Tuesday, Oct 09, 2007
Bonkers
BBC: Northern Rock gets new guarantee
The Treasury has agreed to protect new savings deposited at the troubled Northern Rock bank
Posted by mrmickey @ 11:56 AM (817 views) Add Comment
8 Comments
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1. paul said...
It is bonkers.
£10bn + £50m in charges. £12m in interest repayments a month.
History will judge the current actions of the Bank as being incredibly foolish and based on unrealistic wishful thinking.
2. whiteknight said...
Whole thing is entirely laughable i agree.
I mean given a choice it should not have been sanctioned, even if this were the full extent of the banking/financial crisis more or less over.
One has to view it in that context obviously. As far as many people are concerned:
1) A problem occurred
2) The cause was found
3) A solution was created
4) We are now in the aftermath
and hence at least any bailout activity looks limited.
In reality:
1) A problem occurred that was an warning symptom (like the twinges before a real heart attack arrives)
2) The doctor prescribed pain killers and sent the patient home - telling him to take it easy
3) The patient raced back to work
Now we are merely awaiting the next more painful phase.
3. inbreda said...
I assume they are doing it on the basis that if they guarantee FUTURE savings, then people will pile their savings into NR, thus averting the crisis and becoming a self fulfilling prophecy.
If they didn't guarantee future funds NR has to pay punitive rates of interest and will not find a buyer and therefore go belly-up possibly causing hysteria and a run on the banks.
I'd put my money in NR if it weren't for the fact that politicians are scum and I know they will change their mind or fail to live up to their promises without so much as the bat of an eyelid.
4. whiteknight said...
seems like a bit of controllable hysteria is necessary before people rouse themselves from the sofa?
5. p. doff said...
I think NR were offering about 6.3% last time I looked. With these 'cast iron' guarantees, it seems as good a place as any to stick in £35K. Why bother with National Savings!!
6. paul said...
Applegaruth : "Eee ek, Murvin, new savers won't put their money in with us because is not guaranteed"
Mervyn : "No way I'm not getting you out of the doodoo again, besides it will unfairly give you an advantage in the market"
Applegaruth : "Well whatsapoint a guaranteeing in'first place? We're still up shet creek"
Mervyn : "Oh alright then"
Applegaruth : "Bloody hurrah!"
7. deepak said...
Paul, Northern Rock EBIT (Earning Before Interest and Tax) are expected after downgrading them is £500 million pounds.
Put in context £12 million * 12 months = £144 million that is around 25% of EBIT.
I would like to own the company which makes £350 million in its worst year.
Although you are speaking to someone who took his money out of Northern Rock day one :)
8. Island Of Sanity said...
this is the most ridiculous thing I have seen. northern rock was itself to blame for the crisis - going too quickly and using an unsustainable funding base to fund that growth. the shareholders took benefit of that growth while it lasted. It is ridiculous to pay honest taxpayers money to then be used to increase share price.
Much better use of the money will be for some sensible public causes instead of proping up a near bankrupt entity