Saturday, January 19, 2008

Rock nationalisation more likely

Rock nationalisation less likely

I laughed out loud when I heard this on the radio. The substance of the release is this: "Prime Minister Gordon Brown has backed a plan from bankers Goldman Sachs to convert the Bank of England's loans to Northern Rock into bonds for sale." I realise many of you will be rolling on the floor laughing already, but for the rest of us, the punchline is that this is exactly how the sub-prime mess came about - by "selling dodgy debt". The second level of irony is that half the credit crunch is the fact no one can sell this sort of debt any more. Coup-de-grace comes with yesterday's story that the first bond insurer has been downgraded, making it nigh-on impossible to shift this stuff, even for prime companies - and Northern Rock is a zombie bank.

Posted by dohousescrashinthewoods @ 09:47 AM (770 views)
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5 thoughts on “Rock nationalisation more likely

  • Manorhouseowner says:

    “The sales would take place as and when financial institutions regain their appetite for such investments.”

    When a government sells bonds isn’t it actually borrowing money. DOES this mean the government in effect BORROWS money from bankers, then gives them interest, and this borrowed money covers whats theyve pissed against the wall on Northern Rock. Typical Gordon Brown – get a cheap headline and stick a plaster on a melting supernova, everything will pass down ok.

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  • Manorhouseowner says:

    I like the quote “The sales would take place as and when financial institutions regain their appetite for such investments.”

    Even if does go ahead isnt a government selling a bond actually borrowing money. So they borrow money from bankers in return for interest, and this borrowing then recovers the money they have pissed against the Northern Rock wall??? Typical Gordon Brown, get a cheap headline, stick a plaster on the melting supernova for a bit longer.

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  • Nice ! Branson pulled the same trick with the Virgin Trains. Take all the juicy profitable bits and shaft the tax payer for the rest. Should have seen it comin’ really…

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  • It may make sense to merge Barclays and Northern Rock and shore it up with new investment from China

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  • A while back i posted that the givernment[sic] will just issue bonds. The question is whose are the bonds? If NR was to issue bonds it would have to pay more than its “penal” interest rate it pays to the BoE so it would be a waste of time. Therefore the bonds have to be guarantted or issued by HMG. So the question then is how does that interest on those bonds get repaid to the governemnt by NR (or do they have a payment holiday?) and what happens should they default? Of course the maket will suss this so either the government guaranttes them or they become gov issued convertibles – into shares for example or other types of debt. The second alternative seems to be preffered BUT i like the way they will get these converted WHEN conditions improve? Oh year and the government will repay war loan and consuls – er one day!! Should be interesting opn monday and to see what happens to the share price.

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