland or anything.

Don't quote me on this but the other banks weren't in a strong position to bale anyone out because as soon as the alarm bells began to sing, inter-bank loan interest rocketed which basically gummed up the system to add to the fall out out on the US subprime. Also, they were most probably hoping that the Bank of England would do the rescuing. Further, I might be wrong, but would there not be competition law difficulties in one private bank coming to the aid of another...?

I think certain people did have a go at trying to stabilise things by circulating rumours/speculation about buying-out Northern Rock soon after the trouble began. It did, if I remember rightly, steady the share prices briefly.

As for the Brown rescuing Northern Rock for party political gain - that, imo, is taking cynicism into the realms of paranoia. Northern Rock's problems spelt major concern for Britain and even further afield, not just a certain part of England.

[Paul]

The BoE has always (in the modern world) had a function as Lender of Last Resort - ie to avoid banks going under. The timing here was odd though, too quick or too slow depending on what you want to believe.

If Northern Rock, or any other institution for that matter, did go under what is the position with existing mortgages? Would the administrator ultimately have the power to go to borrowers and ask for the mortgage to be repaid immediately or would the administrator be bound by the contract between borrower and lender?

I know what the reply would be if NR asked me for their money back

[Al]

If Northern Rock, or any other institution for that matter, did go under what is the position with existing mortgages? Would the administrator ultimately have the power to go to borrowers and ask for the mortgage to be repaid immediately or would the administrator be bound by the contract between borrower and lender?

I know what the reply would be if NR asked me for their money back

Pretty sure that other banks/building societies would be happy to take over most mortgages. The underlying asset value is quite high in most cases. The only possible exceptions being recent ones but I am sure something could be done even in cases of negative equity.

[broadsword]

Don't quote me on this but the other banks weren't in a strong position to bale anyone out because as soon as the alarm bells began to sing, inter-bank loan interest rocketed which basically gummed up the system to add to the fall out out on the US subprime. Also, they were most probably hoping that the Bank of England would do the rescuing. Further, I might be wrong, but would there not be competition law difficulties in one private bank coming to the aid of another...?

I think certain people did have a go at trying to stabilise things by circulating rumours/speculation about buying-out Northern Rock soon after the trouble began. It did, if I remember rightly, steady the share prices briefly.

As for the Brown rescuing Northern Rock for party political gain - that, imo, is taking cynicism into the realms of paranoia. Northern Rock's problems spelt major concern for Britain and even further afield, not just a certain part of England.

It's OK, Jim "Michael Milken" mk2, has already bitch-slapped me.

The credit crunch was all of the banks' making, it just seems bizarre to me that the tax-payer is bailing out a private-sector company. It just goes to show, how delicately our economy is based, with no manufacturing to speak of. The whole country is running on the tick.

[philipl]

There is something of a myth about manufacturing.

There is no manufacturing employment to speak of in the UK any longer. Well its still at a touch under 20% but way smaller than the over 50% it was in the '70s.

However, UK manufacturing output is by a number of measures at an all time high.

Just as in the seventeenth century, it took 95% of the population to work in agriculture and extraction (mining, forestry etc) and that now employs less than 2% of the UK population, so automation is doing the same to manufacturing.

The fact that we don't see cars with British badges doesn't mean cars are no longer manufactured in the UK.

Back to the banking crisis. I suspect that the failure of the Soc Gen bosses to get the fraud charges to stick on Kerviel means that Soc Gen is toast as a bank. Going to be very interesting to see whether Sarkozy is going to be able to manufacture a French bail out or whether the EU finally chokes on French protectionism and gets them to open up. Barclays must be watching this very closely.

[jim mk2]

There is no manufacturing employment to speak of in the UK any longer.

The fact that we don't see cars with British badges doesn't mean cars are no longer manufactured in the UK.

y.

......beep, beep, beep, does not compute

[philipl]

British built Nissans, Hondas and Toyotas.

In fact other than the BMW Mini and Renault Traffic, if you want to buy British, buy Japanese marques.

[Bazzanotsogreat]

Northern Rock nationalised

Not sure that state ownership was part of brown's 'golden rules'

[Flopsy]

But St Margaret ended up doing it for BAe (I think and the steel industries) and what about Network Rail? I'm not sure what more could have been done, because letting it go under would have been political, financial and economical suicide.

More pressing for me is whether it is appropriate that a nationalised bank should be sponsoring the local football team

[jim mk2]

Government cannot let any bank go to the wall ; my only criticism is they should have nationalised NR back in October.

Darling is taking the blame but the real culprits are Applegarth and his fellow fat cat executives who caused the mess in the first place. Disenfranchised shareholders should sue them.

[blue phil]

Government cannot let any bank go to the wall

Yes they can .

[blue phil]

I'm not sure what more could have been done, because letting it go under would have been political, financial and economical suicide.

More pressing for me is whether it is appropriate that a nationalised bank should be sponsoring the local football team

I reckon that guaranteeing the depositor's money and selling off the rest would have been the best option - and a good signal to the other banks . It's just plain wrong to give guarantees to investors .

I think the bank already paid Newcastle up front for the sponsorship . I trust they'll have to look elsewhere when the contract runs out .....

[Wiggy]

The real culprit for NR is Gordon Brown who allowed banking regulation to be dispersed and watered down by splitting responsibilities between the FSA, the Treasury and the Bank of England. This left a framework that allowed Applegarth to put into practise his ludicrous business model.

What sort of economy can we have if a goverment bails out every failing bank? So bankers take huge risks to maximise profits ( and,of course, bonuses) but if the business plan doesn't work the taxpayer foots the bill?

Our banks have operated with the weakest regulatory system in the OECD since 1997. The City of London has been the Wild West of banking resulting in the most indebted society in the western world. One man is responsible for this...the former Chancellor.

[blue phil]

The City of London has been the Wild West of banking resulting in the most indebted society in the western world. One man is responsible for this...the former Chancellor.

THIS article illustrates just how indebted we are .

Add to that the billions the taxpayer are now having to cough up (with only vague mumblings that we might see some of it again ) and you have a picture of the most dishonest and incompetent government we have ever had to endure .

[philipl]

I think Wiggy has got this right.

The institutional response to Northern Rock has been consistently woeful.

Sadly the FSA top brass who knew what they were doing all retired within three years of each other and the new boys were not of the right calibre. Brown has a reputation as a micro-meddler and this massive mess is his and his alone.

Great shame as the guy has a lot of impressive achievements so his record as Chancellor has far more plusses than minusses. Unlike his doomed Premiership.

[jim mk2]

The real culprit for NR is Gordon Brown who allowed banking regulation to be dispersed and watered down by splitting responsibilities between the FSA, the Treasury and the Bank of England. This left a framework that allowed Applegarth to put into practise his ludicrous business model.

One man is responsible for this...the former Chancellor.

Wrong.

Governments can regulate as much as they like but financial institutions will always come up with new products and complicated instruments (in NR's case securitised loans) that are exposed during an economic downturn.

The culprits in NR's case is not Brown but 1) Applegarth as chief executive who took excessive risks 2) the NR board for not keeping reins on Applegarth 3) the FSA for not warning the NR that their business model was unsustainable.

What sort of economy can we have if a goverment bails out every failing bank? So bankers take huge risks to maximise profits ( and,of course, bonuses) but if the business plan doesn't work the taxpayer foots the bill?

Fortunately banks do not fail very often. The last one I recall was in the 1970s credit crisis. Government has to protect savers and mortgage borrowers who would lose their savings and their homes through no fault of their own.

As for the banking executives responsible for the mess they should answerable to the regulatory bodies and suffer severe financial penalties.

[Flopsy]

I reckon that guaranteeing the depositor's money and selling off the rest would have been the best option - and a good signal to the other banks . It's just plain wrong to give guarantees to investors .

I imagine PMQ's might be good fun today

[Wiggy]

Wrong.

Governments can regulate as much as they like but financial institutions will always come up with new products and complicated instruments (in NR's case securitised loans) that are exposed during an economic downturn.

Wrong.

If the regulatory bodies had not been watered down then NR wouldn't have been able to borrow 90% of it's mortgage book. When the B of E was responsible for banking practice the financial institution had to hold a much larger proportion of depositors funds.

The culprits in NR's case is not Brown but 1) Applegarth as chief executive who took excessive risks 2) the NR board for not keeping reins on Applegarth 3) the FSA for not warning the NR that their business model was unsustainable.

Fortunately banks do not fail very often. The last one I recall was in the 1970s credit crisis. Government has to protect savers and mortgage borrowers who would lose their savings and their homes through no fault of their own.

Correct.

Governments do this by providing proper regulatory frameworks. This government has dismantled previous checks and therefore we have had this free for all. Mr Brown loves to take all the plaudits for the ( so called) independant central bank.....but is distancing himself from this fiasco, caused by his own policies.