Northern Rock shares plunge 31%, Paragon Group drops 17%

Haha, dont get me started on the daily mail, otherwise known at the daily kneejerk or the daily third reich by me!

The independant has always been a bit too namby pamby leftist for my tastes.

But what do I know, I count the sun as my favorite followed closely by the telegraph.

Channel 4 news (the most untrusted in a recent poll) is my current favorite for TV news. Their in depth coverage of international news that is not covered by the other stations gets my thumbs up.

I reccomend watching it after the BBC news at six, when you dont feel like watching the one show.

Again dont get me started on the one show, a copy of US today show, talk about dumbing down of the nation!

This post just appeared on BBC's economic editor's blog;

I see this morning from Standard & Poor's website that they downgraded Northern Rock to negative on June 27 this year..you can track the fall in the share price from then as those in the know sold their holdings.Currently Northern Rock has an S&P rating of A-1 - so has Bradford & Bingley.Are Mr Bradford and Mr Bingley to go negative shotly too?

Bradford & Bingley is a name I keep hearing. What is worrying, is that some Northern Rock consumers are placing their money into Bradford & Bingley.

We could see another run on a different bank if it starts to go negative.

Robert Peston makes another good point on his blog

I have learned that it cannot be taken over by another bank in the absence of a major policy shift by the Bank of England.

Northern Rock CANNOT be taken over

[edit on 16-9-2007 by infinite]

Interesting read from history, I think all should; (I'll focus on the part referring to the United Kingdom)

Stock market crash of 1973–4

Worse was the effect in the United Kingdom, and particularly on the London Stock Exchange's FT 30, which lost 73% of its value during the crash. From a position of 5.1% real GDP growth in 1972, the UK went into recession in 1974, with GDP falling by 1.1%. At the time, the UK's property market was going through a major crisis, and a secondary banking crisis forced the Bank of England to bail out a number of lenders

en.wikipedia.org...

Some good digging there, any idea what lead to the downgrade on the 27th?

It appears to have been downgraded before the subprime fiasco came to light.

My usual source, Google finance has no news going back that far for NRK, it would be interesting to see what lead to the downgrade, that caused a big drop in share prices that day.

The part where you mention that NR cannot be sold is misleading, I beleive.

From reading the article, it appears that NR was seeking emergency funding via takeover long before they went to the BOE.

Under the terms of the emergency loan from the BOE, any buyer would have to settle up with them immedietly upon purchase.

Therefore, any potential buyer of NR must take them as they were before the BOE stepped in. Nobody was interested then, and I am sure that NR is even less appealing to potential buyers now.

I feel this is perfectly reasonable from the BOE, why should they prop up a foreign buyer?

As for NR savers taking their money to Bradford and Bingley, oh wow!

I would presonally go for a large international institution for stability, and reccomend diversifaction in ones saving portfolio.

Originally posted by DeepCoverUK
The part where you mention that NR cannot be sold is misleading, I beleive.

It's political.

The Bank of England, and the government, might be accused of bailing out a business, knocking up a share price to help the board profit from a takeover.

That's the problem for them.

i.e choosing the business over it's consumers.

I've been doing more digging

There are more banks out there and the Treasury knows it.

Mr Darling also said there would be backing for any other bank which ran into difficulties in the current credit crisis.

Translation:

We know there is just more. Just admit it and come forward.
That wasn't a statement of confidence, its coming from a Chancellor unaware how bad this is.

Bradford & Bingley is the name again. Alliance & Leicester is another.

The Bank of England has come out and said, off the record, it expects more to come forward and use its emergency funds (which isn't good)

U.S: Credit Crunch to Crash UK Housing Market 2007−08

The Credit Crunch has been hitting the UK Mortgage Sector hard as many easy credit mortgage deals have been removed from the high street shelves in recent weeks. Despite central bank actions to ease financing terms and increase liquidity, this does not address the real issues of illiquid mortgage related bonds and expectations that the UK Housing Market will slump on the back of a surge in foreclosures.

www.fxstreet.com...

Stop digging now

Looks like things could get bad for some. The market is well overdue an adjustment in my opinion.

The prices at the moment are crazy, and the tresuary/government didnt do anything to halt the spiralling prices at the right time.

I feel bad for the first time buyers who overstretched themselves to get on the ladder.

I dont feel so bad for the buy to let crowd that have driven the prices up so much in the first place, or the bankers and hedge fund managers who have made big profit off the back of easy credit!

About a year ago, I was discussing a heavy tax on buy to let mortgages with my accountant, to bring house prices back in line.

I dont suppose you have any indication as to how big the BOE slush fund is? I just hope they dont go to far and bankrupt the central bank!

I know that the FSCS doesnt have enough in its coffers at the moment to cover is somebody goes belly up. They will have to raise their levy if this is the case.

Do any of our American buddies have any idea if some of their lenders are in a similar position, I have a feeling countrywide is a bit wobbly. Will the fed step in to save the day, in the same way that the BOE has done here?

Originally posted by DeepCoverUK
I dont suppose you have any indication as to how big the BOE slush fund is? I just hope they dont go to far and bankrupt the central bank!

Can you bankrupt the Bank of England?
I've never heard of a case in which the central bank has gone bust


[edit]

Northern Rock is opening up it's branches an hour early tomorrow and will stay open until every customer is dealt with.

Gonna get ugly.

Word in The City, Northern Rock is going to be cut up and the mortgages will be passed on to other lenders.

[edit on 16-9-2007 by infinite]

Well not bankrupt, but it could cause a huge decrease in the value of the pound, which could lead to a bad spate of hyperinflation. (especially when there is no gold to shore things up!)

Which in effect is the same thing as the central bank going bust.

There have been a few cases of this in the past, that are detailed on Wikipedia.

I saw that the telegraph suggested that NR would be split amongst the other lenders.

It will be interesting to see what happens.

Originally posted by DeepCoverUK
I saw that the telegraph suggested that NR would be split amongst the other lenders.

That would effect the confidence of the banking system and cause panic amongst consumers worrying about their mortgages.

It's not a nice route to take.

I heard some of these dealings were traced to shorting by The Glove, a ring of City financiers with roots in 17th C occultist movements. More follows.

Back in March 2007, ex-BOE Governor Eddie George admitted:

The Bank of England deliberately stoked the consumer boom that has led to record house prices and personal debt in order to avert a recession....He said he was "very conscious" that stimulating consumer demand could give rise to problems in the future.

Pretty candid statements made by Mr. George some months before the chickens actually came home to roost. Contrast his remarks to the recent comments made by America's Pontius Pilate...Allen Greenspan. While it might be politically expedient to avert a recession through the manipulation of credit, once the pyramid is stacked, all it takes is one wobbly domino...and aversion starts to look more like postponement.

Originally posted by OBE1
Back in March 2007, ex-BOE Governor Eddie George admitted:

The Bank of England deliberately stoked the consumer boom that has led to record house prices and personal debt in order to avert a recession....He said he was "very conscious" that stimulating consumer demand could give rise to problems in the future.

Everyone should star OBE1 post

That is an excellent find!

I can see those comments coming back into the media in the next few days now since the problem has arrived.

Originally posted by DeepCoverUK
Stop digging now

Do any of our American buddies have any idea if some of their lenders are in a similar position, I have a feeling countrywide is a bit wobbly. Will the fed step in to save the day, in the same way that the BOE has done here?

Most of the smaller subrime lenders have already gone bankrupt or stopped lending. American Home Mortgage (which wasn't considered subprime lender before all this started) and New Century Financial are the firs two to jump to mind. Countrywide is wobbly, but the phrase "too big to fail" keeps getting thrown around. It is probably the first of the mortgage lenders that also had a large deposit base as well(they actually had a minor bank run a few weeks ago). Bank of America provided them with $2 Billion in emergency funding about a month ago at what I understand are hard tems for CW, and just last week they announced "arranging" $12Billion in additional financing but havn't released where it came from yet. They shouted from the rooftops they got $2bilion from BoA but that $12 Billion no one knows yet. Some people believe that the only reason Countrywide isn't bankrupt yet is because no one has figured out who is going to end up servicing all its mortgages.

Indymac and National City banks are two smaller regional banks that shorts seemed to be really interested in due to subprime exposure. Some people think that Washington Mutual and Wells Fargo both have lots to worry about because they have both written alot of loans in "bubble" states. There has even been speculation that one of the big four (Wachovia, Citigroup, JPMorgan-Chase, or BoA) could have some multi-billion skeletons in their closet.

I think 3 of the largest investment banks report 3q earnings next week. Lehman brothers on Tuesday(same day as Fed decision), Goldman Sacks and Bear Sterns on Thursday. There are rumors that one of these is gonna report a REALLY BAD quater. It most likely will not be Goldman, they are regarded as "the smartest people on the Street", and I'm sure it doesn't hurt that the US Treasury Sec is a former GS CEO.

The media here is pretty much already reporting that the FED is cutting rates on Tuesday, if they should surprise negatively there will be the proverbial blood on the streets. You hear the financial, and to a lesser extent non-financial media harp about a rate cut you'd think it would magically help all these people about to have ARMs adjust keep their homes. Sadly, it will not. Things may become clearer this week as those investment banks report, and FED speculation subsides, but they could just as easily continue to hide losses and postpone the reckoning longer.

[edit on 17-9-2007 by jefwane]

Wow thanks for that info, looks like it could be pretty bad over there too!

Souds like a week of carnage ahead on the markets, why isnt there any end of the world threads this week?

Does anyone have any good news?

Do any other members from other countries have more news about how it is going over there?

from the BBC

In morning trade in London Northern Rock's shares, which had lost 33% on Friday, fell from 438 pence to 293 pence. Shares in mortgage lenders Alliance & Leicester and Bradford & Bingley were also down, by 14% and 11%.

[edit on 17-9-2007 by infinite]

The bank run has continued, and its looks worse from the pictures on the BBC.

So far, 8% of deposits have been taken out of Northern Rock. The Bank of England, HM Treasury and the financial regulator to discuss the bank's future.

Originally posted by infinite
So far, 8% of deposits have been taken out of Northern Rock. The Bank of England, HM Treasury and the financial regulator to discuss the bank's future.

That's a hell of a lot. What are the reserve requirements there? I think it's only around 10% here, i.e.. the bank only needs to keep 10% of deposits on deposit with the Federal Reserve Bank.

Originally posted by djohnsto77
That's a hell of a lot. What are the reserve requirements there? I think it's only around 10% here, i.e.. the bank only needs to keep 10% of deposits on deposit with the Federal Reserve Bank.

I have no idea. It's probably the same I think.

Remember, the 8% does not include internet and postal accounts, so it could be A LOT higher.

I have a feeling countrywide is a bit wobbly. Will the fed step in to save the day, in the same way that the BOE has done here?

It’s old news on our end.

A friend of mine workes in LA countrywide office, I gave him a call, he said – Run!

Even my mom in law refinanced out of countrywide months ago.

BOA is bracing for impact, WAMU is digging in;

Mortgage Worries Sink WaMu - Forbes.com

www.forbes.com...

Is WaMu the Next Countrywide?

www.thestreet.com...

We’re in big trouble here.

I’ve been on the phone, most everybody I know have been converting to Euros for months now.

The feeling here is that dollar going to seriously drop as a result of all of this.