Government May Inject 10bn Billion Into Northern Rock

[A.steve]

http://uk.reuters.com/article/domesticNews...0090122?sp=true

The government is considering injecting as much as 10 billion pounds into Northern Rock to use the nationalised bank to ramp up mortgage lending, the Daily Telegraph reported.

I'd seriously consider supporting a civil war if this were as reported.

Edited January 23, 2009 by A.steve

[HAMISH_MCTAVISH]

http://uk.reuters.com/article/domesticNews...0090122?sp=true

I'd seriously consider supporting a civil war if this were as reported.

I hate to say "I told you so"..........

Nah, actually, I don't hate it at all.

[thirdwave]

http://uk.reuters.com/article/domesticNews...0090122?sp=true

I'd seriously consider supporting a civil war if this were as reported.

Well,I suppose it would only cost the taxpayer a few extra reams of paper. It could run foul of EU competition laws though..

Edited January 23, 2009 by thirdwave

[MSWHPC]

.

Edited January 23, 2009 by CGNAO.

[laurejon]

Why not just pass a law that states Banks should be empowered to deduct taxes direct from employees wage packets ?

The Government could close the HMCR and save a fortune by laying of hundreds of thousands of workers, and hand the taxation powers directly to the Banks, who are the people the taxpayers are paying anyway.

[thecrashingisles]

I hate to say "I told you so"..........

Nah, actually, I don't hate it at all.

Even if you could get 10 billion into the hands of insane would-be house buyers it would be just a tiny drop against a deflationary tsunami. In fact getting more lending going will only help to set a clearer (and lower) market price for houses.

[laurejon]

I am guessing that Northern Rock are sitting on a huge mountain of worthless debt, and this additional 10bn would merely serve to underwrite it. I doubt very much Brown would be directing new money to be lent on an asset that is clearly depreciating at alarming levels...................would he ?

Common sense tells any lender that lending on property today, even with a 25% deposit will still leave the Banker looking at a negative asset as security in a years time.

Edited January 23, 2009 by laurejon

[A.steve]

Even if you could get 10 billion into the hands of insane would-be house buyers it would be just a tiny drop against a deflationary tsunami. In fact getting more lending going will only help to set a clearer (and lower) market price for houses.

You're as right as HAMISH is a plonker (IMHO).

This doesn't stop me being livid at the principle.

If someone were to try to mug me for the £50 in my wallet, I'd fight them - I'd risk thousands of times greater loss not to comply. Similarly, here, any attempt by the government to directly fund mortgages is clearly and unequivocally an attempt to maintain a price for houses such that ownership is beyond the means of all who need a home. It is corrupt and evil. It doesn't matter to me that it is inept and doomed to fail - it is still wrong.

[HAMISH_MCTAVISH]

I doubt very much Brown would be directing new money to be lent on an asset that is clearly depreciating at alarming levels...................would he ?

Nope. Thats exactly what it's for. New mortgage lending.

So £10bln to NR (as a downpayment, IMO) Plus £8bln to RBS, plus another £100bln available for all banks through government guaranteed securitised mortgage funding, plus another £250bln in govt insured loss protection.

PLUS, another 80 bln is already being discussed as direct capital injections into the banks.

Thats a HUGE pool of liquidity, hitting mortgage products near you sometime around the 3rd quarter of this year.

[OnlyMe]

I am guessing that Northern Rock are sitting on a huge mountain of worthless debt, and this additional 10bn would merely serve to underwrite it. I doubt very much Brown would be directing new money to be lent on an asset that is clearly depreciating at alarming levels...................would he ?

Common sense tells any lender that lending on property today, even with a 25% deposit will still leave the Banker looking at a negative asset as security in a years time.

It is not his money, I doubt he cares if the whole lot is lost as a consequence.

Looks like some questions are going to be asked.

http://www.guardian.co.uk/business/2009/ja...hernrock-europe

Brussels threatens to block proposal for Northern Rock to step up lending

* David Gow in Brussels

* The Guardian, Friday 23 January 2009

* Article history

The European commission is threatening to veto the UK government's revised remit for Northern Rock, the mortgage lender which was nationalised last year.

Neelie Kroes, the EU competition commissioner, and her senior officials believe that the Treasury's move to extend the 2011 deadline for Northern Rock to repay its debts to the taxpayer, increase its lending activities and take on more staff may breach EU state-aid rules.

In particular, the revised remit is viewed as calling into question the government's professed intention to restructure the Newcastle-based lender - a condition of any commission approval for long-term aid after the first six months of rescue assistance.

It is understood that the new role for the Rock will mean a renewed full-scale investigation of the lender's future and delay any decision on the initial bail-out beyond the target date of Easter.

Last June the commission voiced serious concerns about the Treasury's restructuring plan for the Rock, indicating that a more radical and rapid downsizing of the lender could be forced upon the UK government as a condition for approval.

[BXLONDONMAN]

http://uk.reuters.com/article/domesticNews...0090122?sp=true

I'd seriously consider supporting a civil war if this were as reported.

this QE must be strong magic how come only germany used it after the first world war, now us soon the rest of the world...the pound will do what ? in zim.babe land they tried QE it led to the zim doller being one of the worlds great currencys,,not really.. the pound and zim doller 1=1 by 2020..

no this can't be true can it dear pm brown !!! :angry:

[HAMISH_MCTAVISH]

You're as right as HAMISH is a plonker (IMHO).

That may be. But plonker or no I have been accurate in my predictions of the way this crash will play out in excess of 90% of the time so far, and have clearly posted so well in advance of these things happening.

So feel free to continue trolling me as much as you like.

And I'll continue to prefer being right to being popular.

[HAMISH_MCTAVISH]

The European commission is threatening to veto the UK government's revised remit for Northern Rock, the mortgage lender which was nationalised last year.

I'll bet they are. Particulary given how p1ssed off they are about the UK devaluing and becoming more competitive than the eurozone.

However, theres more than one way to skin a cat. All they have to do is partially reprivatise and it will dodge the bullet. NR (and RBS, and LLoyds, etc) will restart mortgage lending on a massive scale before Q3 this year, guaranteed.

[laurejon]

Nope. Thats exactly what it's for. New mortgage lending.

So £10bln to NR (as a downpayment, IMO) Plus £8bln to RBS, plus another £100bln available for all banks through government guaranteed securitised mortgage funding, plus another £250bln in govt insured loss protection.

PLUS, another 80 bln is already being discussed as direct capital injections into the banks.

Thats a HUGE pool of liquidity, hitting mortgage products near you sometime around the 3rd quarter of this year.

So if I were to draw flow diagram it would illustrate the following.

The money would come out of my pocket to the Inland Revenue, who in turn hand it to the Bank, who in turn lend it to me. When I cannot keep up the payments on the loans, I ask the bank for more money, starting the circle from my pocket by doubling the payments to the Inland Revenue then forwarded to the bank, then back to me again.

Not withstanding that, my debts are secured on something I have no interest in because its worth less than I owe for it.

Thats Genius, and I can see it really going to put liquidity into the market place

[billybong]

It's not to help savers/taxpayers - of course.

[A.steve]

That may be. But plonker or no I have been accurate blah, blah, blah

I didn't call you inaccurate, I called you a plonker - I was convinced of the things about which you've been right since well before you joined.

I make no claim to be able to be accurate - I ask questions in which I'm interested to discover answers. I may also offer my opinion - about which I am the sole expert and authority.

[Injin]

Nope. Thats exactly what it's for. New mortgage lending.

So £10bln to NR (as a downpayment, IMO) Plus £8bln to RBS, plus another £100bln available for all banks through government guaranteed securitised mortgage funding, plus another £250bln in govt insured loss protection.

PLUS, another 80 bln is already being discussed as direct capital injections into the banks.

Thats a HUGE pool of liquidity, hitting mortgage products near you sometime around the 3rd quarter of this year.

It'll be gone by then.

All it is doing is bringing the hyperinflationary collapse closer.

[A.steve]

It'll be gone by then.

All it is doing is bringing the hyperinflationary collapse closer.

Your two lines above are contradictory.

[laurejon]

I'll bet they are. Particulary given how p1ssed off they are about the UK devaluing and becoming more competitive than the eurozone.

However, theres more than one way to skin a cat. All they have to do is partially reprivatise and it will dodge the bullet. NR (and RBS, and LLoyds, etc) will restart mortgage lending on a massive scale before Q3 this year, guaranteed.

There is no way on Gods fair earth that Banks will duplicate the mistakes they have made over the past decade, its pure fantasy.

The lending book on property is effectively closed, property was formerly an appreciating asset past 1996, so Banks returned to lending. If anyone was around pre 1995, and economically active they will tell you that getting mortgage was more painfull than pulling teeth.

Banks will not be lending on property to any great extent, not now or in the immediate future. Banking is about risk, and its also about hedging that risk on security, and property is predicted by the City to fall to around 50% off peak, and that in private is described by some bankers as conservative.

I really dont think this mess has sunk in to many people at present. We are living in unprecedented times, never in our history has the collapse been so rapid, and predicted to be so protracted. We are merely today looking over the edge, the drop through the hangmans door is yet to come.

[HAMISH_MCTAVISH]

So if I were to draw flow diagram it would illustrate the following.

The money would come out of my pocket to the Inland Revenue, who in turn hand it to the Bank, who in turn lend it to me. When I cannot keep up the payments on the loans, I ask the bank for more money, starting the circle from my pocket by doubling the payments to the Inland Revenue then forwarded to the bank, then back to me again.

Not withstanding that, my debts are secured on something I have no interest in because its worth less than I owe for it.

Thats Genius, and I can see it really going to put liquidity into the market place

Ummmm..... No.

You really don't get it, do you.

The government is effectively loaning it's AAA credit rating to the banks to use for mortgage lending. Only a small percentage of the £350bln plus is actually coming from taxpayer money. The majority is being borrowed on the open market, with the govt only guaranteeing to cover the inevitably tiny % of defaults, but it's even charging the banks for the guarantee.

So for every 350 bln raised, the taxpayer, even in the worst case, will only be responsible for perhaps 3% of that amount. And thats before repo and resale, which will again cover around 50% of the 3% loss, and the charges that the banks pay for the guarantee, which will cover most of the rest.

It's the way of the future to restart the markets. Rent a rating. Despite all this doom and gloom about massive bank liabilities, everyone knows damn well that the actual defaults will be tiny. The rest is just hype. Theoretical mark to market is killing the economy, as 90% plus of these loans will eventually pay off the full amount, and even those who default will likely repay better than half of what was owed. It's complete fairytale stuff to assume that actual liabilities will ever be more than 3-5% of total potentials.

[InternationalRockSuperstar]

The government is effectively loaning it's AAA credit rating to the banks to use for mortgage lending.

The government is loosing its AAA credit rating by p1ssing it away to the banks to use for mortgage lending.

[Injin]

Your two lines above are contradictory.

Only if you think the banking system is the only place that can hold money.

[InternationalRockSuperstar]

Only a small percentage of the £350bln plus is actually coming from taxpayer money.

yep. most of it is hot off the printing press.

[MRMX9]

How is one still relatively small lender going to pump prime mortgage lending on its own. What a waste of £10bn - couldn't the government just build some council houses!

[laurejon]

Ummmm..... No.

You really don't get it, do you.

The government is effectively loaning it's AAA credit rating to the banks to use for mortgage lending. Only a small percentage of the £350bln plus is actually coming from taxpayer money. The majority is being borrowed on the open market, with the govt only guaranteeing to cover the inevitably tiny % of defaults, but it's even charging the banks for the guarantee.

So for every 350 bln raised, the taxpayer, even in the worst case, will only be responsible for perhaps 3% of that amount. And thats before repo and resale, which will again cover around 50% of the 3% loss, and the charges that the banks pay for the guarantee, which will cover most of the rest.

It's the way of the future to restart the markets. Rent a rating. Despite all this doom and gloom about massive bank liabilities, everyone knows damn well that the actual defaults will be tiny. The rest is just hype. Theoretical mark to market is killing the economy, as 90% plus of these loans will eventually pay off the full amount, and even those who default will likely repay better than half of what was owed. It's complete fairytale stuff to assume that actual liabilities will ever be more than 3-5% of total potentials.

OK so you are saying the taxpayer would only be responsible for 3%, but if the bank were to go bust (Please bear in mind Gordon Browns statement that no British Bank will be allowed to go bust) then who will pay the 97% + debt if the bank goes Bust ?

The point you appear to be missing here is that the Banks do not have any money, and the money they do have is required to be conserved to cover their expected losses that reveal themselves each and every day.

Edited January 23, 2009 by laurejon