Northern Wreck

PG · Northern Wreck

I see that Northern Rock is going to split itself into two banks. A "good bank" and a "bad bank".

Under the plan, all Northern Rock's £18.5bn of customer deposits will be transferred into "BankCo", the "good bank", along with about £10bn of good mortgages and £8.5bn of cash. "AssetCo", the "bad bank", will be left with the other £50bn of mortgages and £30bn of unsecured loans and Treasury assets.
Some £3bn of the Government's existing £15bn loan will be converted into capital, with about half placed in the "good bank". Another Government loan of roughly £8bn will be made to the "good bank" to issue new mortgages. Responsibility for paying off the loan will remain with the "bad bank".
As that runs down, the first £40bn of redeemed mortgages will be used to pay bondholders in Northern Rock's £30bn securitisation vehicle, Granite, and £10bn of covered bonds. Only after that will taxpayers start to recover their £20bn loan.

The good bank may be worth £1.5Billion in a sale / float. The bad bank is basically worthless so it seems. And as us good old taxpayers are at the end of the queue of creditors in the bad bank our chance of getting our £20 billion unsecured loan back are pretty slim. Still, there'll be lots of work for the consultants, lawyers accountants, non-exec directors, civil servants, lords and MP's needed to run this set up. Oh and of course there are the jobs to be maintained in labour held seats. So that's allright then.

Now, correct me if I'm wrong here, but if the bank has £18.5 billion of deposits (and taxpayer loans are at least £20 billion) , it would have been cheaper for the taxpayer to just guarantee 100% of deposits and let the rest go into administration in the first place.

Run the country? This shower could not run a bath.

Big Blue

When this all kicked off last year I hoped to get 50% of all mortgage holders together and offer 50p in the £1 to repay the mortgage immediately in cash borrowed from other banks, thus halving the mortgages on a shit load of properties. If all banks in the system went to 50p in the £1 recovery it could have been acceptable.

This would have enabled the properties to be sold at a lower rate, forced the housing market down to affordable levels and reduced the personal debt ratio of a huge proportion of national households.

That was of course a selfish ideal :smile: but it would have saved the taxpayer having to shell out for this shit.

gonnabuildabuggy