成人快手

Robert, lets face it whatever the solution to this problem be it the the central banks pumping money in to ease the credit squeeze or employing some very expensive advisers,that no doubt we will have to pay for, it won't solve the problem long term.

Following your commnets yesterday we all have to accept the facts that these loans will have to be repaid sometime. You, me and business will have to repay the debt. Are we really saying that by pumping in more cash into the financial system we can maintain low interest rates ad-infinitum for the whole of the Western economy whilst the East continues to become more and more competitive controlling key resources? I had a mortgage at 16% interest back in the 70's. Was it a problem? No, because I only borrowed what I could afford.

We have perpetuated the concept of easy money not accepting personal responsibility for our actions and making it easier to accept bankruptcy and failure as a norm because it鈥檚 becoming more acceptable. The Governor of the Bank of England used the word 'Moral Hazard', ie we cannot remove risk from all institutions or products, in his response to the handling of the Northern Rock crisis. Critics accused him of muddying the waters with some academic theory. Is this new? No,

When Gordon Brown made a statement to the House of Commons back in 1995 setting out the proposal for establishing the FSA, he was criticised at the time because amongst other issues it was felt Moral Hazard would be a problem. This can be viewed, via the web, in a Research Paper published in 99 on the House of Commons website. So why should we be surprised 12 years on that we're in the mess we are in?

The banks have been allowed to take on unaccepatble risks with our money.

The politicians were warned then and and like the three monkeys they see no evil, speak no evil, and hear no evil as long as it gets them back in power after their 5 year term.

So whats next? a few uncomfortable years I suspect. Some of those with fixed rate mortgaes should be able to remortgae after the term expires but I bet it won't apply to all. The banks will want to recoup their losses put up their charges making it far more difficult to borrow money.

Perhaps we might have to save some money for once or is that a sense of djea vu?

"And all of us as taxpayers can perhaps take as a little comfort that if this bank is ultimately nationalised, the commercial alternatives will have been explored and weighed in a rational and proper way"

Speak for yourself. I for one have a big question mark in my mind as to whether or not this government is capable of doing anything in a "rational and proper way". The way out of this requires, inter alia, an acceptance of the uselessness of the tripartite system built against all professional advice on the instructions of one Gordon Brown.

Did Stalin ever admit to making mistakes?

It is a relief to see some creativity at work for sure. I am not sure though that the suggestion to take comfort is accurate.

Whilst the current exercise may well be exploring the "commercial alternatives" now available, the fact remains that this exercise would be unnecessary had the Government acted decisively from the outset.

As I have said previously, by all means protect the savers. Commercial lenders and shareholders should not though be protected. They engage in a business based on a simple trade between risk and reward and sometimes risk wins - unless, as here, the Government decides to intervene in which case advisers win whilst the taxpayer takes a literally massive hit.

Mervyn King is being congratulated for finally seeing sense in increasing money supply recently. In reality, if memory serves, he should be congratulated for being the only one bold enough at the time to suggest allowing market implications and solutions to work through. Given a choice between that, with the market self-correcting over time, or helping foot a 拢25bn bill I am definitely in the former camp.

Same old claptrap Peston, a little updated with more personal views and opinons but nothing really new. Please get a proper job somewhere and stop making a living out of Northern Rock "news".

If Goldman Sachs can put together a funding package for NR, why shouldn't NR tell Virgin and Olivant to F### Off. Both interested parties are only really interested in making shed loads of money at everybody's expense.

Lets be honest, all NR would get from Virgin is a new name. Virgin had assets of 拢2bn, NR had (past tense) assets of 拢113bn. Virgin Money has a couple of hundred staff, NR has 6,000 - and they're a very impressive workforce. Whatever the misguided Adam Apple Pie asked for, he got, these staff can make NR vibrant again. Whatever they're asked to do, they'll do.

Olivant don't want to own the Co, they think there is still value in the NR name ...and so do Mortgage brokers and so do I, so if the funding is available why entertain them.

So RAB & SRM prefer Olivant, so what. They both piled into NR like Vultures when the share price was @ 拢2 hoping to make a quick buck on the corpse of NR. If they lose their shirts, could we really care less ?

Get the funding in place, keep the staff on board and away you go.Virgin and Olivant, F.......

ROCK STEADY

Oh, and Robert, why don't you get youself up to Newcastle and live the NR dream totally (as you seem to want to do). You could interview the staff, explain how your posts are fair, factual and unbiased.

...and tell them how you broke the story and have sought congratulation ever since Sept 13th.

"And all of us as taxpayers can perhaps take a little comfort that if this bank is ultimately nationalised, the commercial alternatives will have been explored and weighed in a rational and proper way."

Eh? No. No comfort at all that the banks, unique among all UK businesses are being given social security. It's an outrageous misuse of governmental power and taxpayers money.

Can we expect the government to extend the same facility to all other businesses out there? Nationalisation instead of administration.

It has made its own financial adviser, Goldman Sachs, available to the Rock, to find funding for the troubled bank that would replace some of the 拢26bn of taxpayer-backed loans.

Aaaaarrrrrggggghhhh!!!!! Why is everybody so blinkered about Northern Rock's current problems???

The immediate problem is that Northern Rock cannot fund its lending, hence the emergency loans from the BofE. Fine.

However, the FUNDAMENTAL problem is that Northern Rock has over-extended its lending. The REAL SOLUTION therefore is not to find alternative funding for Northern Rock but for Northern Rock to REDUCE ITS LENDING. And how do they do that? Answer: BY INCREASING THEIR MORTGAGE RATES. Doing so will make their mortgages unattractive to their existing borrowing customers who will therefore be motivated to transfer their mortgages to other lenders. This is capitalism in its absolute simplicity, so why is everyone obsessed with far more complex solutions???

Anyone would think Gordon Brown was dictating the course of events...

Well, well, well...you've got to hand it to Goldman Sachs, they sure do know how to make money.

Here they are, sitting on a $19bn 'bonus pool' generated by shorting mortgage-based junk, whilst the BoE pays them to help in administering the last rites to one of their victims.

Cheers you up no end doesn't it!

Re: Northern Rock increasing its mortgage rates

LOOK AT THE NUMBERS:

If the average mortgage is (say) 拢200,000, then it would only need 50,000 mortgages to be transfered for Northern Rock to gain 拢10bn cash with which to repay some Bank of England loans. And once NR start reducing their BofE emergency borrowing, I think even Robert Peston would be amazed at just how quickly this so-called "crisis" simply evaporated...

(cribbed from my post #47 on /blogs/thereporters/robertpeston/2007/12/rock_and_nationalisation_2.html%29

Number of points.

1. The financial industry has become parasitic. The value it brings is now less than the cost it adds to societies productiveness. It turn 拢1 into 拢0.95p. It didn't always do this ,but now it does,because the ROE on capital employed has been dropping in real terms for decades. I have the figures and it's clear mature economies can no longer afford this industry performing in the way it now does. It will still work for less mature economies. Bottomline ,each reinflate (production of credit) brings about a falling output and this is in part due to overcompetition for yield and the cost of the industry trying to get same.See below.

2.West needs low rates and will get them and keep them.It has no choice as the ability to get increases in incomes is now determined in a relatively open global market by the global wage rate.If the East has kept our purchasing costs down so have they also kept our earnings down.You don't get one without the other.Real growth is flat and chasing it and yields is becoming a negative sum game for society although not for the finance industry who get first bite at credit and fees regardless of outcome.

3.NR is not a global player and never was. It's problem going forward is it will be playing in what is going to be a cut throat UK market.To suggest it's current status based on past performance means it has a business model and management that can compete going forward is incorrect.For it to survive it will need either the protection of being a public entity ,or the financial strenth/management supplied by one of it's successful bidders.

4.2008 looks like being an extremely difficult year and as such time is running out for this issue to be decided.The longer it is left the more difficult it may become to take a private funded option.

Post 8 : Yummy Carol Kirkwood

Your solution is not really a solution, I'm afraid. There are too many of Northern Rock's mortgage loans that are only viable if property values remain high enough that there is no risk of default losses. If default risk has to be priced into the interest rate this, in many cases, will make default inevitable - so no rational lender would be prepared to touch such loans.

This problem isn't just Northern Rock's - it's spread across the entire industry. Loans have been made to the maximum of an individual's ability to repay, at rates that are artificially low because they don't include an "insurance" against default losses. All these loans will be being carried at par value in the accounts of whoever holds them, but the reality is that they're not worth anything like par value - unless property values can be prevented from falling.

So what we have is the threat of an economic catastrophe unless we can sustain a level of property values that speculation has driven up to at least 100% above economic value.

Don't you think it would have been better to have listened to wiser councils who have been saying all along that this is what would happen if we didn't act to suffocate the speculation before it took hold?

John (comment #1)

People who live in glass houses.... If you had a mortgage at 16% in the 1970s, when inflation was up to 29%, you benefited from the greatest easy money bailout of all time - exchange control. Your experience founded the "take out a big mortgage, you won't lose in the long run" culture that played a key part in generating present economic problems. If public money is required to clean up this mess, your generation should be the last to begrudge a contribution!

Has anyone else missed the rock hipocracy? - they cant fund them selves, their savings are 100% govt backed yet they are offering a bonus to savers who keep their accts in 2008

At last someone else - Carol Kirkwood - has made the obvious and pertinent comment about how NR's loan book can be shrunk over time by raising interest rates to reflect NR's higher funding costs and encouraging the taxpayer-funded loans to be paid off well before the normal 25-year (say) term of the underlying mortgages.

But there will be limits to this. Given how fast the NR loan book has grown, very many of these loans will be recent and within initial "special terms" periods of one kind or another. When those end, a hike in the NR standard variable rate will encourage mass remortgaging...but only if the borrowers can find an alternative lender offering better terms.

And that may not be possible if house prices fall significantly over the next year or so, creating negative equity for many such borrowers - even if the present credit crunch unwinds as it probably will.

Result: the NR loan book will increasingly be made up of poorer-quality loans for which a higher interest rate would be appropriate. That would be tough for the borrowers concerned, who would not get the implicit subsidy that usually results from a "one size fits all" interest rate...but is it an unreasonable outcome, given the risk that their loans represent to a lender?

This isn't a total solution, but it ought to be part of the solution. It's also one that could be politically harder to sustain following nationalisation of NR.

It's certainly an aspect that deserves more attention and comment- over to you Mr Peston!

It speaks volumes for the level of confidence in this government's promises and undertakings that the flight of money from Northern Rock simply continued and continues virtually unabated notwithstanding the socalled guarantees put in place by the Treasury. And why on earth SHOULD depositors trust this government or the pronouncements of the FSA, both of which have been so manifestly incompetent in regulatory matters concerning the banks or the world of pensions and insurance.

Perhaps if Gordon Brown had made even the slightest effort to be truthful, fair and open in his treatment of those who lost their pensions in the failed corporate schemes, or those who were so dreadfully let down by regulation of Equitable Life, consumers of financial products may be a little more willing to accept that 'guarantee' or 'protection of depositors' meant what it stated, instead of yet another empty promise from this morally bankrupt government.

Northern Rock's very real problems may indeed have been caused by the adoption of a reckless financial model, which hit the buffers when the wholesale money markets closed down, for reasons outsode the Rock's control, but what on earth is financial regulation all about if it is not to police and control such reckless behaviour? The chickens are coming home to roost, and we had better all hope that sanity will start to prevail in the financial markets soon, because I personally have very little confidence that Brown or Darling have a clue how to repair confidence that has been so irretrievably shattered in both the Rock, and this government.

Re: Northern Rock increasing its mortgage rates

LOOK AT THE NUMBERS:

If the average mortgage is (say) 拢200,000, then it would only need 50,000 mortgages to be transfered for Northern Rock to gain 拢10bn cash with which to repay some Bank of England loans. And once NR start reducing their BofE emergency borrowing, I think even Robert Peston would be amazed at just how quickly this so-called "crisis" simply evaporated...

(cribbed from my post #47 on /blogs/thereporters/robertpeston/2007/12/rock_and_nationalisation_2.html%29

"And BTW Carol Kirkwood is quite right. But NRock is instead offering ultra-competitive rates, subsidised by our money." - NBeale

Not sure where you got your facts from but you clearly haven't looked at Norther Rock's current mortgage range. The rates are anything but competitive (2 year fixed rates are over 7% unless you pay a 3% product fee). This is being done for exactly the reason that they're trying to run down their mortgage book.

Re Nr 9 Tony's comment:

Such wonderful, witty and true comment. Maybe Goldman Sachs is employed on a 鈥渘o win no fee鈥� basis?

If Northern Rock increased their lending rates then people would transfer their mortgages away to other banks. Hence cash would flow into Northern Rock. As an electrical engineer, this would seem to be the natural correcting action, rather like a flyweight governor. Why has this not happened? Would this have palliated the fall in the share price?

We are at that point where you have to ask is NR still acquiring new business and if so why?

IT is a banking business somewhere between take over and administration (nationalisation LIKELY), with no liquidity of than that offered by the public purse... so is it legal that a bank over which such questions as to it's fundamental future are so open and in doubt, is still taking deposits... still making morgage offers... still arranging morgages and therefore daily adding to the debt owed to us taxpayers... which it, ultimately cannot in any way offer, to any degree, any guarantee to pay back.

The legality of this situation is bound to be tested in the courts, the Lords and ultimately the European courts soon enough, but ask yourself this... the police got stiffed over point five on their arbitrated payrise ...about 拢14 million. Was it because all the governments' money is invested in the Rock?

I do not find it all surprising that depositors have contimnued to withdraw funds unabated from the Rock. It demonstrates absolutely the complete lack of faith in representations of this morally bankrupt government that statements about 'guarantees' and 'depositor protection' are quite simply not believed.

Perhaps if Brown and Darling had been a tad more honest and open about the whole disastrous lost pension issues, with the failed corporate schemes and Equitable Life, instead of prevaricating, ducking and diving to deny responsiblity for regulation, the great British public might have conceivbably been inclined to accept the word of the British government.

As it is, the chickens are all coming home to roost and neither Brown nor Darling have a clue how to restore confidence.

Comment 13

Re-reading my post, I see I have recommended something that may be an impossibility. Wise councils are rare indeed, but there are some wise counsels peeping up out of the general morass.

Apologies for the error.

I should like to wish young Robert Peston a very happy Christmas. ~ And I feel the 成人快手 should sponser Robert to purchase a turky and present it to the Northern Rock. After all R.P. has made quite a killing out of all this.

Why not just let Northern Rock go into administrative receivership like Rover did? Just wind it up and close it down as has happened to a lot of manufacturing businesses in the UK. Those who have savings with Northern Rock have had plenty of notice to get them out to somewhere safer, such as under the bed. Northern Rock shareholders shouldn't get anything.

How come capitalists are only in favour of the market system when things go well?

Northern Rock is part of the capitalist system, in fact it's right at the centre of it - property ownership, property speculation and loans to make money from money.

Everyone who says they believe in capitalism and the free markets should be saying the same thing - leave it to find it's own level and either sink or swim.

As a none property owning socialist I couldn't care less about Northern Rock, which is a bit bizarre because that's the attitude capitalists should have as well.

The solution to Simon's issue (post 13) and most other problems in this area is simple - increase the rate of inflation. This quickly pushes up the price of housing, avoiding the negative equity trap. It makes the loans easier to repay, which helps almost everyone, and if this is achieved by letting the government print money and spend on capital infrastructure, this helps everyone.
If the rate of inflation can be kept above the bank rate (more difficult now but it has been done in the past) then it amounts to a tax on money whch helps redistribute wealth from the moneyed classes to the debted classes.
Yes, I lived the through the horrors of Britain in the 70's and 80's and yes, like many other people then I thought low inflation was the cure for societies ills.
I was wrong.
The high inflation period we had then achieved the wealth redistribution that the present labour government claims to believe in but doesn't practise. Those with money are getting richer while the rest of us are getting deeper in debt, despite our years of education and long hours of work actually making things rather than just redistributing bits of paper.
It is almost unbelievable that some of those (like NR) who have their hands in the cash-generating machine have been so incompetant as to lose money when their peers have been making it hand over fist, but this hardly justifies us helping them out.
Let the company fold, bring back money creation into the hands of the government, and let inflation rise to the level of 7%-10% where it needs to be.

The solution to Simon's issue (post 13) and most other problems in this area is simple - increase the rate of inflation. This quickly pushes up the price of housing, avoiding the negative equity trap. It makes the loans easier to repay, which helps almost everyone, and if this is achieved by letting the government print money and spend on capital infrastructure, this helps everyone.
If the rate of inflation can be kept above the bank rate (more difficult now but it has been done in the past) then it amounts to a tax on money whch helps redistribute wealth from the moneyed classes to the debted classes.
Yes, I lived the through the horrors of Britain in the 70's and 80's and yes, like many other people then I thought low inflation was the cure for societies ills.
I was wrong.
The high inflation period we had then achieved the wealth redistribution that the present labour government claims to believe in but doesn't practise. Those with money are getting richer while the rest of us are getting deeper in debt, despite our years of education and long hours of work actually making things rather than just redistributing bits of paper.
It is almost unbelievable that some of those (like NR) who have their hands in the cash-generating machine have been so incompetant as to lose money when their peers have been making it hand over fist, but this hardly justifies us helping them out.
Let the company fold, bring back money creation into the hands of the government, and let inflation rise to the level of 7%-10% where it needs to be.

The first glimmer of light in the situation is citibank 'owning-up' to its $50bn SIV debts. In the short term this will adversly effect credit ratings etc, but in the longer-run it will restore some much needed confidence. Other banks and institutions MUST follow this example and maybe then we can see a way out of the mess created by all the junk CDOs, Commercial Ass(et) Paper and the other toxic waste poisoning financial systems.

I see Goldmans have played their cards well yet again, in today's moves to rescue NR.

They waited until everyone else played their hands before quietly orchestrating a position with the Treasury for a "win win" deal for them. They get to work for the Treasury to find the best solution - including nationalisation, under the guise of giving a level playing field to all commercial bidders for NR. Good for 2008 bonuses too!

More taxpayers money is being spent on what could have been saved months ago by proper "market intervention" rather than political dithering.

When will politicians ever learn - let bankers be bankers, businessmen be businessmen, and politicians stick to knitting.

Congratulations!

I am now so sick and tired of the relentlessness of this Northern Rock-obsessed blog, that I will as of today cease to monitor Peston's Picks.

So we taxpayers can take some comfort can we Robert? This government that couldn't run a whelk stall has decided to throw 拢25,000,000,000 of our money at a failing bank but we might at least get some of it back. Oh what joyous news! Crack open the bubbly! We might only lose 拢14,000,000,000 after all.

The bottom line is we either let the market take its toll and watch Northern Crock collapse (and maybe one or two others, who knows), or we simply throw more and more money at it and make everyone lose out due to a deluge in the money supply.

But the government that lost 25,000,000 peoples' personal details in one fiasco, then another 3,000,000 in another fiasco, then threw 拢25,000,000,000 in another fiasco and can't even sign a treaty without turning it into a shambles is on the case. Well that's good to know.

It's ironic that the Government is going cap in hand to the very same PE players darling and broon were trying to 'clobber' with.....er 18% flat rate CGT. Be careful boys.

I want to make a couple of points

1. The government is trying desperately to find a rescue bid for NR - this means that NR has to be a functional business entity and its business to lend money for mortgages. If NR simply reduce its portfolio (now possibly at a loss) it will just realize a huge loss on the book with no business.

2. I blame the shareholders. I think they are holding the nation hostage by scuppering any reasonable deals to takeover NR. There are 2 classes of clients of NR: depositors and mortgage borrowers. I did not pay tax to bail out shareholders. I do not mind sponsoring any scheme to guarantee depositors cash (I think they should NOT receive any interest during this period about libor) but the rest of NR must be wound up and shareholders take all the hit on a takeover

3. The government should only care about the depositors' cash. The only reason why they are propping up NR right now is because there is insufficient cash or assets to back the deposits. Given the situation, I think NR MUST be pressured to be sold to be run as a business with conditions to repay the government's loan.

I repeat: I AM NOT INTERESTED TO PROTECT SHAREHOLDERS WITH MY TAX DOLLARS.

Re: #13 Simon Stephenson

I am more than happy to accept that Northern Rock increasing its mortgage rate will necessitate a deflation of the property bubble, and indeed may even precipitate a property crash. But trying to support an over-inflated asset class has never been achievable (if history is anything to go by), so trying to achieve the impossible is hardly the argument against taking the opposing action!

(ie You can't argue that the property bubble shouldn't be burst/allowed to burst given that history has proven that bubbles cannot be sustained indefinitely.)

However, a market is a market and everything has its price. I wouldn't be surprised if there were quite some pain associated with such a rate rise, but I am confident that it would all work itself out. That's what free markets do.

And yes, I quite agree that it would have been better had this situation been avoided in the first place, but this is what happens when you try and mitigate the bursting of one bubble (actually, there was more than one just after the turn of the millennium) by artifically engineering another bubble to replace it rather than let the situation play out naturally. You can't change the economic cycle. I could never understand why Mr G Brown was able to convince so many people for so long that he had been such a successful steward of the economy - it was all based on CONSUMPTION, with the whole thing underpinned by unprecedented levels of personal debt. Still to this day I do not know how one can borrow or spend oneself to wealth. If someone could tell us, perhaps we could all sit back and do nothing for the rest of our lives...

Finally, I read the other day that most major mortgage lenders had passed on the recent BofE 0.25% Base Rate cut, but that Northern Rock hadn't. Perhaps it is politically more palatable for Norther Rock not to raise its mortgage rate, but simply not to lower it when the rest of the market does? But then, I wouldn't want to cast aspersions on the independence of the BofE MPC. After all, I can't imagine that they would be swayed from targetting inflation, say, by reducing the Base Rate a couple of days before a report showing very significant inflationary pressures building in the economy...

Re: #22 john thomas

You make a very good point regarding NR acquiring new mortgage business. To be allowed to do so implies that the FSA considers it a going concern. However, I would sincerely hope they are actually taking very little new mortgage business whilst concentrating on trying to attract more savings - that goes hand-in-hand with reducing their loan book in order to rectivify their over-extended lenging situation.