Posted on 09/14/2007 11:17:34 PM PDT by bruinbirdman
Northern Rock is the only story in town today. Before running through the main angles here, let’s just quickly get a few things straight.
If Northern Rock is not bust it is only because of the Bank of England and the government don’t want it to be. Call it what you like, but this bank ran out of money and can no longer fund all its liabilities, let alone finance its aggressive business model. It is not an innocent victim of events far away, as chief executive Adam Applegarth portrayed it on this morning’s call; it has had to be rescued because its strategy made it more vulnerable to those events than others’. One of our reporters listening to Applegarth on the analysts’ call this morning was struck by how laid-back and quick to blame others he was.
Willem Buiter of the LSE, writing in his blog this morning, is right in my view: the collapse of Northern Rock would not have threatened the financial system and the Bank need not have propped it up. Other guarantees could have been given to protect customers and prevent a run on the bank(s). This looks instead like a political decision intended to spare Gordon Brown and Alistair Darling’s blushes.
What happens next? First, Northern Rock gets bought, or gets a significant strategic investors. Some banks have already had a look but had problems valuing the business. HSBC and Lloyds TSB must be potential bidders. Expect talks over the weekend, heavily encouraged by the Bank of England. Northern Rock shares are down 22 per cent. Other bank shares are off a bit as well, although Alliance & Leicester is falling sharply. It’s possible, I suppose, that the business just goes into run-off but a takeover seems more likely.
We also need to assess how people think the Bank has handled this, and how many other banks – here or abroad – are in a similar position.
And we must explain what this means for customers. Long queues are forming at some Northern Rock branches - one of our photographers has just phoned in to say, for example, that that people are standing all the way down Moorgate in the City. We’re checking wire reports of rival banks handing out leaflets to Northern Rock customers in the street.
Has to be Bush’s fault. If a Brit gets toenail fungus, it’s Bush’s fault.
Agreed.
Could it be that the reported economic outperformance of the US by the EU over the last few years has it’s basis in funny numbers and easy money? The euro’s strength has been way above what a rational person would value it at when you compare buying power at the official exchange rates in many european cities ... I have heard stories of $15 coffees and such when paaying in US Dollars..
An analyst at Forbes has suggested, given the historical highs of sterling and euros, it might be wise to take profits in companies with ADRs denominated in greenbacks before the exchange rate falls.
yitbos
Not enitrely convinced about the relevence of brings GWB into this, entirely fiscal, entirely British thread.
Please explain.
its always good when a bank goes bust. it keeps the rest of the financial industry on its toes. well that and banks are money grabbing bast**ds, so its great to see them go down.
Sorry, I left off the /sarc.
‘sokay man.
the gov thought it wise to now guarantee all monies in the bank. which means that the bank didn’t in the first place. They are all money grabbing sons of *$$%$£^!!!!!!!!!
We had the same situation towards the end of the Reagan years. Greedy b@st@rds stole the savings and loan industry blind, and the gov’t was stuck with bailing out the industry. Jail is too good for the greedy thieves - I have a 19 cent solution for them, one at a time (a bullet costs 19 cents) .....
it seems government and dodgy fiscal affairs go hand in hand!
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