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Northern Rock Not The Only Bank In Trouble

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Evening News ITV.

Northern Rocks model is basically to borrow from one source and lend to the other, no reserves.

Now with LIBOR and the credit crunch they can't get the cash hence cap in hand to BOE.

Many other smaller banks operate using the same model. NR is the first not the last to land themselves in serious trouble.

And to think this time last year NR were being heralded for their business acumen operating like this. Look at them now.

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Is it true that GMAC only asked for proof of income for 9 out of 10 applicants of their mortgages?

If so, does that mean they could be in trouble as this is effectively self certing via the back door?

Are they classed as a UK lender? I assume so, as no doubt they are regulated under british banking.

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Evening News ITV.

Northern Rocks model is basically to borrow from one source and lend to the other, no reserves.

Now with LIBOR and the credit crunch they can't get the cash hence cap in hand to BOE.

Many other smaller banks operate using the same model. NR is the first not the last to land themselves in serious trouble.

And to think this time last year NR were being heralded for their business acumen operating like this. Look at them now.

If NR goes (it won't) then the BOE knows the rest will follow.

We'll just see every bank looking after each other at the expense of the little people (us).

This means lower savings rates and higher mortgages.

"Nothing to see, move along now, pay up"

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If NR goes (it won't) then the BOE knows the rest will follow.

We'll just see every bank looking after each other at the expense of the little people (us).

This means lower savings rates and higher mortgages.

"Nothing to see, move along now, pay up"

They need our money hence +7% Savings Rates.

Smaller institutions WILL go under including maybe Northern Rock this is 100% correct.

Larger institutions will look after themselves maybe even as part of a Cartel, those with assets and funds will prosper massively with new business due to short supply of lenders.

Loan Rates Will increase with less competition and market turmoil.

House prices will crash.

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House prices will crash.

That's what matters.

The BOE is making yet another mistake by bailing out NR. Nitwits.

Oh, I suppose it's all above our pretty little heads, all this finance stuff. The BOE think it's 'only temporary' (Mmm, until NR goes out of business?).

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The BOE is making yet another mistake by bailing out NR. Nitwits.

I'm against this bailout, however this is not necesarily to keep the business going - just to make sure the savers don't lose their money. That would mean a wind down of new lending business and a selling to a big bank - perhaps for a pound. The shareholders are going to take a haircut on this one.

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Is it true that GMAC only asked for proof of income for 9 out of 10 applicants of their mortgages?

If so, does that mean they could be in trouble as this is effectively self certing via the back door?

Are they classed as a UK lender? I assume so, as no doubt they are regulated under british banking.

GMAC are a US company owned by General Motors Corp. and Cerberus Capital Management LP - they are scared at the moment

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They need our money hence +7% Savings Rates.

Smaller institutions WILL go under including maybe Northern Rock this is 100% correct.

Larger institutions will look after themselves maybe even as part of a Cartel, those with assets and funds will prosper massively with new business due to short supply of lenders.

Loan Rates Will increase with less competition and market turmoil.

House prices will crash.

Has anyone considered this crisis may have orchestrated by the bigger banks? In 1907 in the US there was a banking crisis in the US. The result was most smaller banks went under and the bigger banks got bigger with all the extra business. It also led to the formation of the Federal Reserve.

Could the LIBOR rate going higher be a ploy by the bigger banks to drive all the smaller ones out of business?

Food for thought.

Here's a clue: Who specifically (names of banks) determines LIBOR?

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Has anyone considered this crisis may have orchestrated by the bigger banks? In 1907 in the US there was a banking crisis in the US. The result was most smaller banks went under and the bigger banks got bigger with all the extra business. It also led to the formation of the Federal Reserve.

Could the LIBOR rate going higher be a ploy by the bigger banks to drive all the smaller ones out of business?

Food for thought.

Here's a clue: Who specifically (names of banks) determines LIBOR?

It wouldn't surprise me, the larger banks are in a very strong position right now.

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Is it true that GMAC only asked for proof of income for 9 out of 10 applicants of their mortgages?

If so, does that mean they could be in trouble as this is effectively self certing via the back door?

Are they classed as a UK lender? I assume so, as no doubt they are regulated under british banking.

GMAC have a UK operation, and they are the biggest subprime lender in the UK. Also the 10th largest overall mortgage lender, or 12th, depending on which stats you believe. I believe they were actually the first to use the securitisation model, but I'm not positive - it was around the same time as NRK, and they were one of GMAC's biggest competitors a few years back.

They got a loan this week for around $21bn from Citigroup, though Citigroup are a stakeholder. Lucky GMAC ^^

Interestingly they also recently made a sale of £1.1 bn of their assets to B&B, so have some capital handy

http://www.mortgagestrategy.co.uk/cgi-bin/...pndh&f=pndf

I'd be interested to know where you got the 9 out of 10 figure - depends what you're measuring it for as they do self-cert mortages as well as verified. Do you mean out of all applications, or of those on Verified?

I can only yet again bump this article done by the Beeb in 2004, in particular note 'fast-tracks', and suggest extrapolating the figures to where they might be today in a highly competitive market.

http://news.bbc.co.uk/1/hi/business/3478635.stm

{Edit: and yes, regulated by the FSA}

Edited by Pecco

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I'm against this bailout, however this is not necesarily to keep the business going -

No, they're bailing them out to protect the banking system; they think. Although don't expect them to say that on telly.

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Has anyone considered this crisis may have orchestrated by the bigger banks? In 1907 in the US there was a banking crisis in the US. The result was most smaller banks went under and the bigger banks got bigger with all the extra business. It also led to the formation of the Federal Reserve.

Could the LIBOR rate going higher be a ploy by the bigger banks to drive all the smaller ones out of business?

Food for thought.

Here's a clue: Who specifically (names of banks) determines LIBOR?

Yep

They have caught as many fish people as possible for a long period of indebtedness at hopefully high profits, but they have been too clever for their own good. Some, well a lot, of financial institutions will go to the wall to protect others but I think its more complicated than they thought with inter bank dependacy built into the system.

Over the next few months I would expect more isolationalist tactics from many of the banks with little or no co-operation especially where it comes to inter bank lending. I expect to read about this soon which in effect will put more pressure on the less fortunate institutions. It is very cruel but it is the way of the barbaric financial sector, banks and subsideries will be thrown to the wolfs.

But as one goes under others will follow each one weakening the position of the next weakest.

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Who else might be in trouble? There is another ex building society named after two towns in Yorkshire that used to be a secure home for your money that seems to be very reliant on the BTL and sub prime mortgage markets?!

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