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Sir Cuthbert Cadsworthy

Why Bradford And Bingley Might Not Follow Northern Rock

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Queuing up to take your money out of Northern Rock was pretty similar in a way to the public’s hysterical reaction to the fuel protests, which was to withdraw all the petrol you can, thereby exacerbating the problem.

If savers had not frantically grabbed their money, which in a sense was a completely irrational, though understandable thing to do, Northern Rock and the entire financial system would have weathered the crisis much better.

If motorists had not dashed to filling stations in 2000, there would have been no national emergency then either.

Its funny how the huge fuel protests of that year have not really been repeated so far, despite the even higher costs of petrol now.

Maybe people wont queue up outside B and B on this occasion because, as with the fuel protests of a few years ago, the huge furore and consequent debate in the media and amongst the public in general has clarified and emphasised the irrationality and counter productiveness of such behaviour.

That's not to say I wont be doing a little dance of wicked glee if it does happen, cad as I am!

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Queuing up to take your money out of Northern Rock was pretty similar in a way to the public's hysterical reaction to the fuel protests, which was to withdraw all the petrol you can, thereby exacerbating the problem.

If savers had not frantically grabbed their money, which in a sense was a completely irrational, though understandable thing to do, Northern Rock and the entire financial system would have weathered the crisis much better.

If motorists had not dashed to filling stations in 2000, there would have been no national emergency then either.

Its funny how the huge fuel protests of that year have not really been repeated so far, despite the even higher costs of petrol now.

Maybe people wont queue up outside B and B on this occasion because, as with the fuel protests of a few years ago, the huge furore and consequent debate in the media and amongst the public in general has clarified and emphasised the irrationality and counter productiveness of such behaviour.

That's not to say I wont be doing a little dance of wicked glee if it does happen, cad as I am!

I have it on the best Authority, that Mervyn King Himself said otherwise. It was the TOTALLY rational thing to do.

Saying that, many people wont be bothered because they have LEARNED, as have the banksters, that Darling will be there with our chequebook to help out.

Such is the price for Moral Hazard.

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Queuing up to take your money out of Northern Rock was pretty similar in a way to the public’s hysterical reaction to the fuel protests, which was to withdraw all the petrol you can, thereby exacerbating the problem.

If savers had not frantically grabbed their money, which in a sense was a completely irrational, though understandable thing to do, Northern Rock and the entire financial system would have weathered the crisis much better.

If motorists had not dashed to filling stations in 2000, there would have been no national emergency then either.

Its funny how the huge fuel protests of that year have not really been repeated so far, despite the even higher costs of petrol now.

Maybe people wont queue up outside B and B on this occasion because, as with the fuel protests of a few years ago, the huge furore and consequent debate in the media and amongst the public in general has clarified and emphasised the irrationality and counter productiveness of such behaviour.

That's not to say I wont be doing a little dance of wicked glee if it does happen, cad as I am!

IMHO the smart money has already been extracted over the past few months and there is no-one left to queue. IMHO the only thing left in B&B is current accounts and smaller savings, and the markets know this (see share price)....

Edited by moosetea

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Maybe people wont queue up outside B and B on this occasion because, as with the fuel protests of a few years ago, the huge furore and consequent debate in the media and amongst the public in general has clarified and emphasised the irrationality and counter productiveness of such behaviour.

I advised my parents to move their money out of B&B last week which they did. This was just a couple of clicks of a mouse sat at home. No need for queuing.

They only had the protected £70k (joint) with B&B but I told them it wasn't worth the hassle of waiting to be one of the first to test the FCS.

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Queuing up to take your money out of Northern Rock was pretty similar in a way to the public’s hysterical reaction to the fuel protests, which was to withdraw all the petrol you can, thereby exacerbating the problem.

If savers had not frantically grabbed their money, which in a sense was a completely irrational, though understandable thing to do, Northern Rock and the entire financial system would have weathered the crisis much better.

If motorists had not dashed to filling stations in 2000, there would have been no national emergency then either.

Its funny how the huge fuel protests of that year have not really been repeated so far, despite the even higher costs of petrol now.

Maybe people wont queue up outside B and B on this occasion because, as with the fuel protests of a few years ago, the huge furore and consequent debate in the media and amongst the public in general has clarified and emphasised the irrationality and counter productiveness of such behaviour.

That's not to say I wont be doing a little dance of wicked glee if it does happen, cad as I am!

Key difference is that as long as B&B have some mortgage assets (no matter how dodgy) they can be swapped for cash at the special £50bn BoE any-old-crap for cash window. So B&B shouldn't run out of cash short-term to pay back. The problem will be longer term as UK lending losses erode the capital left in B&B, leaving it in breach of banking regulation.

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It isn't deposits that will sink B&B. They can manage that all on their own with irresponsible lending which is now beginning to suffer a much higher default rate than initially predicted. They lost 8 million in the last quarter. That's before mass withdrawals of deposits !

I wouldn't want money in them because they lend insane amounts on self certified 'liar loans' and BTL. Banks can create money, but the losses are real and taken back onto the balance sheet. B&B is committed to take on more subprime loans. I wonder what they will get back through repossessions and forced sales for all those BTL mortgages on inner city flats ? 50% losses !!!! ?

http://www.bloomberg.com/apps/news?pid=206...LM&refer=uk

``It would be insane to pay for access to the banking world by taking on risk that was unmanageable,'' said Gadhia, 46. ``Northern Rock would have given us huge scale and profile immediately. The big difference between Northern Rock and Bradford & Bingley is the quality in the balance sheet.''

Bradford & Bingley's mortgage arrears are more than double the industry average, and a 2006 deal commits the bank to buy about 1.4 billion pounds of mortgages a year through 2009 from GMAC LLC. Rather than take on ``massive'' risks from Bradford & Bingley, Virgin Money may form a joint venture, buy a competitor or set up branches, Gadhia said. Her unit is part of Virgin Group Ltd., run by billionaire Richard Branson.

Edited by sikejsudjek

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When you have a mass withdrawal the only rational option is to pull your money out too.

You may like to think of it as a herd effect but ultimately it is the only rational option.

I may be wrong on the figures but wasn't it £100bn in outstanding loans and £20bn deposits? So loans out did savings by 5 to 1 which means it was more irrational to keep your money in the bank.

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B&B are finished as a company.

I have a lot of my cash in there, but only because I've got a fixed period bond so can't take it out. They attracted me with a high rate of interest (probably more than their mortgage rates). At these rates of interest they can't make a profit. If they lower their interest rates savers will go somewhere safer.

Nobody will take out a B&B mortgage in case they do a Northern Rock and massively hike their rates for borrowers.

They're stuffed, basically.

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Wilhem Reich, author of one of the greatest treatises on personality disorders, coined the term "Little Man". This phenomenon of the human species was no better illustrated than when at the Swedish Smorgasbord, the 1930's equivalent of Harvesters, where you could have as much to eat as you like for the same price. Of course "Little Man" stuffed his face, for his pathetic greed and small mindedness overcame his sense of moderation and dignity.

Similarly, Little Man is the first in the queue to fill up unnecessarily to the brim at the slightest announcement of fuel shortage, because in his small minded stupidity he fails to realise that if there is a REAL shortage then a full tank will only last a day or two at most, so it is a futile and grossly selfish act.

But people queuing at Northern Rock, or if it happens, at Bradford and Bingley, is not necessarily the act of a "little man" but possibly a perfectly rational response to a bank and a government they quite justifiably do not trust. They do not trust that banks have sufficient funds to service cash withdrawals of more than a few percent of the total deposited and they do not trust any government announcement that deposits up to a certain sum will be guaranteed. This is an entirely reasonable position from the depositor's point of view, and is present because those depositors know that banks nowadays have almost zero cash to investor ratios with which to service demand for withdrawal. It is all the more reasonable when you realise that no government could possibly stump up enough cash to guarantee more than a few thousand people out of millions if multiple runs on banks were to occur.

Indeed the "credit crunch" itself is nothing more than a "run" on loan offsets between banks who long ago ceased to trust each other. And this lack of trust is there because each individual bank knows that ITS OWN business model is untrustworthy; therefore by logic so is everyone else's. But the root cause of the credit crunch IS the behaviour of multiple "little men" (and "little women") who in their combined small mindedness sought to make a short term personal profit at other "little men's" expense through the illusion that easy money grows on trees - and for a while it did, or appeared to.

One could argue that the phenomenon of the Little Man had its finest hour through the period of Thatcherism, whereby the ultimate "Little Woman" of all time appealed without precedence to the small minded greed and selfishness of all the Little Men, millions of them, in the land. And this attitude has been carried forward by Blair's New Conservatism, masquerading as New Labour. The current trend in green issues is no more than a banal smokescreen for a wider Little Man philosophy. One can continue being utterly selfish, greedy and self-serving, as long as one takes the trouble to occasionally pay lip service to green themes by cutting down on plastic bags or buying a hybrid car whose manufacture and running costs actually create a higher carbon footprint than owning a conventional small vehicle.

The entire structure of Western Society is predicated on rewarding Little Man activities, so it is no wonder that the phenomenon has become so deeply entrenched.

VP

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Queuing up to take your money out of Northern Rock was pretty similar in a way to the public’s hysterical reaction to the fuel protests, which was to withdraw all the petrol you can, thereby exacerbating the problem.

If savers had not frantically grabbed their money, which in a sense was a completely irrational, though understandable thing to do, Northern Rock and the entire financial system would have weathered the crisis much better.

B0ll0x. The reason Northern Rock ran into trouble because they borrowed a lot of money short - from the money markets - to lend long into mortgages. Institutional investors saw what had happened in the U.S then took one look at Northern Rocks insane business model and decided that they wanted their money back. If professionals are prepared to to take this action then its quite rational for Joe public to follow suit. If savers had not grabbed their money and NR were left to the free market rather than the governents 'invisible had' to bastardise a phrase then they would have slowly ground to bankruptcy anyway.

Edited by chefdave

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  • 395 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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