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Northen Rock... should I be worried


GeordieSteve

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Even if every customer wanted to withdraw their money they still have enough assets to draw on to give it to them.

Well they don't, that's the problem;)

But then again they shouldn't be expected to.

No bank can survive such a sudden run, not even the biggest one. Remember Fort Knox in the early seventies, even they couldn't survive a run that's why Nixon broke the convertibility.

 

In the case of NR (and others:innocent:) the value of the 'assets' on the balance sheets bears no resemblance to reality if they were forced to liquidate them.

Especially in this environment, they wouldn't get many pennies per pound of toxic 'asset'

 

Common sense and calmness will prevail eventually, and all will be OK again (albeit at a lower level, we've been riding a bubble for some years now and a reality check is due)

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According to the article on the BBC news website and the financial expert dude on the news last night they do. But then the media doesn't always things right.

 

They do, if their assets fetch what the paper values are.

But that's why we have a credit crunch in the first place: too many assets are floating around and they are not worth the paper they are written on (the toxic stuff).

They were priced competitively, that's why corrupt (or incompetent) fund managers stacked them high.

 

But they won't fetch their nominal price, and nobody wants to trade with anyone who may be holding them.

 

Just like trading IOUs of supra tuners. If you had a bunch of them from Martin a year ago you'd be king, but as soon as they changed the tune nobody would want these IOUs at face value;)

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They do, if their assets fetch what the paper values are.

But that's why we have a credit crunch in the first place: too many assets are floating around and they are not worth the paper they are written on (the toxic stuff).

They were priced competitively, that's why corrupt (or incompetent) fund managers stacked them high.

 

But they won't fetch their nominal price, and nobody wants to trade with anyone who may be holding them.

 

Just like trading IOUs of supra tuners. If you had a bunch of them from Martin a year ago you'd be king, but as soon as they changed the tune nobody would want these IOUs at face value;)

 

I thought they did have enough money to give to customers because they can draw an unlimited amount from the BOE at +1 baserate. The key with these guys is that they can afford to go light on the savers because unlike most banks that is not their main business focus. Mortgages is their biggest source of income and that is not a quick thing to change.

 

What is most likely IMO is a takeover as their mortgage books are so healthy.

 

I'm toying with the idea of buying shares, but there is a slim risk it could be wiped out.

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I thought they did have enough money to give to customers because they can draw an unlimited amount from the BOE at +1 baserate.

where did you get that from?

It's a company like any other in the sense that if they make bad decisions they will lose money.

On the other hand, being a bank and part of the whole banking system that is purely based on trust, it is to everyone's interest that this trust is maintained.

So now comes the moral hazard: Does the BOE back them up all the way? That is effectively using taxpayers' money to cover up incompetence and corruption of a private company.

Or does the BOE leave them to boil in their juice and lose their shirts? Leaving market forces work can bring some devastating results sometimes.

 

But the BOE is not a separate entity, it is not the Vatican. Ultimately it is part of the government, who also have the keys to the presses (that print money!)

 

So it looks like the government is now going for the 'blank cheque' approach. It's a bit like losing your fortune in a casino and then asking the government for your money back.

Only on a huge scale, that could destabilise the whole economy.

 

I can't blame them for taking this approach, even if it sends the wrong signals for corrupt financiers all over the country;)

Stability of the economy and trust in the system comes first.

 

 

I'm toying with the idea of buying shares, but there is a slim risk it could be wiped out.

Very risky!

It's not like the dotcom boom where British Steel had dropped extremely low, despite having intrinsic value many times over.

This now is a web of deceit, theft, malicious rumours and sheer incompetence. Someone's bound to lose money here.

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:blink: Interesting reading. John you couldn't be further from the truth, now appart from the fact that the member banks all 16 of them have a mutual agreement to help customers of a failed bank NR isn't going to fail they actually have £120billion if they were going to fail the BoE wouldn't have given the loan to them. Believe me I see £900 million a day going between the banks the £2billion that's been withdrawn is peanuts. Buying shares was a good idea yesterday not so good from now on as you won't make as much money. ;)

It makes me laugh how much people listen to the idiot media when most of the news is self perpetuating bullsh@# anyway.... :innocent:

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..Believe me I see £900 million a day going between the banks..

I've seen as much or more dude, before y2K I had worked on interbank money tranfer code.

Not material in this case, volume is one thing, purpose is another. Intentions and human sentiment are fickle, greed turns to fear pretty quickly, and widespread dishonesty doesn't help one bit.

 

If you remember the LTCM saga, it was resolved quietly;).

So will this one, the scale of the problem is similar.

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