Comments on: Is Northern Rock the government’s fault?

By: Richard

Richard — Thu, 20 Sep 2007 10:37:12 +0000

” CRASH GORDON ” is crashing and it`s only the beginning. After years of mis-management I dread to think what the future will bring!
Why? are the house price inflation figures left out of the overall inflation calculations?
If they had been in over the last 9 years ,interest rates wuold have been around 8% over this period,and we would not be facing this frightening future

By: Graham Mellor

Graham Mellor — Thu, 20 Sep 2007 10:30:40 +0000

Jeff Adams (earlier) has it right. Somewhat like at Barings, management on Wall Street and in the City fail to understand what their ‘clever’ financial instrument structurers are really up to (from which they and shareholders receive significant gains short-term) and the likes of Northern Rock, not to mention pension funds (all eventual losers), pile in to buy these investment products.
Gordon Brown and the Governor of BoE have no chance and can only react. If, as it seems, management at financial institutions and credit rating agencies have only limited day to day risk management capability, regulators and government will have an even sketchier overview and no chance to anticipate the full impact until things suddenly turn sour!
We have to accept that the evolution of financial markets will always give rise to occasional turmoil and losses for the unwary. That is unless and until someone is clever enough to make everything devised by those on the leading edge of money making (hedge funds and alternative instrument brokers etc.) transparent without destroying market and competitive opportunity. An impossible task given that it is already acceptable practice to allow ‘black box’ products and trading strategies that only favour the institutions and have made market volatility the name of the game!

By: Purewal

Purewal — Wed, 19 Sep 2007 15:08:43 +0000

What happened was the inherent inabilities in a free market economy to adjust to modern current climates. Governments being all powerful they have to oversee the proper running. What this goverment done was rather late,and to shore up their right to govern.

By: tony

tony — Wed, 19 Sep 2007 13:19:37 +0000

as far as i can see the only losers sre the share holders

By: mark

mark — Wed, 19 Sep 2007 12:42:12 +0000

of course its the governments fault, Crash Gordon has presided over an economy based on excessive borrowing, fudged inflation figures, a collaspe of manufacturing and yet he is quoted in the main stream press as being the best chancellor ever! Crash Gordon the seeds of debt you allowed to be sowed are no coming home be a man and accept the blame

By: Naz

Naz — Wed, 19 Sep 2007 12:18:15 +0000

As one friend of mine put it: “Thanks very much Mr Darling, there’s a few investments I also made with Ladbrookes Bank that I would also like you to underwrite!”

If we are to believe that the market is so good at self-regulation then why does the government, and the British tax at large always seem to be bailing companies out? Do we not get the worst of both worlds: the inability to effect the actions of a company, but still having to mummy-cuddle them when they mess up!

By: Jeff Adams

Jeff Adams — Wed, 19 Sep 2007 12:08:50 +0000

The workers at the banks did things that were very successful for the last 5 to 10 years, profitable and popular for all investors.

Then the complication of what they had done meant that no one knew for sure who was going to have to pay for the losses when things started to go bad.

The major lenders and investors refuse to fund anyone who looks over streatched and Northern Rock is one of the more dependent on wholesale borrowings.

BUT N.R. ARE NOT THE ONLY ONES. There are similar banks in most countries and in some countries almost all of the banks are in a similar state.

The ‘blame’ is very wide. It starts with the senior workers in the banks who created these clever investments, it includes the investors who wanted higher yields, it includes the regulators who are never brave enough to stop you getting a mortgage or stop you putting your money in a higher interest account. It includes the central bankers and politicians who called for lower interest rates and financial support whenever anything goes bad.

By: mark field

mark field — Wed, 19 Sep 2007 12:03:57 +0000

There appears to be a number of parties complicit to this situation, and where some degree of blame should be placed:

1. The BBC for scare monger reporting, that caused the “run” on Northern Rock

2. The Bank of England for not stepping in sooner with their guarantee of “lender of last resort”, and acting in the interests of the UK economy - as the ECB did for Europe and the Federal Reserve did for the USA.

3. The management of Northern Rock for mis-matching funding requirements and sources of funding (this is basic accounting principles)

4. The Government of the United Kingdom for being SLOW

Will these lessons be learned or will be have the same situation in another credit crunch cycle? Some of us are old enough to remember Barings, BCCI, Slater Walker etc.

By: Alan Wombell

Alan Wombell — Wed, 19 Sep 2007 11:16:50 +0000

After eight years of trying to round-shoulder its obligations with the Equitable Life saga, the DTI (or whatever it is currently called), has yet again failed to do its duty. What is the purpose of this ineffective organisation?

By: Peter Schwarz

Peter Schwarz — Wed, 19 Sep 2007 10:11:59 +0000

Seems to me that the support given by the Government and the Bank of England to the Northern Rock Bank is not so much about boosting up the Northern Rock but rather a case of window dressing in order to save the Government serious embarrassment resulting from possible questions from the financial quarter. I agree that the savings of account holders will be safe for now, though share holders will be feeling distinctly nervious and quite rightly so.