[cite]Posted By: Rothko[/cite]So was it a mistake for the likes of Bradford and Bingley, Allance & Leicester and Northern Rock to convert from being a Mutal to a PLC?
I think most "little" people would say yes.
Those conversions happened largely at the behest of the institutional investors who bribed the "little" people with a couple of hundred pounds worth of shares each, peanuts in the larger scale of things but a lot of money to the many people with little savings (under £500 say) who used to have a building society account.
[cite]Posted By: Rothko[/cite]am I allowed to ask it?
No!
I reckon you might think differently if you had diligently saved £100k over your working life and were looking forward to spending it in retirement, don't you?
Maybe, maybe not, but as NYA put it, the backing of the BoE would give me a lot of confidence which they still haven't drawn down on yet, and Northern Rock will probably end up in the hands of one of the big high street banks.
[cite]Posted By: Rothko[/cite]So was it a mistake for the likes of Bradford and Bingley, Allance & Leicester and Northern Rock to convert from being a Mutal to a PLC?
I think most "little" people would say yes.
Those conversions happened largely at the behest of the institutional investors who bribed the "little" people with a couple of hundred pounds worth of shares each, peanuts in the larger scale of things but a lot of money to the many people with little savings (under £500 say) who used to have a building society account.
The thing is Len that the "little" guy would've got f*cked anyway - he always does. Yes, people were "bribed" if you want to call it that but my view at the time (I was a "little" guy - hard to belive for anyone who knows me!) was that I was never going to get much out of these big financial institutions anyway so was going to take what I could get when I could. The money I got (from The Woolwich and The Halifax) paid for me to go to Australia and I just wouldn't have been able to afford it otherwise - and now with a young son I would've been unlikely to afford it it since.
So, maybe you reap what you sow and it's everyone's fault how things have gone - but fug it, I got to see Oz for free! )
I sort of agree with both points of view, but the irony is that the BoE bailout news on Thurs night meant NR savings were safer than they were on Weds, but no-one queued up on Weds. But if it was public knowledge that NR was the most at-risk bank to the credit crisis. If I had savings at both NR and B&B, I'd be walking straight to the desk at B&B, not queuing up at NR.
To use an inappropriate inalogy, it reminds me of the people who refused to fly immediately after 9/11 despite that event making flying safer, not more dangerous. Understandable and irrational at the same time.
If my money was there I'd be shifting it to another bank - I don't believe that NR will go under, but belief means I do not know for certain and sometimes in life it's better to be safe than sorry, that isn't panic, just prudence.
Personally I can't see NR lasting the week or having any kind of independent future - apparently Lloyds were approached about a takeover on Friday, but declined, I presume because they could only see an asset that was falling in value and they would have bought for over the odds. if so that was a correct decision considering the fall in the shareprice today. Trying to guess the floor at which a share will fall too in these situations is well nigh impossible as you have to factor in the irrationality of the mob, and all those shorters, but remember in all cases the final price that a share can fall to is zero.
[cite]Posted By: LenGlover[/cite]Don't forget that Northern Rock are still receiving SOME incoming cashflow via the likes of Oggy repaying his mortgage.
The problem is that they are asset rich, but cash poor.
Anyway the whole NR situation will probably put an end to any ideas that the likes of the Nationwide and Britannia being converted for a long long time
[cite]Posted By: Rothko[/cite]So was it a mistake for the likes of Bradford and Bingley, Allance & Leicester and Northern Rock to convert from being a Mutal to a PLC?
No, you are drawing the wrong inference from this.
The problem is they took on too many dodgy loans and mortgage loans and chased the savings market with accounts and saving bonds at attractive rates on interest etc, consequently they are being forced to pay out more than they are taking in. That has nothing to do with converting from mutual status to a PLC.
[cite]Posted By: Rothko[/cite]So was it a mistake for the likes of Bradford and Bingley, Allance & Leicester and Northern Rock to convert from being a Mutal to a PLC?
I think most "little" people would say yes.
Those conversions happened largely at the behest of the institutional investors who bribed the "little" people with a couple of hundred pounds worth of shares each, peanuts in the larger scale of things but a lot of money to the many people with little savings (under £500 say) who used to have a building society account.
The thing is Len that the "little" guy would've got f*cked anyway - he always does. Yes, people were "bribed" if you want to call it that but my view at the time (I was a "little" guy - hard to belive for anyone who knows me!) was that I was never going to get much out of these big financial institutions anyway so was going to take what I could get when I could. The money I got (from The Woolwich and The Halifax) paid for me to go to Australia and I just wouldn't have been able to afford it otherwise - and now with a young son I would've been unlikely to afford it it since.
So, maybe you reap what you sow and it's everyone's fault how things have gone - but fug it, I got to see Oz for free! )
I was with Abbey National when it was a Building Society, voted "NO" to conversion but got given some shares when it went through anyway.
I was so skint at the time (new baby, mortgage and one income) that I had to sell them almost immediately and after the broker took his cut I probably made about thirty quid!
Had I been able to keep them I would have made a lot more.
A lot of people though need their cash straight away. They put a bit away if they're flush but have to take it out immediately if something out of the ordinary happens.
[cite]Posted By: Rothko[/cite]So was it a mistake for the likes of Bradford and Bingley, Allance & Leicester and Northern Rock to convert from being a Mutal to a PLC?
No, you are drawing the wrong inference from this.
The problem is they took on too many dodgy loans and mortgage loans and chased the savings market with accounts and saving bonds at attractive rates on interest etc, consequently they are being forced to pay out more than they are taking in. That has nothing to do with converting from mutual status to a PLC.
I understand what you are saying and agree to some extent but had they retained their mutual status they wouldn't have been allowed to take on "dodgy loans" etc.
So in that sense Rothko is drawing the correct inference.
Speaking as a mortgage broker, i can honestly say that, from an underwriting (ie assessment of risk) point of view, there is no real difference between the PLC's and the Building Societies.
[cite]Posted By: Rothko[/cite]So was it a mistake for the likes of Bradford and Bingley, Allance & Leicester and Northern Rock to convert from being a Mutal to a PLC?
No, you are drawing the wrong inference from this.
The problem is they took on too many dodgy loans and mortgage loans and chased the savings market with accounts and saving bonds at attractive rates on interest etc, consequently they are being forced to pay out more than they are taking in. That has nothing to do with converting from mutual status to a PLC.
actully, i think the problem is that they lend long term (for mortgages) and borrow short term in the interbank which is great when the market is operating normally...unfortunately, because of the fallout from the us subprime all the banks are panicking and have pulled most of their lines (northern rock wont be the only one that's got fewer banks willing to lend to it at the moment) and so they cant fund themselves (a bit like you and me if all of a sudden the banks pulled our overdraft limits and credit cards)...on paper we would still be solvent but in the shortterm we might struggle day to day to pay for things...
[cite]Posted By: LenGlover[/cite]Don't forget that Northern Rock are still receiving SOME incoming cashflow via the likes of Oggy repaying his mortgage.
Just might give it a miss on the 1st October......... )
Following on from comments earlier in the thread that NR shares might make a good investment:
A comment in the press today stated that shareholders would be lucky to get £3.00 for their shares in the event of a sale and may get as low as £1.70 in the event that the business is broken up and sold.
What doesn't help is when the bbc set up a web page called "creditcrunch" and their newsreader inadvertently calls the troubled bank "Northern Wreck"...
Being a mutual might have helped in that they are supposed to back their loans with a minimum 50% of savings and NOT short term money on the markets - I read today that liquidity might return soon and that short term rates are returning to normal spreads but those in the City (NYA?) could tell you more.
On a different note I do resent the panic - a bit like running around screaming if there is a fire and then next door cathes it - or turning on the team and giving up your season ticket when relegated. Idiots are trying to make a name for themselves or score political points...it's what happens to everyone's mortgage rates and house prices that really matters so I'm hoping for a rate cut now which wasn't too likely three months ago
and on the share price - people at work are watching it and may pile in tomorrow now that it levelled off around 4 pm I wonder what it will go for - the only thing holding up a deal is that the Bank of england won't guarantee the business once it's sold - so some institution needs a lot of spare cash to take it on in case everyone carries on taking out 1 bn every day
would be interested to hear more about the sub prime stuff in the US but very annoyed that it impacts us here in London...
I see that the Chancellor has now guaranteed the deposits in NR in full. How much safer an investment can you get. With a yield of 6.9% is it a better than buying Govt. bonds?
Seriously though I have grave reservations about how the original liquidity fund issue was handled.
The Bank of England facility was described as an "Emergency" fund. The Bank of England were described as the "bank of last resort". Technically these are both correctly described I sure but what sort of signal do they send? If I was an investor and had my fingers burned by Equitable Life or knew somebody who had, and I also remember BCCI (They were clients of my former employer and known to us at the time as the Bank of Crooks and Criminals International). Then I heard "Emergency" and "Last Resort" I'd be pretty worried.
For me the B of E/Govt should have made this a much lower key announcement with words like "temporary liquidity stability facility". Or better still kept stum and not said anything.
Seriously_Red, I'm sorry but I think normality is a long way from returning to the money markets. Tomorrow is a key day because Lehman Brothers will report its earnings (the first major bank to do so since the crisis began), and then later the US Fed will announce its interest rate decision (probably down 0.25%). The problem is uncertainty and frankly the central banks are powerless to make the problem go away.
In the meantime, bailing out the weak banks (whose failure might have been the cathartic clearout the markets needed) is not likely to help, and infact risks an embarrassing and unnecessary precedent (as you suggested, why wouldn't every rational NS&I saver switch his/her money to NR?). The way that A&L collapsed in the final hour of trading suggests the markets are a lot smarter than King/Darling.
I still don't understand finance. It's all Emperors New Clothes to me. Nothing has actually happened, no meteor strike, no crop failure, no discovery of a massive oil deposit under Croydon, no biblical flood on the cornfields of Kansas.
These finance people are just keeping themselves in work and baffling the rest of us while they get rich doing nothing of any real importance.
without re-reading everything on here to see if somebody has alreadu made the point, the one thing that all the media/government experts seem to be overlloking is the real reason people should consider getting their money out of northern rock is accessibility...i think we can all agree that if the worse comes to the worse (which is pretty remote anyway) the depositors will now get all their money back...the trouble is, how quickly they would get it back is another question...
Algarve - nothing happened ... but the risk of something happening went through the roof
A&L fall yesterday was based on a rumour and I'm glad to see it back - I like NYAs comments about buying in and falling knives - a bit like last year and how far were the board prepared to back Dowie -
To me the real problem is highlighted in the Times and on timesonline today - every other western country has full protection for savings whereas the UK backs only £2K + 95% up to £35K which is pretty poor - so if this is sorted then the man in the street (or ex-pat millionaire flying in from spain) won't feel the need to stir up the risk. As NYA says there are several institutions reporting quarterly numbers this week and will have to state the real impact (or hazard aguess) at their exposure to the sub-prime mess
Comments
Yes to your question, but then I would probably have put the money in a Building Society rather then a bank
I think most "little" people would say yes.
Those conversions happened largely at the behest of the institutional investors who bribed the "little" people with a couple of hundred pounds worth of shares each, peanuts in the larger scale of things but a lot of money to the many people with little savings (under £500 say) who used to have a building society account.
No!
I reckon you might think differently if you had diligently saved £100k over your working life and were looking forward to spending it in retirement, don't you?
:)
The thing is Len that the "little" guy would've got f*cked anyway - he always does. Yes, people were "bribed" if you want to call it that but my view at the time (I was a "little" guy - hard to belive for anyone who knows me!) was that I was never going to get much out of these big financial institutions anyway so was going to take what I could get when I could. The money I got (from The Woolwich and The Halifax) paid for me to go to Australia and I just wouldn't have been able to afford it otherwise - and now with a young son I would've been unlikely to afford it it since.
So, maybe you reap what you sow and it's everyone's fault how things have gone - but fug it, I got to see Oz for free!
To use an inappropriate inalogy, it reminds me of the people who refused to fly immediately after 9/11 despite that event making flying safer, not more dangerous. Understandable and irrational at the same time.
Has anyone got any dirty jokes???
Personally I can't see NR lasting the week or having any kind of independent future - apparently Lloyds were approached about a takeover on Friday, but declined, I presume because they could only see an asset that was falling in value and they would have bought for over the odds. if so that was a correct decision considering the fall in the shareprice today. Trying to guess the floor at which a share will fall too in these situations is well nigh impossible as you have to factor in the irrationality of the mob, and all those shorters, but remember in all cases the final price that a share can fall to is zero.
The problem is that they are asset rich, but cash poor.
No, you are drawing the wrong inference from this.
The problem is they took on too many dodgy loans and mortgage loans and chased the savings market with accounts and saving bonds at attractive rates on interest etc, consequently they are being forced to pay out more than they are taking in. That has nothing to do with converting from mutual status to a PLC.
I was with Abbey National when it was a Building Society, voted "NO" to conversion but got given some shares when it went through anyway.
I was so skint at the time (new baby, mortgage and one income) that I had to sell them almost immediately and after the broker took his cut I probably made about thirty quid!
Had I been able to keep them I would have made a lot more.
A lot of people though need their cash straight away. They put a bit away if they're flush but have to take it out immediately if something out of the ordinary happens.
I understand what you are saying and agree to some extent but had they retained their mutual status they wouldn't have been allowed to take on "dodgy loans" etc.
So in that sense Rothko is drawing the correct inference.
actully, i think the problem is that they lend long term (for mortgages) and borrow short term in the interbank which is great when the market is operating normally...unfortunately, because of the fallout from the us subprime all the banks are panicking and have pulled most of their lines (northern rock wont be the only one that's got fewer banks willing to lend to it at the moment) and so they cant fund themselves (a bit like you and me if all of a sudden the banks pulled our overdraft limits and credit cards)...on paper we would still be solvent but in the shortterm we might struggle day to day to pay for things...
My fixed rate comes to an end in a couple of months and I was thinking about a tracker. What's the best one around at the moment in your view?
Just might give it a miss on the 1st October.........
A comment in the press today stated that shareholders would be lucky to get £3.00 for their shares in the event of a sale and may get as low as £1.70 in the event that the business is broken up and sold.
On a different note I do resent the panic - a bit like running around screaming if there is a fire and then next door cathes it - or turning on the team and giving up your season ticket when relegated. Idiots are trying to make a name for themselves or score political points...it's what happens to everyone's mortgage rates and house prices that really matters so I'm hoping for a rate cut now which wasn't too likely three months ago
and on the share price - people at work are watching it and may pile in tomorrow now that it levelled off around 4 pm I wonder what it will go for - the only thing holding up a deal is that the Bank of england won't guarantee the business once it's sold - so some institution needs a lot of spare cash to take it on in case everyone carries on taking out 1 bn every day
would be interested to hear more about the sub prime stuff in the US but very annoyed that it impacts us here in London...
Seriously though I have grave reservations about how the original liquidity fund issue was handled.
The Bank of England facility was described as an "Emergency" fund. The Bank of England were described as the "bank of last resort". Technically these are both correctly described I sure but what sort of signal do they send? If I was an investor and had my fingers burned by Equitable Life or knew somebody who had, and I also remember BCCI (They were clients of my former employer and known to us at the time as the Bank of Crooks and Criminals International). Then I heard "Emergency" and "Last Resort" I'd be pretty worried.
For me the B of E/Govt should have made this a much lower key announcement with words like "temporary liquidity stability facility". Or better still kept stum and not said anything.
In the meantime, bailing out the weak banks (whose failure might have been the cathartic clearout the markets needed) is not likely to help, and infact risks an embarrassing and unnecessary precedent (as you suggested, why wouldn't every rational NS&I saver switch his/her money to NR?). The way that A&L collapsed in the final hour of trading suggests the markets are a lot smarter than King/Darling.
These finance people are just keeping themselves in work and baffling the rest of us while they get rich doing nothing of any real importance.
(Ducks for cover...)
Puzzles me as to why they didn't do that...
See Alliance Leicester are up 21% currently, and Northern Rock up 6%. A&L would have been a nice little earner if you'd got on it yesterday....
A&L fall yesterday was based on a rumour and I'm glad to see it back - I like NYAs comments about buying in and falling knives - a bit like last year and how far were the board prepared to back Dowie -
To me the real problem is highlighted in the Times and on timesonline today - every other western country has full protection for savings whereas the UK backs only £2K + 95% up to £35K which is pretty poor - so if this is sorted then the man in the street (or ex-pat millionaire flying in from spain) won't feel the need to stir up the risk. As NYA says there are several institutions reporting quarterly numbers this week and will have to state the real impact (or hazard aguess) at their exposure to the sub-prime mess