Will Labour get the blame now?
November 19th, 2007
How will the increasing crisis play in the polls?
Back in September, in what now looks to have been a completely different political era, one of the great surprises was how the early stage of the Northern Rock crisis seemed to have no impact in the polls. In fact when specific questions were put polling respondents did not blame Gordon or Labour.
It was the moment when I started to believe that Brown could really walk on water and I opened a significant buy position on the party on the commons seats spread markets.
How different it all looks this afternoon after the company rejected the offers to buy it and the government saying that “there is no certainty that any bidder for the Rock will have access to £24bn of emergency loans after February.” Shares in the firm are down 16%.
All sorts of questions now arise. Was the Chancellor right to guarantee the deposits of all savers in Northern Rock? What about the emergency financing? Should NR be nationalised as is being urged by LD acting leader, Vince Cable?
Most of all how much is all this going to cost the taxpayer?
We should not have to wait too long to find out how the voters are responding. There are at least four polls in the pipeline.
My current big betting position is a Labour sell.
Mike Smithson
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Will questions be asked if Labour would have acted his way if it wasn’t a company in its heartlands. Dame Shirley Porter comes to mind somehow.
When are the next PMQs? Dave should be all over this.
O/T but Rod, i downloaded your swingometer but it needs a password to change the cells & make predictions - what is it?
NR was ‘unable to meet it’s commitments as and when they fell due’ and should have gone into receivership. But there was an election coming, and the last thing the Government wanted was a backdrop of growing financial crisis and millions of angry savers with their cash locked up in a bankrupt bank to add to the millions of existing pensioners with their savings trapped in worthless pension funds.
Darling would agree to anything to get those awful pictures of queuing savers off the telly.
But now they are stuck. Northern Rock is still just as insolvent as ever and nobody wants to buy the bank as it is. The Government (and that means you and I ) is locked in with a cash requirement that is growing daily and the only route out looks likely to be via a massive cash sweetener to whoever is prepared to take the whole sorry mess of the Chancellors hands.
It’s a scandal which has the potential to bring the Chancellor down.
It’s all about timing Mike. Labour should have got the blame for the flooding (they were warned, cuts, vital infrastructure next to rivers with no flood barriers, etc) but the public and media mood was with them. Now it isn’t.
4. What, both of them Marcus?
Following on from the last thread, I thought Mike’s point about ‘entitlement’ with Nick Clegg was very apt. It’s a word that sprang to my mind when watching the Blair-Brown documentary last night. Two men who thought they were were they were as of right. Mandelson said that Blair’s initial reaction to hearing about people attempting a coup against him in 2006 was ‘I’m not being told what to do by a bunch of backbenchers’. the fact that he was only ‘entitled’ to be PM because of their support was obviously a blind spot to him. Then you hear an alleged quote from Brown, ‘ I want the job now’ i.e it’s mine of right. How sad.
As for NR, it’s a drip drip effect. Not going away and it undermines what people see as Gordon Brown’s one big strength. A safe pair of hands with the economy. (Marcus 4) The lack of independence that Darling has in no.11 (and is plain to see) means that Brown can’t simply sack him and draw a line under it.
2. Test - it’s Vince Cable who’s been making the running on NR. I’m surprised Cameron hasn’t landed more blows already.
I said last week at the time that Cable was excellent. Last week, Cam had to hold Brown to account over illegals in Home Office security positions (each week a fresh Labour disaster). This week he should go for NR. Fact is nobody cares when the LibDems ask things; Cable’s very good questions got no coverage.
1 - Hardly. Labour stepped in because this was a major player in the city markets. It’s not like they did anything at all for their heartland supporters who lost money on Farepak is it?
That the truth is the polar opposite to the mud you are slinging about is gruesomely ironic for a leftist such as myself.
9: Test not true Cable lead the coverage on 1pm news. We were no where.
11 really? stand corrected then. I didn’t read about it in the papers. I was a founding member of Tories for Cable long before the current PR disaster of LD leadership.
Cable should be a Tory! Defect now!
10 - in world banking terms NR is not ‘a major player’or even close to being one.
Darling can’t take the fall without it hitting Gordon badly. Therefore something else will have to happen - expect a complex ‘independent’ funding vehicle who will own the assets being held for collateral. By the time Darling’s finished the losses will be safely off the books and no one will really be able to tell how much it’s going to cost the taxpayer;
If you like Vince Cable (Test 12), and quite rightly too - does this not mean that you should join the Lib Dems?
10
NRK a MAJOR player?
You jest..
Maybe a big lender of mortgages..
As for Labour supporting MAJOR players… well the Conservatives let GEC nearly collapse and it was a LOT bigger…(before the collapse started)…
12. Maybe Cameron missed a trick when he tried to recruit Laws. Obviously Cable is the man you need. The danger is though that neither of the contenders are going to compare favourably to Vince. Clegg is ineffectual and Huhne seemed to lose it in the joint interview yesterday.
10 - “That the truth is the polar opposite to the mud you are slinging about is gruesomely ironic for a leftist such as myself.”
Is there an English translation available?
10 - Farepak’s victims were spread fairly thinly around the country though, and there was nowhere where they were sufficiently concentrated to swing constitutuencies. Northern Rock’s employees and customers are concentrated in the north-east however, a region we are often told is crucial for the next general election - not to mention that it’s home to the constituencies of several key ministers.
Didn’t Cable used to be a Labour Party member? No chance he would defect again to another party surely.
NRK shares have stabilized around 110 p since this morning (-17%). The market seems to wait for Darling’s statement.
4. I’m not a fan of nationalisation, but might it not be best if the BoE put in a Receiver, sold off its loan book, and discharged its debts?
Tressage - Orange Book LDs and Tories are not wildly far off. It’s the Europhilia that prevents a serious rapprochement. I think LibDems like Mike S would be very much at home in Cameron’s Conservatives. Also, as a political activist, I want to change things, not be part of some protest group.
20. I think the markets are waiting for Roger to make his move.
21 nationalisation is he only option to mitigate the losses to the taxpayer. That way the UK would keep any restructuring gains; otherwise they would go to private equity.
What time is Darling’s statement?
21 Next thing, Roger will be tipping NRK as attractively priced.
18. How is the North East crucial to the next election? Labour might lose 2 or 3 seats to the Lib Dems and 1 or 2 to the Tories. Cameron’s prospects there are no better than in Wales and little better than in Scotland.
The big question is whether Tories would tactically vote Lib Dem to get Labour out. Something most of them seem averse to.
22. Liberalism & Conservatism are irreconcilable, the whole ‘liberal Conservative’ rubbish is a joke cooked up by Cameron & his cronies. Why belong to a wannabe ‘liberal’ party (not that I really think that they really do want to be liberal) when you can be part of the real thing?
I’d rather gnaw off my own are than join the Tories.
28. Sorry gnaw off my own arm!?
Very noticeable that the current line is all “The Treasury say that…”, “The Treasury think that…”. Bottler Brown and his Darling Chancellor are clearly distancing themselves from the scene of the crime.
How would the EU state aid rules affect any nationalisation of NR?
29. I would have thought it was the LibDems who now longer understood the concept of liberalism if they are promoting the nationalising of NRK
28 Well, plenty of liberals in the twentieth century thought otherwise. About half the Liberal MPs who were elected in 1929 ended up as Liberal Nationals, an adjunct of the Conservatives in all but name, and plenty had joined the Conservative before that.
It all depends whether you’re a right wing liberal, or a left wing liberal.
Interesting to see that the Halifax has rececently cut its deposit rates for savers, despite the “credit crunch”.
Presumably, this is as a result of it having received a hefty chunk, i.e. several £ billions of the amounts stumped up by the BoE to repay previous NR depositors.
31 Presumably, if the B o E have taken security for their lending, and were to appoint a receiver, then strictly speaking it wouldn’t be a nationalisation.
25- 3:30 pm
[19] Yes indeed, Vince Cable was a member of the Stroud Green Ward Labour Party in the mid 1970s. How do I know? I was the Secretary.
And yes, I was young and foolish.
I don’t know whether this has been mentioned before but the
Comprehensive Spending Review is running late. This makes it very difficult for councils to set next year’s budget. The £25bn already given to NR is presumably a cash item and over 7% of the national budget. The money may be repaid but not for the foreseeable future. Does this mean that grant allocations will be severely reduced and taxes overall increased?
21 Sean Fear whether a Receiver or nationalisation one of these seems inevitable. NR is unviable as even its own management are unable to sell £20bn of its loan book to close its funding gap and carry on as a going concern.
I remain puzzled as to why NR has been unable to package up part of its loan book to reduce its need for Govt cash. Not all the loans can be bad.
Test (22), if you think that real Liberals would be at home with “Cameron’s Conservatives”, how does it happen that the likes of the Wintertons, Liam Fox, Michael Howard, Bill Cash etc etc etc are all quite at home there already?
38 Now we are getting to the crux of things….
28 The Liberal Party was formed largely because of a split in Tory ranks (giving the Liberals ex-Tories like Palmerston & Gladstone). When the Liberal Party split over Ireland the Conservatives first went into coalition with and then merged with the Liberal Unionists, after a later split the Conservatives received a new infusion from the National Liberals (John Nott IIRC always claimed to be a National Liberal rather than a Tory).
The free trade wing of the Conservatives (perhaps even the Thatcherites?) still represent that classical Liberal/Whig inheritance. There is nothing unlikely about a liberal conservative.
40 - all political parties are big tents, are they not?
Cameron was elected leader by 2/3 of the membership. He sets policy, and he has revolutionised the standing of the Tories. It’s his party Tressage. It’s a libertarian, civil liberties party. Come on over. We can rid the country of New Labour’s authoritarian state, you know the LibDems cannot.
33. Yes, but in my mind they were not real Liberals, they were those more interested in power rather than any kind of tenents of Liberalism. Things were very different back then anyway as people were far more concerned with things like balwarks against the socialists/communists.
Not at all Sean, left & right counts not a jot towards it. If you are from the more hard core radical anti-establishment wing of the party (as I consider myself to be) you see the Conservatives as a paragon of the self interest, conservatism & establishment that are to be opposed. If you are from the mildly Liberal but don’t like to rock the boat part of the party then you probably feel better disposed towards the Tories. Where I live, the former is far more prevalent.
3. It shouldn’t do. Try the spin-buttons, on the left hand side, and the drop-down list boxes in black on the right hand side. The sheet is protected to prevent inadvertent deletions of the formulae, and to be more user friendly! There is an instructions tab hopefully explaining how it works…
20- You getting the price live? I can only find it online with a 15min delay.
40. Don’t forget Michael Gove, a proudly declared neoconservative.
39
NR were offering 120% loans. Would you buy that?
No one in their right mind would.
They were a major lender to Buy to Let landlords. Woith property prices falling, would you buy any recent BTL loans?
Nope..
Rearrange the following words “worms a can of ”
O/T: interesting contribution to the Royal Diamond Wedding
http://www.throneout.com/royal_affairs.asp
If you’ve ever wondered (amongst other things) why Andrew and Edward (unlike Charles and Ann) look nothing like Philip….
43. Test, how can you claim that the Conservatives are ‘libertarian’ when you are more than any other party hostage to the vested self interests of big business & virtually every big hitter in your party has or had some kind of consultancy at those big firms. How, for that matter can you put the rights of married couples above those of co-habiting couples in the tax system?
40:
Because political parties are broad churches.
49:
Just goes to remind us all just how repugnant many republicans really are.
52. But what if it’s true?
48. The funny thing is that Northern Rock called their 125% loans ‘Together’ mortgages. Presumabely they meant that they would drown in debt together with their customers.
43 As I have said before Test , the only party that consistently has MP’s defecting from it is the Conservative Party they manage this even with Cameron as leader ( or perhaps because of ) .
OT- Put “Peter Tobin” (the guy with two bodies in his back garden) in Wikipedia…….
Wow….just….wow
39 - re: selling chunks of the loan book - chances are, in the current environment, even a supposedly high quality part of the NR book would suffer a fair sized discount on an emergency sale basis - the markets are hugely risk averse right now. And NR only has a small shareholders’ equity base to absorb losses (£2.3bn as at last interim statement); if it took more than a 10% discount, that and the additional borrowing costs would probably force it into a net liability position and almost certainly trigger a forced winding up. There may also be punitive covenants on other borrowing that such a disposal would trigger.
There is a lot of nonsense talked about what the Tories would have done or “should do” in such circumstances. The answer is clear: they should perform the correct role of government as demonstrated by every crisis from Barings in the 1890s to … well … Barings in 1995. To wit, they have a role of bringing people together to allow the private sector to salvage the situation. In the first Barings crisis, Rothschild bailed their competitors out; in the second, Barings was sold to ING. The government’s role is to make sure that the company in question goes into administration and subsequent ownership with the minimum of fuss and maximum efficiency, and avoid impacting the rest of the sector.
To this end, the offering of the guarantee was fine and probably the right thing to do under the circumstances. The incompetence which I’m sure George Osborne will have been referring to on the programme this morning that someone mentioned, was that the government failed to set up a buyer. Instead they have now just thrown good money after bad without bringing the mess to a conclusion - it’s been going on for two months now! Barings was sold over a weekend (under a Tory administration I might add); Long Term Capital Management was unwound in a week by the Fed. This is how it is supposed to be done - not the drawn out debacle that we have now.
Cable has been ahead of the game on this one. I get the feeling Cmaeron and co aren’t saying much because they have no idea what they’d do.
animal. If even a “solid” part of the loan book is worth less than face value, then the Govt is risking money and needs to factor in a hit for that equivalent to 10% of the money loaned.
10. Yes - NR was not really big enough to constitute a major systemic risk to the UK banking sector, so it certainly doesn’t count as a major global player.
It does however constitute a significant systemic risk to Labour’s network of power and patronage in the NE.
What’s happening at the (formerly?) pro-Brown Daily Mail? Is Dacre still off sick?
“Chancellor’s job ‘on the line’ as Northern Rock fails to find a buyer”
http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=494886&in_page_id=1770
Darling’s Commons statement due at 3.30 (after Brown has rewritten his speech ;-))
Re the Lib Dem leadership, my tuppence’orth is that it was a no-win situation for Clegg - he shouldn’t have complained as it looks weak to go to the ref. He should have had the charisma to laugh it off - imagine someone like Blair or Ken Clarke complaining - you can’t, can you? That is the charismatic legitimacy required for leadership of a modern political party. Unfortunately neither he nor Brown has it; and Cameron only just. Weak times …
58. I think the real political failing wasn’t so much in the paniced response to Northern Rock hitting the buffers, but in the regulatory complaceny and orgy of easy credit that led to the problems in the first place. The government turned a blind eye, in spite of the systemic problems that were being stored up, because stoking up house price inflation was seen to be in their interests. To be fair to them they probably thought it was in the interests of the country as a whole but they were badly mistaken.
The FSA has only now started to take action against dodgy mortgage brokers: http://news.bbc.co.uk/1/hi/business/7101867.stm Anyone who thinks sub-prime is a US only phenomenom will be in for a rude awakening over the coming months.
44. Well, they amounted to about half the party.
Actually, I think the right/left divide became increasingly critical for twentieth century liberalism, between those who regarded the State as the biggest threat to liberty, and those who considered people could not be truly free unless the State took all sorts of measures to empower them.
60 - HF, yes, I agree. They are risking money, and should be factoring in a likely loss. I don’t expect an admission of this to be forthcoming until the money is actually gone, though.
64. oops… *phenomenon* (Da da da da da :))
Will Gordon sit beside his Chancellor for the NR statement? He was noteably absent when Jacqui Smith gave hers last week.
68. Will Darling explain which schools and hospitals will be closed in order to finance NR, or does that equation only have relevance when Tory spending and tax proposals are being discussed?
62 Rothermere has seen the recent circulation figures and decided to adjust the tiller.
68. Odds are 3-1 he will 1-4 he won’t. Bit of overround there.
65. Indeed, I don’t aggue with the numbers, but I do say that some stayed true to the beliefs of Liberalism, & the rest decided that power was more important.
You see though Sean, I don’t see the state thing as a left/right issue. Economically perhaps, but in other ways those who regard themselves as right wing (Conservatives etc) see the state as a solution to problems (’prison works’, upholding traditional marraige through the tax system, section 28). Liberals have an ambivalent attitude to the state with all wanting it to keep out of private lives as much as possible, but the differences being on how much economic Liberalism is preferable to attain a Liberal society & how that relates to the freedom of the individual.
He’s not there. What a shock!!!!
73- Hes down the shops buying a Croatia shirt
73. What courage
75 What a coward.
74 No, that’s Andy Murray territory.
hes saying nothing, just trying to buy more time.
FTSE is down 115
Cameron is there. What an utter coward our Prime Minister is.
Anyone know the extent of additional exposure to HM Treasury, that’s you and me folks, for every 1% fall in Northern Rock’s loan book, that’s the widely and imminently expected fall in house prices, folks?
81. Osbourne bringing that up Peter. Good reply.
Labour MPs silent, Darling stammering, dying on his feet. Osbourne slew him.
He has`to resign!
If the BoE and thus ultimately the government does end up managing a large portfolio of mortgages, can we be assured that those who go into arrears will be treated in a normal manner, including the use of foreclosure where necessary?
Gordon has given up on COBRA. He’s now gone on to MAMBA. The mood there is black, the atmosphere even more poisonous….
Coward Macavity. Coward!
Crikey, Cable os good:
“thirty millenium domes”…………. Wow, what perspective..
83: Labour ministers resign? What a silly idea, they’ll learn lessons and need to stay on to put things right even if they caused them.
83 - Darling stammering, and dying on his feet?
He’s learning from his Master!
What a great Puppet Chancellor he is.
I can’t believe GB has retreated to his bunker. Sick note from Mummy for PMQs on Wednesday, then?
He ducked Osbornes question about a subordinated loan. if the govt has injected capital into the bank as well as making secured loans then he must resign.
cable again very good
Vince Cable on generally good form, but his attack on the City does not sit well with either of the main parties - lots of murmuring.
Go Vince! Fab opener!
Lousy biased speaker
86, 89 - we’re doing Macavity a great injustice. He’s currently out launching his Cones Hotline for the 21st century…
http://news.bbc.co.uk/1/hi/uk_politics/7101075.stm
The parallels with John Major become more obvious. (Except people actually voted Major in, in great numbers)
Darling is a disgrace, how dare he mock, when he has made such a balls up, the whole Labour front bench, laughing themselves, grins on their faces, i want to throw up
Ropes and lamp-posts are needed.
Can someone explain what’s so funny in what Darling said?
And now he’s suggesting that the government fully take over the bank. He has headed down the wrong path really - attack has now not struck home. Darling given a reprieve to refute Cable’s argument.
93 - so Gordon is giving his first speech on the environment since becoming PM - a “wide-ranging” speech - which will be totally over-shadowed by his Chancellor dying on his arse live on TV. Either Brown really didn’t have anything much to say about his Green-house Hotline - or the City has really lost its nerve over NR.
Or perhaps both…
96- At least they droped plans for a 101 telephone number!
FTSE down 130 (2%)
Re Northern Rock and my assumptions.
I acknowledge that shareholders will be wiped out. My theory is that the maximum loss to the treasury is likely to be £2bn, and if there is another bidder for NRK, then (because most of the money will have been lent at 7%) HM Govt will have made a nice turn.
Regarding my theory that foreclosures would be no greater than 10%, can I point out that in the US, they have never been greater than 5%, and according to the Journal of Housing Economics, they average around 2% in the UK. So, reckoning that NRK has been incautious in their lending still only gets you near 10%.
Again, assuming 20% loss ratio is also a conservative number. Most houses have risen in value in the last few years, and even reckoning that all the mortages were at 95% loan-to-value when they default (a crazy assumption) plus there is 15% lost on administration, you still only get 20% loss. Historically, loss rates have been sub-5%. (Admittedly in a rising house price environment - but even if we assume prices fall 10% in the coming year, it’s hard to get loss rates about 20%.)
People bandy-around large number. But the truth is that - when all’s said and done - Northern Rock will probably end up losing £2-3bn in the mortgage market. Something that will fall almost entirely (and correctly) on the shareholders.
Who is this bearded moron?
he has now admitted that lloyds would have taken it over in exchange for 30bn of commercial lending from the bank. this could have been arranged easily from other UK lenders under “advice” from the BOE. He has just shot himself in the foot.
every Labour question about jobs in north east - not the taxpayer!
REDWOOD! CALL JOHN REDWOOD!
Was it not our dear own Roger, or maybe we should properly call him RogerDAMUS, who told us about three months back - when Northern Rock blew up - “I dont know what the Northern Rock fuss is all about, it will all be forgotten by Friday”.
Those, I believe, were the exact words of RogerDAMUS, the great soothsayer of pb.com.
I understand that later this evening he will be venting more prophetic steam, on the surprisingly excellent chances of Scotland qualifying for Euro 2008.
93. Is the government being run to a script written by Chris Morris? You’d think that at least one person would question the wisdom of a ‘Green Hotline’
Killer question by Binley - he refuses to answer, stammering again! Guilt?
he refused to answer the question again about the subordinated loan. this means that brown lied to parliament last week. not only is some of the govt exposure not secured but SOME is actually junior to senior creditors.
FTSE now down 160 (2.6%)
John Thurso has grown a beard. Wasn’t it just a moustache before?
FTSE over 160 off. Property stocks going down the drain.
If equity market is a forward indicator economic outlook for deteriorating fast.
107. I am starting to think that this has the potential to bring down the Government.
107 - You can’t lie about the status billions in loans to the Labour Party’s pet bank. Darling is going down. And NR may well take Brown down too.
Get some money on Jack Straw as next PM. Pronto.
Darling - poor chap his heart isn’t in it.
110: all world markets off. Stockholm is off 3.4%; Switzerland 2.5%; the US is off 1.5%. Claiming this is all a reaction to the UK government’s policies on NRK is a little parochial.
111-Wouldn’t this be ironic?
110- Dow is also down 160 at 13,000
As a tangent, I wonder if Vince Cable’s position calling for nationalisation and a winding down of the NR business out of line with the views of the Lib Dem councillors in the area such as in Newcastle?
Darling seems remarkably relaxed.
Are Labour backbench MPs labotomised on entry? One person who just stood up, blaming the Tories, well, lets just say, at a school, he would be considered ’special needs’.
111. Don’t panic. As Ave It 07 would, er, have it, “Brown’s our Northern Rock”
100 - robert
Your assumptions only hold *if* NR has the opportunity to trade out of its current predicament. This, I think we would all accept, is now very, very unlikely. There are 2 options:
1.) NR goes into run off (no new business, becomes zombie fund). BoE funds required to prop it up for the long term, value gradually eroded. 7% rate moot as it is effectively owned by its debt holders (the Govt); they’d be charging themselves interest.
2.) NR book is bought piecemeal, at a discount. Right now, potential purchasers will demand a hefty discount, because they are buying exactly the risky, opaque asset class that did for the CDO market. With ~£10bn of lending unsecured, the BoE will take a large hit from this.
It could have been just a little painful. It is now looking as if it will become very, very bad indeed.
If 6000 jobs are so important, why didnt Labour save the Rover plant workers!
119-LOL LOL etc
(as he would say too!)
While i agree with some others, that Cable has made the running on this, but missed the target by going for nationalisation, but that aside, it is very clear that Cable is the best leader the Libdems have had in the last twelve months, and is easly better then the two people currently fighting it out…
123- I think Clegg is a better public speaker though
I did not follow the statement and debates. Can someone give me a summary of the main points?
125- Darling “I am a financial god”
Labour backbenchers “6000 jobs in the North east so we must keep them AT ALL COSTS unlike evil Tories” X20
Yes: but these things don’t change the fundamental value of the loans or the likelihood of repayment.
In the event of (1) then we see customers rolling off introductory rates and short-term fixed loans, therefore net interest margins *rise*. That said, lots of lost jobs in North East as branches close. *But* negligable loss to treasury (and quite possibly profits).
For (2), result large hedge funds with brass cahones make large profits at the expense of shareholders and the government. Also, result, lots of branches in North East close.
You forget (3) NRK is put into insolvency; bought by someone for 98cents in the dollar.
However you cut the numbers, NRK has £2.2bn of book value that has to be “burnt through” before bond holders and the treasury loses.
123. I agree but we are basing that mostly on intelligence (of which I believe, there has always been broad cross-party consensus that he is has in abundance), but sadly that is not of import in this day in age.
Can one of our esteemed financial experts explain the impact on Govt finances of lending £20B, £30B or even £40B to NR.
One of our earlier poster raised the matter of the public sector borrowing requirement. Does the NR commitment require the Govt to go and borrow that amount from elsewhere as I assume we don’t have the reserves for this?
If Darling goes, then Brown HAS to follow, surely? Does anyone really believe this is all Darling’s doing, and nothing to do with Brown?
I cannot believe how one man has been able to f… up so much in so little time. GB has exceeded all expectations as far as I’m concerned.
BTW - does anyone know if he’s actually going to Wembley on Wednesday? Please tell me he’s not!
HF, I don’t believe there is an impact; the Bank of England’s treasury department is not included in the PSBR.
However, there will be an impact on all of us in terms of higher interest rates the government has to pay due to higher issuance.
I think Cable’s idea of nationalising NR which he is now back-tracking on makes little sence at this stage. Assuming as it is likely it was linked to administration of NR it could materialy increase the Government’s financial exposure and it could under present company law make it impossible for existing depositors to withdraw money from NR probably for several months.
Robert 100 you may be right but if the Government has only a second charge on some of it’s advances the Government’s position could be worse than you suggest. It is unfortunate that Darling declined to quantify the extent to which the Government has a subordinated position. This will give the opposition a lot of ammo. to expose the Government’s mismanagement.
Another interesting aspect is that Brown did not attend this afternoon. Bearing in mind he has twice declined on TV to say when he was first advised by Darling of the Treasury’s involvement in the NR liquidity crises it appears Brown is personally politically vulnerable in relation to NR.
New Paddy Power N Rock Market if anyone’s interested…
How much will Northern Rock be sold for?
Applies to the official outright sale price of Northern Rock by June 30th 2008.
Less than £425 Million 11 - 4
£425,000,001 - £475 Million 2 - 1
£475,000,001 - £525 Million 3 - 1
£525,000,001 - £575 Million 6 - 1
Over £575 Million 4 - 1
£425m equates to a share price of approx 100 pence
Bizarre, the equity value of NRK has to be close to zero.
130
I understand he’s not going to Wembley. One Jonah in McLaren is enough:-(
The important point was made in 107.
130: Iain Dale says he’s not.
127 you keep writing as if NRK can simply trade its way through its problems and get full value for its assets.
Even if it does then there is still the matter of the rolled up interest premium owed to the Treasury. as Robert Peston puts it
It actually qualifies as part of the Rock’s capital base. To be more precise, it ranks alongside tier II capital under BIS rules.
in other words the claim that this penal interest will ever be collected is laughable. The taxpayer can kiss goodbye to that money.
The opportunity cost of the £24 billion+ needs to be factored in as well. Does this mean increased government borrowing or higher taxes? I presume the government won’t issue an instruction to increase the money supply unless they really do think you can just print more of the stuff to pay for things.
138 tier II capital is the subordinated debt Osborne asked about. Brown lied, darling lied. nobody will resign though cos they never do.
129 & 131 It goes much wider than this. The exposues will be taken into account by the IMF, credit rating agengies etc. which are already concerned regarding the UK Government’s heavy increase in “off balance sheet finance” (e.g, PFI commitments)which under new accounting rules may have to go on balance sheet. Don’t be surprised if this has unpleasent implications for the UK e.g. net outward flows of capital from the UK and exchange rate implications.
126. English complaints about subsidising Scotland will sound hollow from now on.
Let joy be unconfined! At last we have a Chancellor whose voice is heard and respected throughout the City. FTSE down only 2.7%, Northern Rock still above a pound and only 21.5% down on the day. It could have been so much worse.
139 got it in one - both Darling and Brown lied to Parliament; more than that they have saddled the taxpayer with a commitment of unknown size that will last an unknown amount of time.
For those saying ‘it’s not Black Wednesday’ - no it isn’t it. White Wednesday freed the British economy to grow, this cl*sterf*ck will lead to higher government borrowing or cuts in services or both.
It has seriously damaged the reputation of our Central Bank and the effects this will have will only be seen over the coming 2 or 3 years.
102. ‘every Labour question about jobs in north east’
Yes, they rather gave the game away this afternoon didn’t they?
140. Oh great. UK = banana republic. Without the bananas…..
143 - and what was the cost to the taxpayer of Golden Wednesday - £3bn? It was single figures anyway; this could pan out in the tens of billions.
Sky lead story: Every taxpayer has to cough-up £900 to bail out NR.
Labour is toast, I’d say….
146 In anything other than the very short term, the UK taxpayer gained from Golden Wednesday.
147. Well the lesson from this debacle is clear enough - the country is being run by a gang of self-serving, dangerous incompetents who should be booted out asap.
One of my current bets is 2010 for the date of the next General Election …. although, for the sake of my damaged and fragmenting country, I’d prefer December 2007.
BBC lead story - every taxpayer may have to cough up £1300.
Also saying that Darling did not guarantee that every penny of principal and interest would be repaid to the taxpayer, something he has previously guaranteed.
125-”Darling on Northern Rock - Live”
http://blogs.guardian.co.uk/news/2007/11/darling_on_northern_rock_live.html
Can anyone help me out on finding a link to William Hague’s speech on William Wilberforce?
148- Yes I never understood why the so-called Black wednesday was supposed to have been negative.
All serious economists will tell you that that after Britain and Italy devaluated at that time, there was a clear transfer of unemployment from these two countries to contnental Europe, mostly Germany and France.
On a day when more of the ugly truth of the huge (and failing) Northern Rock bailout attempt becomes evident, I feel I that more of Gordon Brown’s vision is revealed … how good of him to have stayed in office even though he was confident that he would win a General Election held in November 2007.
So the upside of the Northern Rock fiasco is that the pound falls, exporting becomes easier, overseas holidays become more expensive, and Brown has to start taxing the grossly overpaid…
Just doing a bit of spinning to while away the time.
155 - aye, that’s true. The useless fluffer could be starting out on a new 5 year term. At least now he could be gone within 6 months.
146 - wasn’t Golden Wednesday the day when Gordon sold half our gold reserves for some bubble gum, a frog in a matchbox and a 29-er conker?
147. Given we’re all lending money to bail out NR, I thought I’d have a quick look at what I’m getting for my money…
The link below shows the £54bn book thats been securitised, with analysis by region, etc on pgs 40-55, so the stuff we’re left with is at best no better quality.
http://tinyurl.com/28o56o
I’m no expert on this, but is 32% (£17.5bn) being interest only as shown on page 54 indicative of a high quality mortgage book?
O/T: Britain’s longest-serving prisoner, notorious child-killer John Straffen is dead….
http://news.bbc.co.uk/2/hi/uk_news/england/somerset/7102293.stm
Tressage the pound falling does not guarantee new business through exports. This is a British myth. Devaluation is very much a gamble, and the downsides for a country which import so much of its staples are significant. Any benefit is usually very short lived and the hangover worse than the original problem. What we need is a stable exchange rate so exporters can plan properly, not a quick fix of boom and bust.
160. More…
http://www.timesonline.co.uk/tol/news/uk/crime/article2901883.ece
Do-gooders were still trying to get him released!
What an effing country we are…
154. The sterling devaluation that occured on Black/White/Golden Wednesday was unambiguously economically positive. Growth recovered rapidly in its wake.
BUT the government didn’t get any credit - and rightly so. Firstly, they deserved to be punished for not abandoning the parity sooner, thereby needlessly prolonging the recession.
Secondly, they deserved to punished for their comical actions on the day itself - actions which to the ordinary voter clearly indicated they had lost control of the situation.
Thirdly, the growth that flowed from the depreciation didn’t make people feel positive quickly enough - they had serious wounds to lick from the 1990-1992 period, and these were exacerbated by tax rises in 1993-1994.
The lessons from this are stark for Labour - don’t appear to be economically incompetent and whatever you do don’t make the taxpayer suffer for it. On both counts it looks like Labour has failed to learn these lessons and is set to pay the price….
153-Do you know when he made the speech?
ChrisD; Hague’s Wilberforce speech in audio, video and MP3 can be found on the link below but does require log in.
http://www.hayfestival.com/archive/details_251.aspx
Witan: What we need is a stable exchange rate so exporters can plan properly, not a quick fix of boom and bust.
Don’t worry we’ve done the boom part now we’ll have a slow bust … and Gordon Brown’s reputation for economic competence will be shown up as the myth it always was … whereas, Norman Lamont and Kenneth Clarke will emerge as the true architects of the years of productive growth 1993-2001.
148. Actually the NR debacle is an indirect consequence of Black Wednesday - the cost of bailing out NR is just one of the many costs of keeping the pound instead of adopting the euro.
Another edition of the ‘Poll of Polls’
Current poll of polls is updated as of the 17/11/07 YouGov results and gives Conservatives 40.2% (no change), Labour 35% (-0.6), Liberal Democrats 14.2% (+0.4)
Putting these figures through both Wells/Baxter and averaging out the results gives us an HoC result of Con299, Lab298, Lib23 which, for the first time since I’ve been doing these, gives the Conservatives minority control of a Hung Parliament. It should be noted that whilst Baxter gives the Tories a 6 lead advantage over Labour, Wells gives Labour a four seat advantage over the Tories, so pick whichever one you wish to believe depending on your political bias! The Lib Dems appear to be holding their own however (no further slides, at least), and even Baxter has them up four seats on the last POP result, six days ago.
This result would give Labour casualties of Home Sec. Jacqui Smith, Jim Knight, Andrew Slaughter and our own Nick Palmer.
The Lib Dems would lose such luminaries as Leadership Contenders Nick Clegg and Chris Huhne, Shadow Foreign Sec Michael Moore, Julia Goldsworthy, Lynne Featherstone, Susan Kramer.
Brown appears to be relaunching the Cones Hotline
Bourneville That is why I worry, bust bad, stability good. Cack-handed Chancellors bad, careful cautious chancellors good.
168 and in theory both main parties would need a third partner for a majority coalition (excluding SDLP & absence of Sinn Fein)
168.
“Putting these figures through both Wells/Baxter ”
advocate of self-abuse?
168. Assuming a 2005 swing pattern, and a nationalist rise, combined with average LD incumbency, I get
Con 292
Lab 294 (including SDLP)
LD 33
Nats 13
Others 2
NI 11 (SF abstain)
LDs hold the balance of power!
‘This result would give Labour casualties of Home Sec. Jacqui Smith, Jim Knight, Andrew Slaughter and our own Nick Palmer’
Excellent - especially the last one on the list.
The BBC’s Nick Robinson predicted at the very beginning of the contest that it would be bitter, if I remember rightly. I was surprised then, but he’s been absolutely right.
Those are important questions to ask but sadly I don’t think it’ll be the actual outcome that will affect politics, but the perceived outcome. And there may be very little connection between the two. If it all somehow works out beautifully, the government will still have suffered as it hasn’t looked good for a while now, and the good news would be a story only very briefly.
There’s quite a good case for depositors’ savings to be guaranteed anyway, at any rate up to quite large amounts, like £200K. Making consumers share the pain suggests that we should be making decisions about whether banks are safe or not. You’d have to work in the City to be able to make a reasonable decision about that. Surely it’s for the FSA and / or Bank of England to make decisions like that.
175. Maybe it was inevitable given no real differences in policy, approach or background to differentiate each other.
176. I would agree ordinary bank depositors should rank highest out of creditors and therefore institutional lenders and banks be forced to make decisions on credit worthiness. Moral harzard isn’t going to work if the people first in the firing line don’t have a clue of the financial strength of an bank. But such a change cann’t be made overnight, it would probably be very long drawnout and complex process.
176. ‘I don’t think it’ll be the actual outcome that will affect politics, but the perceived outcome’
Could well be. But note in this context that a) the government is struggling in its relations with the press at present and b)