Thursday, January 10, 2008
Isn’t this what got us into this mess in the first place?
Rock;s debt may be sold as bonds
Goldman Sachs is endeavouring to convert the taxpayer loans to Northern Rock into bonds for sale to investors, the BBC has learned. But in order to make them sellable, these new Rock bonds would need a triple-A credit rating. Goldman believes one or more of the world's giant commercial reinsurers might take over some or all of the government guarantee. But they [the reinsurers] would charge for taking on the Rock risk from the government; for providing the cherished triple-A rating. Goldman's success or failure in securitising this debt will decide the very future of the Rock.
Posted by drewster @ 11:40 AM (446 views)
4 thoughts on “Isn’t this what got us into this mess in the first place?”
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alan says:
Perhaps forcing the “self cert” borrowers to remortgage with another society would be too hard?
If this happened, the new applications would come under greater scrutiny than the Rock gave and rates would be allocated accordingly instead of the taxpayer picking up the re-insurance bill. I wonder what kick-back Goldmans get from finding a likely buyer for the bonds etc., etc.
hpwatcher says:
It simply isn’t the right time to be doing anything like that.
Launch Patrol says:
WTF! isn’t this how we got into this mess in the first place?!?…. oh dear god.
drewster says:
What kind of bond reinsurer would be crazy enough to insure Northern Rock? They’d have to charge a massive premium. The total cost means that these bonds would effectively sell at anwhere between 85% and 40% of face value, depending on the outlook for the UK economy. That amounts to a state subsidy for the bank.