Thread: Northern Rock Finally goes belly-up - Nationalised by Broon & Co

Well its finally happened. Branson told to F.O. and all the Brits pick up the tab to bail-out this failed bank...

BBC NEWS | Business | Northern Rock to be nationalised

Watch the GBP fall tomorrow...........

What an absolute Farce this whole thing is !!

Seeminly part of wider doom and gloom for UK:

Basket case Britain must rebuild its credibility - Telegraph

Basket case Britain must rebuild its credibility


By Ambrose Evans-Pritchard, International Business Editor

Britons cling to a comforting notion that overpopulated islands with a shortage of land can never suffer a sharp fall in house prices. Such illusions are often at the root of the most extreme asset bubbles.

Some of the most spectacular property crashes over the last 60 years occurred in the Pacific rim islands during the 1990s. Tokyo land prices fell 80pc in Japan's deflation. Property prices fell 63pc in Hong Kong, and 56pc in Taiwan. Each is a more crowded island than Britain. In each, the bust followed rampant misuse of debt leverage. Closer to home, we see a crunch in Ireland. Dublin property prices fell roughly 10pc in 2007. A study by Trinity College Dublin said values may halve before the excesses of the credit boom are fully purged.

The British economy has been recklessly mismanaged for over five years.

Indictment One: the UK current account deficit reached 5.7pc of GDP in the third quarter of last year, the worst of any major country in the world, bar Spain. "This is approaching Banana Republic status," said Albert Edwards from Société Générale. "Years of macro-mismanagement have dragged the UK economy to the edge of a precipice. The household sector is borrowing at a cyclically unprecedented 4pc of GDP. Basing economic growth on unsustainable asset price bubbles was always a recipe for disaster," he said.

Indictment Two: we are a budget basket case as well, with a deficit of 3pc of GDP at the top the cycle. We enter slump without a fiscal shield. Even America is doing better. This deficit is beyond the legal limit of the Maastricht Treaty, not that Downing Street cares. Gordon Brown may have to care more about the bond vigilantes and currency traders who have sharper claws.

They may yet force him to raise taxes into a downturn, as Labour's Philip Snowden had to do in 1931, or as Latin America's big spenders have had to do with an IMF gun to their head. A hard landing will have a "catastrophic impact on UK public finances" as tax revenues dry up and dole costs soar, says Capital Economics. "A recession as deep as that in the early 1990s could push borrowing up to £150bn per annum," it said. In the ERM smash-up, Britain swung from a 2pc surplus to an 8pc deficit. That was the result of subcontracting monetary policy to the Bundesbank. This time we have our own bank, bruised though it may be. It can cut interest rates a long way.

Indictment Three: the state share of the economy has risen from 37pc to 45pc in eight years, on OECD figures. We have risen above Germany for the first time since the Schmidt-Callaghan era. Berlin has been trimming as we bloat fatter. So have the Swedes, Danes, Dutch, Belgians, Austrians, Italians, Spanish and Eastern Europeans. It is a matter of political taste whether you think Brown's largesse on doctors, nurses, schools, and roads has been well used, but there is no denying that we are now one of the most socialist/collectivist states in the world.

Indictment Four: household debt has reached 103pc of GDP, pushing the frontiers of irresponsibility into uncharted terrain. The Americans buckled at around 85pc. UK home equity withdrawals have reached £50bn a year. We are spending unrealised paper profits at a rate of 4pc of GDP per annum. Some 58pc of all home loans issued in Britain in 2006 were either sub-prime, buy-to-let, or other forms of "specialist lending". The effective cash and liquid assets ratio of the banks has fallen to zero.

Is it not disturbing that Northern Rock should have collapsed even before the housing market turned, and defaults had begun to soar? What happens now if UK house prices fall 5pc in 2008 as forecast by Merrill Lynch, or indeed further?
The most pernicious effect of this sorry tale is the impression that Britain might be better off in EMU, under the tutelage of the European Central Bank, which has handled the credit crunch with skill. It carried out a pre-emptive "rescue" of the euro-zone banks by showering the system with liquidity and accepting rubbish as collateral, but it had to do so because there is no clear-cut lender of last resort in EMU. It cannot risk a Northern Rock. Who bails out whom? That must never be tested.

Yes, Mervyn King's hair-shirt austerity was quixotic, and ill-judged, but at least he tried to fight moral hazard. Europe capitulated immediately. It did so because EMU is a dysfunctional monetary union, where the Latin and Germanic halves are moving further apart and so are the spreads on sovereign bonds. The gloss will come off Euroland in due course.

In Britain we must rebuild our smashed credibility. We face a decade of grinding debt deflation, like Japan. Thank you Mr Brown.

Originally Posted by bkkandrew

"This is approaching Banana Republic status," said Albert Edwards from Société Générale.

Like were gonna listen to anything coming out of Soc Gen seriously.

Two words:

Jerome Kerviel

Originally Posted by Spin

Originally Posted by bkkandrew

"This is approaching Banana Republic status," said Albert Edwards from Société Générale.

Like were gonna listen to anything coming out of Soc Gen seriously.

Two words:

Jerome Kerviel

Maybe it takes one to know one?

Brilliant - Northern Crock grants serving prisoner 9 buy-to-let mortgages!!!!!!!!!!!!!!!!! USING THE PRISON AS THE CORRESPONDENCE ADDRESS!!!!!!!!!!!!!!!!!!!!

FTAdviser- Home - Financial Adviser - News - Prisoner gets 'approval' for 9 mortgages

A serving prisoner has been able to obtain multiple buy-to-let mortgages from a well-known crisis-ridden mortgage bank despite using the prison as his official address, it can be revealed.

The man, who is believed to be a mortgage broker directly regulated by the FSA, but is also affiliated to one of Britain's best-known IFA firms, applied on nine separate occasions for mortgages from the troubled bank and on each occasion was given a loan.

The barefaced scam, dreamed up in the prison cell, has been the talk of the mortgage broker sector in the North East all of last week with one leading source asking not to be named in any Financial Adviser story.
He said: "Do not name me, but it is scandalous that something like this can happen without the bank even checking out his true identity. But knowing the people who worked for that lender I am not surprised. So much for lenders knowing their customers."

The only mortgage bank on the record as facing liquidity problems in Britain is Northern Rock, but John Watson, a spokesman, denied knowing about such unusual would-be landlords. He said: "I am not aware of any investigation into potentially fraudulent buy-to-let mortgages." Other mortgage banks also denied any knowledge of the applicant.

It is not clear if the scandal, which many believe may be the tip of an iceberg, has been reported to police or the City regulator, but Northumbria Constabulary has denied having received a complaint fitting the details of the scam.
Det Supt Oliver Shaw of City of London fraud squad said: "It could be legal. There is no bar on prisoners taking out mortgages or any other financial products as long as they do not lie on their application form about their income and personal circumstances."

Buy-to-let mortgages are not regulated by the FSA as they are considered to be commercial arrangements.

The City of London police will be publishing a report on mortgage fraud at the end of February.