Northern Rock: Nationalisation Will Buy The Toxic Mortages

[jp1]

Taxpayers 'to get Rock rubbish'

Clashes are expected later in the House of Lords as peers debate the nationalisation of Northern Rock.

It comes after claims in the Commons the government was only taking over the "rubbish" from the mortgage book.

The part which takes the best mortgages and resells the debt will not be taken into public ownership, MPs were told.

Lib Dem spokesman Vince Cable said a firm called Granite had been "hived off" from Northern Rock with many of the best mortgage loans.

Mr Cable said: "The problem is that Granite is a separate institution which, as I understand it, securitises the best assets of the bank.

"The best mortgages of the bank are wrapped up in the Granite vehicle."

'Asset-stripping operation'

He said chief secretary to the Treasury Yvette Cooper appeared not to know what was happening to these mortgages.

We now need to have a very rapid and thorough explanation of exactly what's gone on here because this could be stopped in the House of Lords unless there's a proper explanation

Vince Cable

Lib Dem treasury spokesman

During an emergency Commons debate on the bill to nationalise the bank, Mr Cable said: "What we are now being told is that in some way this has now been hived off to the benefit of a person or persons unknown, apparently, to the minister.

"What is going on here appears to be not public ownership of Northern Rock but an asset-stripping operation designed to benefit whoever, we don't know. This is a very serious development."

He said the remainder of Northern Rock's assets, which have been acquired by the government, consisted of unsecured mortgages for up to 125% of the value of a home.

'Ping pong threat'

Mr Cable added: "We now need to have a very rapid and thorough explanation of exactly what's gone on here because this could be stopped in the House of Lords unless there's a proper explanation."

The Lib Dems support the nationalisation of Northern Rock but they will call for more time to debate it if the government does not provide a better explanation later when the emergency legislation comes before peers.

The government could then be faced with the prospect of the bill 'ping ponging' between the Lords and Commons on Thursday - the deadline minister have set for getting it on the statute books.

Jersey-based Granite, which was set up in 1999, is a securitisation vehicle through which mortgages are parcelled up and sold to investors.

It is thought to hold about £45bn of Northern Rock assets, about 40% of its business, but there are potential legal obstacles to its nationalisation, including the fact that is based offshore.

MPs have also expressed concern that - under Granite's structure - investors could call in their loans if mortgages are not continually replaced by new ones.

Conservative MP Philip Dunne said this left "a gaping hole" in the nationalisation programme, potentially putting taxpayers at a much larger risk than previously claimed.

But Ms Cooper insisted the government had made the position on Granite clear and taken everything into account and that taxpayers would not be made to the foot the bill if it collapsed.

"It is a separate legal entity, it will not be covered by the order - but equally it was not covered by the government guarantees and we have made that clear from the beginning," she said.

'Rubbish assets'

But former Conservative chancellor Kenneth Clarke persisted: "The best assets are in Granite.

"It looks as though there is a contract enabling more assets to be drawn in and it is the rubbish in the assets that we are now nationalising."

Emergency legislation to nationalise the stricken bank was rushed through the Commons in a single day on Tuesday.

The Banking (Special Provisions) Bill was given a third reading by 293 votes to 167 despite Conservative opposition.

If passed, the legislation will put the troubled bank into what the government has described as temporary public ownership.

The action comes after the bank ran into problems last autumn amid the US sub-prime lending crisis and the global credit squeeze.

Ministers opted for public ownership of Northern Rock after rejecting a bid from a consortium led by Sir Richard Branson's Virgin Group and a proposal from the board of Northern Rock.

[The Colour]

They know the game's up, they're just trying their darndest to cushion their fall from grace with all their private sector buddies when the tories get in.

[bobthe~]

Taxpayers 'to get Rock rubbish'

Interesting, very interesting.

I wonder whether Branson knew he wasn't getting granite..

[The Hooded C law]

The whole position of the "Granite" vehicle seems dodgy. Especially the use of charitable status.

I've always said they should have let the Crock go under. As it is we seem to be strengthening the position of big American bond holders with tax payers cash.

[Leonard Hatred]

FFS - have none of them got the guts to call subprime "subprime"?

[jaspers]

The treasury teams audit of what's left of Northern Rocks mortgage book runs into problems......

[laurejon]

The Crown Prosecution Service has a duty to prepare a case against Mr Gordon Brown, he has presided over Enron Style failures, and elected himself to office in a bid to change laws to protect himself.

Gordon and Tony Blair have bankrupt the nation, they should face serious charges, and serious consequences when they are found guilty.

[piece of paper]

I don't understand this at all. My reading of this board and other sources have led me to believe that the present global crisis is due to the fact that CDOs were made up of the poo mortgages.

Am I to understand that NR securitised the wrong type of mortgages? Even worse, they securitised the same type as everybody else, so those are turds, and what is left in the taxpayers' new company are dihorrea squirts.

p-o-p

[OnlyMe]

I don't understand this at all. My reading of this board and other sources have led me to believe that the present global crisis is due to the fact that CDOs were made up of the poo mortgages.

Am I to understand that NR securitised the wrong type of mortgages? Even worse, they securitised the same type as everybody else, so those are turds, and what is left in the taxpayers' new company are dihorrea squirts.

p-o-p

Looks like it - I thought I was hearing things.

Mortgages so bad that nobody would securitise them?

[jp1]

I don't understand this at all. My reading of this board and other sources have led me to believe that the present global crisis is due to the fact that CDOs were made up of the poo mortgages.

Am I to understand that NR securitised the wrong type of mortgages? Even worse, they securitised the same type as everybody else, so those are turds, and what is left in the taxpayers' new company are dihorrea squirts.

p-o-p

Yes, and Our Supreme Leader's plans to turn around Northern Rock amount to trying to polish a turd

[jp1]

Classic reply from Labour MP, George Mudie, on Radio 4 news, when quizzed about Ganite and Northern Rock

"The only Granite my constituents in the Leeds Labour Club will ask me about is the granite on their kitchen tops

[Nationalist]

Granite seems to have been used as a conduit to market - NR sold to Granite who mainly sold to the open market but kept some of the good stuff back for themselves. And Granite is offshore so can't be nationalised and presumably has a weaker (!) regulatory regime applied.

This smells very dodgy. Did NR top brass realise the game was up months or years ago and start hiding assets offshore? Who owns Granite? Who wants to bet that plonker Appledork has a piece of that pie?

[Bubble&Squeak]

Looks like it - I thought I was hearing things.

Mortgages so bad that nobody would securitise them?

Weren't some banks holding the super subprime turd tranches themselves... that was the impression I got from the subprime cartoon that appeard here a while ago.... maybe I am wrong and Crock have completely screwed themselves and now the tax payer

[Lone_Twin]

Correcto.

What can't get sold gets kept.

.

Nasty business, I didnt realise granite wasn't in the

deal. As someone says above is this why Branson

wouldnt buy the medicine without a hefty sugar lump?

.

ST

[mobeyone]

I don't understand this at all. My reading of this board and other sources have led me to believe that the present global crisis is due to the fact that CDOs were made up of the poo mortgages.

Am I to understand that NR securitised the wrong type of mortgages? Even worse, they securitised the same type as everybody else, so those are turds, and what is left in the taxpayers' new company are dihorrea squirts.

p-o-p

My take on it is that banks have always made business and more money out of so called subprime customers by inflating interest rates for less borrowings.. AKA known as rate for risk (rip off). Pure greed has set in over the last few years due to a change in lending criteria allowing sub-sub prime customers access to finance.

It is true that good customers are not profitable, poor customer are who default and pay additonal charges on top of higher rates, these are the ones who make money for banks through late payment charges etc.

Has anyone recently tried applying for a loan over £15k? you are looking at rates of or over 20%....

Make no mistake, banks are still making money out of this, people are still applying and taking out mortages and other financial products.. allbeit at higher rates... which means more profit.

NR customers who remortgage or require additonal funds will be able to do so... but at cost.. a cost that is only profitable to a bank.. and I daresay that NR in a few years will probably turn into a profitable bank once again on the back of providing ripp off mortgages to those with poor credit histories.

Edited February 20, 2008 by mobeyone

[ParticleMan]

It occurs to me that this is a very sleazy play from Vince Cable (who has been pushing the "Nationalise It" message a bit like the way certain sections of the community push "Legalise It"). He knew that the Government would be forced to deal with the Granite issue (ie, the stratification of NRK's instruments), and knew that it would explode precisely this way.

But did he say a word about this while parading around the interview circuit? Did he fairy-cakes. Clearly, this guy is no statesman - he just does not have our national interest at heart. He'll cheerfully watch your tax dollars get swapped for whatever scraps of political capital he can make from this.

But it's useful to see him expose himself this early in the game. That way we don't have to waste further time figuring it out, later.

Edited February 20, 2008 by ParticleMan

[thecrashingisles]

He'll cheerfully watch your tax dollars get swapped for whatever scraps of political capital he can make from this.

Have you been reading too many American websites?

[Gone baby gone]

It occurs to me that this is a very sleazy play from Vince Cable (who has been pushing the "Nationalise It" message a bit like the way certain sections of the community push "Legalise It"). He knew that the Government would be forced to deal with the Granite issue (ie, the stratification of NRK's instruments), and knew that it would explode precisely this way.

But did he say a word about this while parading around the interview circuit? Did he fairy-cakes. Clearly, this guy is no statesman - he just does not have our national interest at heart. He'll cheerfully watch your tax dollars get swapped for whatever scraps of political capital he can make from this.

But it's useful to see him expose himself this early in the game. That way we don't have to waste further time figuring it out, later.

We have all known from day one that Granite was separate from NR. The potential buyers, government and opposition will all have known the situation so I would agree that for Vince Cable to start pointing it out loudly now smacks of political opportunisim. However, the information was there from the start, and he is just raising the profile of this mess. People will now start to realise why nobody thought buying NR was a good idea, any price is too high for a worthless brand and a pile of toxic 120% mortgages.

If anything good comes out of this, it will be more detailed scrutiny of the next nationalisation of a failed bank.

[ParticleMan]

There is only one holistic system of systems, one vast and immane, interwoven, interacting, multivariate, multi-national dominion of dollars. Petro-dollars, electro-dollars, multi-dollars, Reichmarks, rins, rubles, pounds, and shekels.

It is the international system of currency which determines the totality of life on this planet. That is the natural order of things today.

Yeah OK. You got me.

That is the atomic and subatomic and galactic structure of things today! And YOU have meddled with the primal forces of nature, and YOU WILL ATONE!

Am I getting through to you, Mr. Beale?

[ParticleMan]

People will now start to realise why nobody thought buying NR was a good idea, any price is too high for a worthless brand and a pile of toxic 120% mortgages.

If anything good comes out of this, it will be more detailed scrutiny of the next nationalisation of a failed bank.

It's a hell of an expensive way to learn something - especially something freely, and widely available at the time.

He's a turd-bag. Happy enough to trash your pounds, just for a little political leverage. He can't even claim ignorance - he's a banker himself (and has been ramping just this claim himself whilst pushing the calls for nationalisation). A dirty, grotty, sleazy, treasonous little man.

Edited February 20, 2008 by ParticleMan

[Gone baby gone]

It's a hell of an expensive way to learn something - especially something freely, and widely available at the time.

Indeed. I feel sorry for us, the taxpayers. I almost feel sorry for the shareholders suckers - as all the information was there for them to see.

[Icantbelieveitsnotbutter]

and whilst the back book deteriorates, and as local communist MPs who cheered Nationalisation realise the job losses come nevertheless, we'll get the spectacle of the Govt trying to pay shareholders nothing, getting dragged through courts, losing and having to pay a lump to settle.