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Government May Inject 10bn Billion Into Northern Rock


A.steve

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HOLA441
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HOLA442
The government is loosing its AAA credit rating by p1ssing it away to the banks to use for mortgage lending.

Not according to the agency that actually issues the rating......

LONDON, Jan 22 (Reuters) - Britain's sovereign debt rating is no weaker than that of other nations with the triple-A grade, despite the government's bailouts for banks and economy-boosting measures, ratings agency Moody's said on Thursday.

Perhaps best to avoid the silly media panic mongering and actually check the source in future........ :rolleyes:

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HOLA443
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.

You really spin, don't you?

Talking in terms of 3% - 5 % makes the whole problem sound trivial, until you realise that 3% -5% of trillions and trillions is a heck of a lot. And just where do you get the 3% -5% from? The problem is that nobody knows the extent of toxic assets/liabalities.

And even those institutions which aren't taking a hit at the moment may be in for a rough ride further down the road. As Will Hutton, who gets an incredible amount of stick on this forum, pointed out tonight, institutions like Barclays are doing well currently, but their balance sheets are going to be hit by corporate defaults, and so it goes on.

Crisis? What Crisis? :lol: You're not really Krusty, are you Hamish?

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HOLA444
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HOLA445
Not according to the agency that actually issues the rating......

LONDON, Jan 22 (Reuters) - Britain's sovereign debt rating is no weaker than that of other nations with the triple-A grade, despite the government's bailouts for banks and economy-boosting measures, ratings agency Moody's said on Thursday.

Perhaps best to avoid the silly media panic mongering and actually check the source in future........ :rolleyes:

the CDS spreads disagree. Money talks and bullsh1t walks...

not long now...

cds_uk.jpg

post-10815-1232674597_thumb.jpg

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HOLA446
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 ?

Again, you miss the point. The banks loan book is an asset. And it will eventually pay off at least 95% of the money.

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.

Untrue. The banks are being forced to conserve capitol to meet the mandated lending ratios as they have to mark down assets on their loan book. However, 95% plus of those assets will eventually pay off the full loan amount, regardless of todays nominal asset value. Basel will be modified, allowing banks to avoid this recap problem and instead focus on lending.

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HOLA448
why would they build any more?

there are vacant properties up and down the country.

According to todays press reports, there are now more than 1.7 million applicaations for social housing.

According to previous posts on here, there are less than one million empty housing units in the UK, of all types combined.

So thats a shortfall of at least 750,000 houses just from the social housing list.

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HOLA449
Again, you miss the point. The banks loan book is an asset. And it will eventually pay off at least 95% of the money.

Untrue. The banks are being forced to conserve capitol to meet the mandated lending ratios as they have to mark down assets on their loan book. However, 95% plus of those assets will eventually pay off the full loan amount, regardless of todays nominal asset value. Basel will be modified, allowing banks to avoid this recap problem and instead focus on lending.

No, you are missing the point. You are assuming a high proportion of sound loans, made against sound assets. You are not allowing for defaults.

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HOLA4410
According to todays press reports, there are now more than 1.7 million applicaations for social housing.

According to previous posts on here, there are less than one million empty housing units in the UK, of all types combined.

So thats a shortfall of at least 750,000 houses just from the social housing list.

No, that's a lot of people who are too daft to squat :P

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HOLA4411
Not according to the agency that actually issues the rating......

ratings agency Moody's said on Thursday.

Is this the same Moody's that was recently lambasted by Congress?

"The story of the credit rating agencies is a story of colossal failure," said Henry Waxman, committee chairman. "They broke a bond of trust... and the result is that our entire financial system is now at risk."

Link

By their own admission "Moody's has no obligation to perform, and does not perform, due diligence".

Link

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HOLA4412
[url=http://uk.reuters.com/article/domesticNews/idUKTRE50L7GN20090122?sp=true]http://uk.reuters.com/article

"About 5 billion pounds of new equity could give Northern Rock the firepower to do about 50 billion pounds of new lending, providing the capital is not eroded by bad debts, it said."

:lol: in other words: none of this money will end up in the hands of the public.

now why doesn't that suprise me.

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HOLA4413
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HOLA4416
HAMISH is a plonker

Completely agree. And completely disagree with pretty much everything he says.

But its good to see a bull here keeping us bears on our toes, however irritating he is. Sibley's funny, but has no serious argument. Hamish is putting more substantial arguments. Its too easy being a bear now .. we're getting complacent, out-doom-mongering each other. Eventually, somehow, there will be an economic recovery. And we (nearly) all want it. And it might be sooner than we think.

Keep plugging away Hamish, even though you're completely wrong. ;)

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HOLA4417
OK, you win - by failing to accept a requirement for coherence.

Oh behave.

People are hoarding cash. it's under mattresses, on balance sheets, in safes etc etc

At some point too many people will go buying and that's when it all comes crashing in. Hyperinflations kick off in an afternoon.

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HOLA4418
Not at all.

It's allowing for a 5% plus default rate. Which is already higher than the worst case projections.

Thus the statement that only 95% of loans will pay off in full.

But obviously the banks and the shadow banking system don't believe this, otherwise they would not be in trouble.

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HOLA4419
Too true, and why wouldn't you when you could squat in a 30mln London mansion, as posted earlier. :lol:

yes indeed i think many people will choose this way out,,this will help the property market big time !! :lol::lol::lol: ther must be a lot of pent up demand for 30m pound squat's... :lol:

zero rent's way to go... :o:lol:

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HOLA4420
Hamish is putting more substantial arguments. Its too easy being a bear now .. we're getting complacent, out-doom-mongering each other.

Couldn't agree more. This place has become a positive-feedback-loop for doom-mongers. Half the time I'm actually arguing points that I fully admit could be wrong. But I have to point out that they equally could be correct. Ignoring any argument that has a possibility of being right serves no-one.

Eventually, somehow, there will be an economic recovery. And we (nearly) all want it. And it might be sooner than we think.

And I'd be inclined to bet that at least half the posters on here will completely miss the recovery when it does come. We'll be 5 years into the next boom before half the guys on here realise it isn't a bull trap.

Keep plugging away Hamish, even though you're completely wrong. ;)

Well someone has to........ :P

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HOLA4423
According to todays press reports, there are now more than 1.7 million applicaations for social housing.

According to previous posts on here, there are less than one million empty housing units in the UK, of all types combined.

So thats a shortfall of at least 750,000 houses just from the social housing list.

So the 1.7 million applicants will move into council housing (eventually) and leave their old homes... vacant? Maybe? So the total number of empty homes will not change in the slightest? Maybe?

What was your point again?

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HOLA4425
See earlier statements about "mark to market" accounting rules.

Basel is a bitch.

The mark to market rule is FAS 157( b ) - whereas Basel (1 and 2) are about a capital adequacy for banks. They're unrelated... except that MTM might decrease the assets of a bank using them to meet Basel requirements.

Basel 2, especially, is significant mainly because it allows a relaxation of the capital requirements of Basel 1. I'd be willing to expect Basel 3 in the non-too-distant future.

Edited by A.steve
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