B&B to be nationalised

So will I still have a job on Monday morning???

At last, an end to all the speculation!

Does this mean my 3-Year Bond is safe ?

It seems that the UK septic bank is being formed by default. Is it not time for a recall of Parliament. Am I being too hopeful that the major parties could avoid points-scoring and agree on the way forward?

at some point robert something will have to happen....

You will have to name your sources as they are a danger to the banking system...

Northern Rock - application to lender of last resort and nationalisation, HBOS, This, loads more... This really isnt journalism, its opportunism on the back of some very unprofessional (or one very unprofessional) person/people....

I am really getting worried now.

Surely the complexity and scale of these banking collapses combined with such massive government intervention makes any predication of the global economy impossible?

So, another one bites the dust. Who is going to be next I wonder?

I remember reading comment after comment on Robert Pestons blog after the collapse of Northern Rock blaming him for causing the collapse. Does anyone feel like blaming Mr Peston now?

I now hope those people who were quick to lay the blame for the Rock collapse at Mr Pestons feet can now see how ridiculous your comments looked to those in the know last year.

As has been said by those at the top, we are now facing systemic failure.

This was not caused by a single journalist, but by a sustained period of stupidity and greed from politicians, bankers, regulators and the general population.

In the long run we get the system, the banks and the government we deserve. Thus it ever was.......

Robert, this story is no longer about banks and building societies. It is about democracy and whether we will still be one in 12 months. The package being hammered out in Washington is only intended to buy enough time for the CEOs to wind up their affairs and flee to their hideaways before Joe Public/Joe Bloggs discovers they have been scammed. How the heck are you going to explain that to the BBC 1 Six O'Clock News audience?

So what happens to the shareholders here?

I have kept hold of my shares that I was issues when they first floated- do they now get magicked out of my pocket by the government, or will I become a smaller shareholder in another bank altogether?

Obviously I don't expect full-on financial advice from the BBC, but I'm struggling to find out what happened to Northern Rock shareholders by way of an example...

It's all very well for the govt to wipe BB under the carpet and pretend that everything will be fine for savers.

But what will happen when one of the big banks such as Barclays finds itself in a similar position in a couple of weeks' time.

Will the tax -payer be forced to stump up another 100 billion? This is the Paulson plan by stealth, but like the USA version it won't work.

Because of bad banking practices by those in charge, the tax-payer is getting shafted and the employees laid off The directors will walk away with pay-offs. How much more of this do we have to put up with?

This is totally outrageous. We peasants need to revolt!

For the Granite in Northern Rock you can at least have some sympathy for the home owners...

But the Aire Valley Mortgages of Bradford and Bingley are just facades for the Ponzi scheme of speculators with chains of buy to let properties.

Now, me, if I manage to keep my job, as a taxpayer have to bail them out.

OUTRAGEOUS!!!

GB and AD you are a joke and its not funny ha ha.

Robert,

You say that "It may well be seen....that demutualisation of building societies has been a colossal mistake."

It was not the demutualisation as such which was the mistake but rather the hubris which overtook the directors of the likes of Bradford and Bingley upon demutualisation, who suddenly found it appealing to shake off the perceived boredom of life as a mutual, and indulge in wild risk-taking and over-leverage among the ranks of over-confident buy to letters.

Blame the directors, and the lack of effective regulation on the part of an incompetent FSA, but not the move from mutual status.

Beware of assigning the blame in the wrong place or you may be responsible for a run on other demutualised financial services companies such as Standard Life.

Welcome to the Weakest Link !

Here is your host, Robert Peston..

Who now has the highest loan:asset ratio ?

If the banks want to survive this, they will have to work as a team ! But can leopards change their spots ?

So, we're keeping the debt and passing it over to NR, for continued sales of 'good' debt at a depressed price whilst holding onto 'bad' debt for simply because no one else wants it

Paul Mason supplied a link to a Merrill Lynch document that indicates governments only recovers around 18% of the debt in such cases, I think - given NR's, and now doubtlessly B and B's, dumping of the 'good' debt.

Brown and his fiscal responsibility... Along with this and PFI this is something like £150 billion of mortgage he's lumbered the UK with.

Niiiice , £41 billion quids worth ( or not as is more the case ) of BTL , Self Cert , Liar Loans.

Welcome to the UK Subprime mortgage market.

DbD

#13

I suppose Govt. could just allow all the depositors to loose their deposits (just like what happened in 1929), share holders to loose any worth in their certificates - there is a good market in collectible bankrupt, obsolete share certificates though I understand (although even that market could be suffering from excess supply reducing values at the moment).
If these 'toxic' mortgages do default, the govt. could start to rebuild the local authority housing stocks that people are going to need in the years to come when people can't get a mortgage without having a 25 to 50% deposit first!

explain "shareholders and holders of its subordinated debt may not be so fortunate"
not fortunate means wiped out?the shares are worth 0p?

Demutualisation was encouraged by carpet baggers looking for a quick profit. The wool was pulled over the eyes of the members of the Building Societies with promises of large pay offs. What bothers me is where the Mr's Brown and Darling are finding the money for these huge bail outs?

Robert

Are you the treasuries official press officer now?

Apalling. The BBC's refusal to host a "Have Your Say" board on the subject shows just how much of a government patsy the BBC has become. Independant unbiased reporting? not from the BBC, you must be joking.

The BBC website also refuses to mention the sheer size of the liability that has just been taken on on taxpayers' behalf.

Absolutely disgusting. Have the Monetary Policy Committee resigned yet for failing to factor the true cost of cheap credit?

Robert walks warily down the street,
With the brim pulled way down low
Ain't no sound but the sound of his feet,
Notebook, insider information, ready to hit fear
Are you ready, Are you ready for this
Are you hanging on the edge of your seat
Out of the doorway the Preston rips

To the sound of the beat
Another one bites the dust
Another one bites the dust
And another one gone, and another one gone
Another one bites the dust
Hey, I'm gonna get you too
Another one bites the dust

Welcome to the world of Mr Preston, Robert where do you get your information from? You have to open up your sources as you mentioned that a lender was possibly going to get nationalised a last week, surely we have a right to know this information.

I'm disappointed that again the taxpayer has to come in and help these crooks. Let it go the wall, if director greed is not checked then where will it stop?

Very disappointed...

"8. At 10:28pm on 27 Sep 2008, beemoh wrote:

So what happens to the shareholders here?

I have kept hold of my shares that I was issues when they first floated- do they now get magicked out of my pocket by the government, or will I become a smaller shareholder in another bank altogether?"




--------------------------------------------------------


Much like with Northern Rock the Government mugs you and you get nothing.



Don't worry though, their bosses golden handshakes will be safe.

come on Robert, 'you have learned'?

where from?

Disgusting behaviour from the BBC (and presumably the Government) that this news should be disseminated in this fashion.

at 15, boilerplated

The shareholders have lost the worth in their certificates, and any depositor has the the first 35000 of their savings guaranteed.

More to the point, had the bank been left to fail someone would've taken the deposit business - much as Barclays descended on parts of Lehmanns.

As for rebuilding local housing... Well, that'll mean the government repossessing houses en masse, a real vote winner there.

Especially when the Tories start digging out Labour's old repossession posters to take Brown down Memory Lane. That'll be a laugh riot.

Why is it always at weekends? These Bank guys haven't had a weekend off now in weeks - they deserve their bonuses!

Close the markets and let's have a week off, calm down and see how it all looks after 7 days of no liquidity - as Warren Buffet said when the tide goes out we'll see who's got nothing on.... it probably won't be pretty.

#19

You, along with anyone else who can be bothered to register, seem to having their say, so what is the problem?

#20
See my post at #15 for what will happen if banks start falling like flies caught in a trap.

#21
The shares are (as of close of business on the 2008.09.26) all but worthless anyway, and would be totally worthless, perhaps if share holders have been a bit more concerned about the morality of what was being done in their names rather than just thinking about how large the dividends are going to be this year or next...

"The reason it faced this calamitous threat was because credit rating agencies had been downgrading the rating of its covered bonds"

Are these the same ratings agencies that have been responsible for giving false triple A ratings to bad debts?

If it is then these agencies should be shut down and the individuals involved should be thrown in prison. They are a fraud.

Robert,

You do know the readers' posts to your blog are censored, right?

"it would be impossible to sell these now for anything but a cripplingly low price. "

Hang on a minute; what's wrong with selling it to another bank at a low price? why should the tax payer have to pick up the risk/cost? Why can't the whole lot just be sold to the highest bidder?

The shareholders wouldn't like it, but that's what the stock market is all about; that's the risk you take when you buy shares.

Why on earth should the government use tax payers' money to subsidise share holders of a failed company?

post 2


Ryan summ your 3 year bond is safe as houses but not as safe as a sandcastle before high tide .


Bond holders are lower in the food chain than depositerrs those extra few percent interest are simply not always worth it ,best of luck though

#23

What do you not understand about the meaning of "defaulted", only properties that would otherwise have defaulted to the mortgage lender would get taken into public stock - Govt. being, in effect, the mortgage lender now?

As for handing out old posters and going down memory lane, people might start remembering all the "Tell Sid" type posters whilst looking at their utility bills...

Spot on. And I'm glad to see that the demutualization issue is going to be raised at last. It's nice, albeit late, to see the likes of bemoh and mightyFop at the receiving end.

The demutualization handouts weren't magicked from nowhere, they were taken from reserves carefully built up against times like this. Those who took the money then are at least partly responsible for the toxic situation now, and should expect to pay dearly.

"Because of the downturn in the British housing market, it would be impossible to sell these now for anything but a cripplingly low price."

You mean the market price don't you?

This is theft from the tax payer. Possibly profitable assets are being parcelled out to the private sector and the public are being left with the rubbish. Absolutely disgraceful stuff.

So the Shareholders and Pension Funds get nothing ?

I suppose this confirms the levels of corruption in the City of London are too great to be dealt with any other way.


This means of course the City has no future.

No one will commit funds to a private pension scheme now.

And when the Private Shareholders realise their companies may well be lying to them, such as in B and B's case, who in their right mind would invest in Shares now ?

On the 25th September:

Richard Pym, Chief Executive, said:
"The changes we have announced today focus the business as a strong savings bank, reduce the size of our lending activities, and increase our capacity in arrears collection.

We are a strongly capitalised bank now undertaking a complex transition with regrettable job losses, but we are planning to put the problems of the past behind us and have a business which is fit for purpose going forward."

What on Earth happened in three days and how is it justified ?

So, everyone who bought an endowment mortgage in the eighties and nineties found the clever people who designed and sold them in fact weren't so clever after all.

Everyone who opted out of SERPS and bought a private pension found out that the return wasn't what they were promised.

And now, the people who thought they would try to take responsibility for their own pension planning through buy-to-let look like they've been shafted as well.

This crisis hasn't come on us in a hurry. It's been brewing for more than 20 years. Robert, it's important that journalists like you point out loud and often that we need long term solutions, not quick fixes.

At last, 130 years after it was written, the Communist Manifesto is coming to pass. Marx stated that capitalism would collapse, leaving the perfect conditions for (true) world communism.

Bring it on.

The government could always just sell Bradford and Bingley to Lloyds TSB and create a huge super-bank that will control over 50% of mortgage lending in the UK as it seems to have ripped up the regulations on monopolies with the permitted takeover of HBOS. It could go the whole way and sell Northern Rock to Lloyds TSB as well. After all why do we need a monopolies commission and regulations restricting market share? I’m sure a huge Lloyds TSB group would only act in the consumers favour.

Presumably if borrowers are moved to higher interest rates in future (as with Northern Rock) which they can't afford then the nationalised entity will have to seek repossession.
If that needs to happen on any sort of wide scale the government will be in a very difficult situation.

re: 37 deputysquire
"Everyone who opted out of SERPS and bought a private pension found out that the return wasn't what they were promised"

I opted out of serps (no choice; by the time I retire the state pension would have been worthless anyway if I hadn't opted out) - one of the reasons that my pension isn't worth what it should be is because the government broke the contract and reduced the amount of national insurance that they rebate into the pension. That has a much bigger impact than how the pension is performing.

If a private company had done what the government had done then the directors would either all be in prison for fraud, or they'd have been sued out of existence.

Can someone please answer what may be a silly question from someone who doesn't particularly understand economics.

Why is it so important that these banks be saved? Surely if it was any other sector that had made such a cock up, there would be a load of firms going bust, a period of instability in that particular industry, followed by the emergence of new firms ready to take on the challenge. So why can't we let the errant banks go bust, let the dust settle, and wait for new, hopefully more trustworthy banks to rise from the ashes? Yes, there would be instability for a short while, but isn't that better than propping up banks that are probably doomed to fail anyway (and who, if capitalism was taking its natural course, deserved to fail for taking such huge debt on board)?

So I guess all this boils down to one question - why are new banks not emerging from this mess?

https://www.youtube.com/watch?v=gNlXgzzdJQA

Republican Thad McCotter with a halfway intelligent rebuttal of the Paulson plan.. who will be the British version we so desperately need?

Instead our embarrasing Prime Minister is being granted token air time with Bush and readily agreeing to any plan despite knowing nothing of the details and being kept politely but firmly away from any of the actual negotiations.

And to think we used to run the world.

Thanks Robert,

I think you're a great journalist. I don't understand why people are against you. The information you're providing is very insightful and important.

Few things are more important than transparency and freedom of information. If details had been clearer earlier, maybe we wouldn't be in such a mess. Not only that, a lot of the information you're providing involves billions of taxpayers money - we all have a right to know,

The banks aimed to outsmart and keep ahead of the regulators, it's not surprising the regulars lost control. Now the banks are like children hurt after playing with matches. They come crying back looking for loans and reassurance.

Watch out for bankers trying to assassinate you!

Post 38,Mcginter,
You do know it was the "capitalists" who funded the bolshevik revolution don`t you?
Do you know of one example of a successful communist country?
Your "(true) World communism" is the planned World-government.Some call it the beast.

Robert,

please please write something explaining the following:

*All* our banks have apparently been lending
much more money to mortgage customers
than they actually have in assets (deposits).

This was done by borrowing huge fractions
of their total lending (50% for HBOS) from
interbank short term loan system.

When further lending is difficult to secure
and they passed on the money to a long
term mortgage contract... well... isn't this
precisely the situation our hypocritical banks have scolded the typical credit card consumer for?

If all the banks are at this, who are the net lenders in the interbank system, throwing
hundreds of billions at HBOS et al.

Is the hedge funds, pension funds?

There must be net lenders.

Simply saying the interbank loan system froze because banks wouldn't lend to one another is trite garbage.

The interbank loan system cannot be entirely composed of net borrowers, just
as the consumer cannot get into credit debt
unless some ill advised bank lends to them.

@30, Boilerplated


Labour made a big stink about repossession rates under the Tories, exactly how do you think it'll go down when it's a Labour government, and not a private bank, doing the repossessing?

Think it'll go down well? Bit of a vote winner? "Hi I'm Gordon, I ran the economy for a decade and now it's all gone horribly wrong, you can't pay your mortgage, so we'll be taking your house. And remember - vote Labour!"

Yeah that'll fly. Like the Hindenburg.

Did Richard Pym mislead me every time he said the bank was fully funded until the end of 2009.
If it turns out not to have been true, can I hold the FSA legally liable for not stopping him from repeating it constantly.

Thanks Robert.

This is a disgrace. A DISGRACE. If any banker involved ends up with any more than a person on benefits as a result of this debacle then Labour must hang their heads in shame.

Given that Kirstie Allsop of Channel Four's 'Location, Location, Location' has advised us all in recent years to invest in property as the value of this asset class will only ever appreciate, will she be prosecuted by the FSA???

Why are there one set of rules for some, but no rules for the people that have caused this catastrophe?

dont trust any of these banks!!!!

Perhaps the best thing Gordon Brown can do now is to ensure that any deal does not end up shafting the bradford and bingley shareholders.
If they are shafted then the unintended consequence will be a reluctance by everyone to invest in any other banks shares, leading to further pressure on capital balances and ratcheting the screw another notch tighter, whereas if the deal allows a reasonable get out price, then the trust that will encourage would lead to higher investment in other banks, thus easing the pressure a little.
The bank was supposed to be worth one and a half billion just over a month ago, this cannot all have dissipated in such a short time, unless the fsa was remiss at the time of the rights issue.
To avoid a lot of litigation, perhaps leading to a European Court insisting on a fair payout, should this not be an opportunity to get a good,value for money, boost to the financial systems for a relatively cheap price.
A lot of the shareholders will be people who got their shares years ago, swing voters,predominantly in the north where Labour rely on being seen as the fair party.
Another group of shareholders are the banks and insurance companies who were good enough to help out at the time of the rights issue. Paying a fair price to them would reward co operation, bolster their balances and encourage rather than discourage bank share ownership.
If the payments were made in shares of any uk bank involved in the rescue, they would probably be retained by most people, again helping capital balances.
If this could all be announced this weekend and the money or shares sorted immediately, rather than dragging on, then it would be a whole lot of advantages, now when we need them, for not too much cost.
It would make Gordon Brown look as if he had some control and foresight, whereas the attitude otherwise would be that the government was just ripping off the shareholders.
Time to be bold.

A lot of people happily took the proceeds of demutualisation and spent them on short-term assets. I expect many of them are amongst those complaining about the follies of others here.

OK folks, the party's over. It was a great one while it lasted but now let's clean up the house, repair the furniture, wash the carpets nurse our hangovers and tell our mums and dads it was all the fault of a bunch of gatecrashers who laced the fruit punch with vodka. It's time settle in for a long dull humdrum daily grind until we find out where the next party is.

This comment was removed because the moderators found it broke the house rules. Explain.

I now believe I am living in cloud coo-coo land having read this. The last two nights festivities have yet to bring up any mention of concern amongst my peers. So clearly the real pain is yet to be felt. Tony Blair obviously knew a storm was brewing. New Labour has been a disaster. I never thought I would say this, but did Old Labour ever look more appealing? Monetary policy should not have been divorced from fiscal policy. Interest rates should be halved immediately.

It is quite obvious that the government is going to be in big trouble financing all this.

The bad debts are going to be colossal in the near future with BTL landlords forfeiting payments. This being because anyone who bought a BTL within the last three years will in effect be subsidising the tenant as the rental income is less than the mortgage interest. Once these BTL landlords are made unemployed which will kick in big time in 2009, then they will no longer be able to subsidice the BTL mortgage and with negative equity will more than likely throw the keys in and go personally bankrupt as will be cleared after one year of any responsibility.

Joe Public might learn by now that all these "Financial Instruments/Schemes" created in the City such as unit trusts, endowments, Pension Plans, BTL, Hedge Funds, Investment Plans only make money for those that sell and operate them, not the investors. Once people understand this, then the City boys and banks will all have to be laid off.

Doom and Gloom without doubt for 2009 to 2012.

The reason the USA and UK government are bailing the banks out is that they have no option if you think about it.

https://video.google.com/videoplay?docid=-9050474362583451279

Unemployment will create the next big hit in 2009. People will call it a day; go personally bankrupt and demand housing benefit, job seekers allowance and tax credits.
The banks will be hit on consumer debt then.

So moving my financial life to Nationwide (a building society) and cashing in half my ISA last October makes me a fiscal genius? Why were people like you Robert not screaming from the roof tops 'it will all end in tears' when you read Northern Rock, et al, were delivering 125% mortgages and 8 times wages loans? I blame Kirsty also!

as someone else has said above-does this mean the end of the private pension industry-who would pump substantial funds into a pension fund now-and as for putting into bricks and mortar?
cash will be king for the next seven to ten years. save it if you can find somewhere safe!

The horrible thought is:

How many Investment Trusts, Unit Trusts and Insurance companies are exposed to this toxic mortgage debt ?

Secondly how many Merchant banks (such as schroders et al) are exposed?

The BBC has a duty to inform the public if any of these reckless banks is still paying astronomic salaries or obscene bonuses to any of its staff.
We can then START WITHDRAWING OUR SAVINGS FROM THAT BANK.
Millions of people are disgusted with their behaviour, and most of them have savings.
The savers of this country, together with the media, can clean up the City.
The mere threat of a "saver walkout" will keep the banks (and their associated companies) in line.

I wonder at what stage people will start taking to the streets and attacking the assets of the banks and "buillding societies" that have so roundly screwed them over the past decade? This is all getting rather unsettling. What in the name of democracy is going on here? Who voted for the government to take on many tens of billions of pounds of unbudgeted debt to be held by taxpayers indefinitely like this, to the extent that there is now absolutely no connection whatsoevet between the UK's earning power (GDP) and our ability to service this colossal mountain of liabilities, let alone pay it back.

Gordon Brown has known all along that this situation was increasing likely to come to pass and, yet, he did nothing, but nothing to prevent it. On the contrary Mr Brown has consistently trumpeted his economic genius and the wonders of Labour rule, more often than not spouting arrant nonsense (lies) about the UK's economic condition in the face of independepent and objective analyses and reports declaring that the UK was heading for the rocks.

Will somebody please tell me how our politicians get away with this? Remember, whatever happens, Gordon Brown (like his banker friends) is made for life (oh, at taxpayers' expense don't forget).

You mention in your article that demutualisation was probably a mistake, and it probably was.

However I believe that there was an even bigger mistake made some 35 years ago.

The country had a network of small building societies in each major town or region. These societies were run by local worthies and managed very simply.

They took in money from local people who knew them, and lent it to local people they knew, on properties that they passed by every day.

Simple,low cost, managed with local pride.If you were hoping to buy a house in the future you saved with the local society so that they would look kindly on you when you wanted that mortgage.

Even if one of these went bust, and they did not do so very often, it was not an event of much magnitude and could easily be sorted out.

However the government of the day decided that these societies were not closely enough regulated and imposed a considerable amount of red tape on them. This was too much for most of their managements and mergers started to take place.

The end result of this was the large societies we have today and the rash of demutualistion.

This resulted in business models to make money for shareholders, understandably enough, and the current mess.

Interestingly enough we are now seeing the creation of Credit Unions, which are local loan organisations, funded by local people.As they grow I do not doubt that they will be over regulated,merged, floated and probably go bust in about 2050.

The point of this post is to say that small local enterprises are better than vast international ones when it involves peoples homes and small savings. The interest rate was better too.

Let the big organisations deal with the big things like office blocks and multimillion pound deposits.The depositors in these circumstances are big enough to look after themselves.

Local organisations can be likened to an edifice made up of millions of bricks; a number of those can break without the building falling down.If it is held up by one large girder, that breaks and everything collapses.

Go Local!

Wouldn't it be embarrassing for Mr Peston if his source proved to be wrong ?

Building Societies should never have been considered to be Banks.

Had the Bank of Scotland not been taken over by the Halifax (Yes I know it was supposed to be a merger, but Halifax called the shots), it would have been here today.

So much for 'power to the people', they are having to pick up the pieces today!!

#53: the half a billion hasn't vanished. What has vanished is the credit rating of BB. As a result, its bond-holders are entitled to ask for either a large margin or, possibly, all their investment back.

That would be £billions, more than BB could provide. So, without action, they are more-or-less insolvent.

Yes, that much value can be wiped out in just a few days.

What I propose is different to others: emergency legislation to freeze the payment of margins / capital to bond-holders for a pre-determined time period - essentially the legislative insertion of a mandatory cooling-off period into all bond contracts, in the same way as, say, the Late Payment of Commercial Debts (Interest) Act inserted statutory interest clauses into all contracts.

Would it hurt? Yes. Would it hurt more than the status quo? That I doubt.

MODERATORS: why can't I use ampersands in replies???!!!

46:
Robert did let slip in one post that UK banks are all net borrowers. The implication of this is that the 'interbank lending' was actually being provided by wealthy foreigners. No problem there then, the way out is simple - do what Russia did and renage on non-domestic debt. Bring back exchange controls. Or pick off a country we don't like, Japan for example and legislate to wipe out any of UK bank debt to Japan.

The more subtle approach would be to deliberately let an investment bank go to the wall that just happens to have the bulk of its debt with 'some foreigners of ill-repute' (to quote Yes Minister). Or has America already done that with Lehman Bros?

The remaining banks need more capital.
Why not pay a good price to the bradford and bingley shareholders, immediately, but in shares of any british bank involved in the rescue.
At some point the northern rock shareholders will either cost the uk a fortune in litigation and inquiries, why not take this chance to make them an interim payment, again in bank shares.
Gordon would find these actions would encourage bank share ownership and surely that gets him a boost to solving the problems and makes him look like a fair and just man.
Perhaps stamp duty on share purchases of banks could be suspended to encourage bank share ownership.

Too hairy for words...

B and B just as expected -

BUT the buy-to(i)-let and self (should have been) certified MUST not be let off the hook. Foreclose NOW.

Take the the properties and flog them off at the best price so that the market in overpriced flats tumbles and starts to get the property ball moving again at lower, more sensible prices. This would be the greatest service HMG could do for the Nation.

The unfortunate thing about the Treasury owning long term debts is that thee is no pressure on them to take the losses as there would be on normal commercial banks. This nationalisation of bad debts will keep property prices artificially high and this must be recognised as this is one of the main brakes on house prices dropping to a more rational level (half what they are now.)

I know the big UK banks will complain about BB deposits now having a government guarantee thus giving them an advantage in the competitive marketplace. Come on folks, these clowns got us into this mess and are incapable of getting us out of it. Where is the 1974 like lifeboat this time?

Sell the branches, if anybody is interested, but keep the saving side and add to Northern Rock. Eventually a UK based Mortgage Bank can be created from the ashes.

Whilst the rest of the UK banking industry continues to run around like headless chickens.

I am far from a supporter of this government, but this is not of their making.

If they are taking over B and B, then it is in the national interest.

The asset book of B and B is ok. It is confidence which is the problem.

Over centuries bricks and mortar have proved to be the best investment. There for the government are getting good assets for a song and when the market rises again, could well make a profit on B and B and Northern Rock which will have a positive effect on the UK balance sheet.

SHort term thinking says this is bad. Long term thinking says it is a shrewd deal.

Also, if there is to be a period of repossessions, the government have a ready made stock of social housing.

There is a greater chance to find a home for such families, rather than relying on expensive B and B accommodation.

There any housing benefit would go from the treasury to B and B, rather than to private landlords.

All of us taxpayers are now shareholders in B and B, in a sense.

In this case, I feel happier that housing benefit that I am funding is reducing the potential future costs of recession.

Everyone has been moaning about the lack of social housing. The government now have an opportunity to provide more through B and B.

Put it this way. If there are 50,000 properties in distress via private landlords, The Govt can take possession of the houses at a knockdown price using the existing earmarked budgets for social housing.

And at the same time they can use that stock to keep a roof over the heads of vulnerable families.

If this was a private capital consortia making this move, it would be described as predatory and as making money out of other people's misery.

I believe in the markets, but I also believe that the public sector has a role in evening out when markets falter.

I am not a Labour supporter.

But if i am honest, I have to say that I can spot a good deal when I see one.

"However the Treasury will almost instantaneously sell to a bank - or even a number of banks - Bradford and Bingley's 200 branches and its savings business.

So B and B savers, who had more than GBP20bn deposited in the bank just a few weeks ago, will find themselves customers of another bank.

The Treasury and the Financial Services Authority will spend tomorrow negotiating with banks interested in buying these parts of B and B. These possible buyers included Santander of Spain, HSBC and Barclays."


How does this make sense? The only things of any value in the branches and savings business would be the buildings and infrastructure, plus the goodwill derived from an established network of savers, in so far as they may be expected to provide inexpensive finance in the future.

Whoever takes over this section of the business will also be taking over a GBP20 billion liability to the depositors, so, in the absence of a transfer of mortgage loans of equivalent value, the Government will have to assume a major liability to the purchaser.

The obvious solution would be to transfer along with the deposits an equivalent value of mortgage loans, but this surely is quite difficult:-

1. Most of them are almost certainly lodged as collateral against B and Bs non-retail funding.

2. Even if they were not, who's going to want to take on a portfolio of dubious assets at anywhere near nominal value as recompense for assuming GBP20 billion of liabilities that are irreducible?

Can anyone suggest a way the savings business could be hived off without the government having to create new public debt approximately equal to the value of the deposits transferred?

Those (few) in this blog and the (many) in the HYS who think B and B should be allowed to fail forget that a bank is different from any other business. The bank's creditors (a large slice of whom are the bank's depositors) would have to be paid from the proceeds of selling the assets. A very large slice of the assets were formerly AAA, but are now junk. It is not that they are worthless, but that it is impossible to put a value on them. The government is in a better position than a private buyer to have a stab at valuing them and then holding them for the long term. Either it makes a profit from them in the long term, or it makes a loss. If it makes a loss this is counterbalanced by the public interest in restoring the stability of the financial system. No private buyer would be prepared to take a loss because it was in the public interest. Only the public, via the government, can do that. [It's called cost-benefit analysis.]

#30

Try getting your head around what I said rather than just trying to score political points, the houses would be repossessed by the bank/lender ANYWAY if the mortgage defaults, ONLY defaulted properties would be taken into the public housing sector. What is more, the 'tenant' (be it the ex-mortgage payer or the tenant of the BTL property) would actually be able to stay in the property as a local authority tenant. Also, I'm talking about only B+B (and possibly NR) mortgages, not an act of wholesale nationalisation of the entire UK housing stock!

All of these accusations at Robert about irresponsible leaking and not naming sources miss the point - it is highly likely that this is another example of an 'official' leak designed to get crucial information into the public domain (and therefore the financial markets) before it can be officially announced.

#37

"the people who thought they would try to take responsibility for their own pension planning through buy-to-let look like they've been shafted as well."

Diddums. Did you think the property market was going to go on rising forever? You can't blame other people for your own short sightedness.

By removing the first time buyer rung of the ladder BTL was a large part of the cause of the housing bubble, which of course is a large part of the cause of this entire problem. People needed to get 125% mortgages just to afford to house their family, not because they were buying mansions they couldn't afford.

Your "pension" is someone else's misery. Houses are not an investment, they are a place to live.

If all this chaos is primarily the result of the housing crises then surely including house prices in the official inflation figures allowing interest rates to regulate the absurd prices that property reached would have prevented all this from occuring.
Could it be that simple?

#53

The shares are worth around 20p, it will be a disgrace if any more is paid for them. As the old warning goes - share price can decrease as well as increase...

Quite frankly the B+B (and all the other de-mutualised building societies) should never have been a bank, it is now obvious that all these ex mutuals were built on a foundation of quick-sand and a promise that one can walk across to the promised land...

People will alway buy shares in well founded companies, they might be less inclined to buy in algorithm and air-head promises. I won't go as far as agreeing with the person who said that communism has come of age but we sure are seeing the dying days of Thatcherism/monetarism.

#56

The foundations to the current problems were laid in stone well before either Blair, Brown or 'Nu-Labour' were known of. As for cutting interest rates, one of the things that has caused this fiasco was the ease at which credit was available (banks making money out of selling other peoples debt), if anything interest rates are way to low - they are most certainly not to high.

76 Cybernewsmaniac:

Cost benefit analysis rules huh? Give it a rest. The point you miss my friend is that it is not the job of government to do the work of the market especially given the complete acceptance of 'the market' by the government. For the sake of market stability? Mmmmmm, we see this argument plastered all over the place by the great and good these days, even Robert peddles this one a bit, even so, it's simply a con. The 'market' is and never has been 'stable'. It is instability that gives investors the opportunity to find profit and entrepreneurs the opportunity to create and 'grow' new companies. Sure these financial companies are monsters but so what? as others have said on here others will rise to take their place if they fall. It seems to me that you're doing a bit of special pleading for the taxpayer to subsidise these failing companies. Bailing out these companies simply prolongs the pain, and will cost is all more in the long run.

Long run, property probably is a sound investment - supply/demand considerations. But a correction is obviously overdue. The buy-to-let boom seems to have had the effect of artificially increasing demand to a level it won't actually reach (in terms of owner-occupiers) for quite a while. But in 25 years, if the UK population is well over 70m, even people who have just bought at the top of the market will probably be well off.

We've heard quite a bit about what Banks are failing here and in the US and a lot of these are multi-nationals but based in the US or UK. What is happening in other countries? Are their banks in trouble?

I believe that a fundamental requirement of Government is to work behind the scenes to do the right thing for the country and announce this news through formal channels.

I am not sufficiently close to the situation to know if this is the right decision for the country, but it is right for the country for decisions relating to the economy to be made behind closed doors and briefed through formal channels.

Why do your sources feel the need to bring all these discussions to light via leaked reports?

Whilst I can't really criticise your decision in this case to publish these leaks, since that is your job, I can't help but feel that those that pass on these stories are undermining the credibility of their own government.

A serious man in serious times shouldn't make such a novice mistake by allowing his Government to permit this continuous leaking of information. Heads should roll.

#70

Because, by the looks of things, no bank wants to take on B+B debt (what you suggest would be a conventional take-over / buy-out), hence the forced nationalisation...

Just for a minute, forget whether this is right or wrong in your eyes , but work through the consequences of The Treasury paying out two pounds a share to the B and B shareholders.
Wouldn't that prevent the next bank crisis and for only a cost of three billon pounds.
It would underpin the share prices of every bank. Could be a cheap fix.
I am a shareholder so I accept self interest is involved, but for the greater good of all, why not .

Just a thought on all of this.....

Does anyone think there is an element of competition killing with the big banks?

Short selling was banned, and now we see the rating of B and B plummet forcing it's hand.

Even in these time of "cards on the table" it wouldn't surprise me if there is lots of underhand shenanigans taking place.

I can just see it.....

"Send B and B to the wall, less competition and we can buy their deposit book - more equity for us and we deleverage"

We find ourselves at somewhat of an impasse.

If we bail out the fat cat bankers, they get to carry on living the luxury lifestyles they are used to, and our financial system limps on...

If we do not bail out, the banks will close their doors, your local supermarket staff will not be paid, the shops will close and there will be no food to buy. Within a few days there will be anarchy.

Which would you prefer?

#74

You are making the same assumption that everyone who has not been at the lower end of the housing market recently (be it journalists, politicians or normal people) is making.

Namely that the people who can't put a roof over their head are somehow "vulnerable" families. That they are somehow second class citizens because they can't afford a house.

This is false! This underclass actually consists of anyone under 30 who can't draw on the bank of mummy and daddy. They don't want to be socially housed, they just want to be able to buy their own home without saddling their future grandchildren with the debt.

We don't need more social housing, we don't need a huge house building drive, the housing market just needs to be allowed to correct itself without Gordon riding in to save the labour voters' investment properties.

It looks as if the government might make a profit on the deal!

What a lot of whingers! Hey, it was a bubble, guys; and it did what ALL bubbles do - it suddenly disappeared leaving a void. There have been enough warnings about this over the last 18 months - if you listened to them as much as you did to Kirsty, you wouldn't be so worried now.

Make way, Robert, for my exclusive - the English football Premiership is a bubble and WILL GO BUST. Remember - you heard it here first. For anyone outside of football, that must be obvious. So you going to blame me when it does go pop?

No good hanging around here, whining. Best get back to work and start creating some wealth to fill in this black hole we've got ourselves.

As a nation we've had it too easy for too long. Need something like this to sort the men from the boys.

In the early 90s, the Swedish banks were in just the same situation, Easy lending, house prices falling, a weak krona, so what did the Swedish government do about it.
They injected a huge sum of money, in todays values $18.3 billion, on a prorata with the USA pop about $605 billion. Only one bank decided they did not need help, all the others were "taken over", shareholders got none of these funds, 100% transparency was needed.
The result was that confidence was restored quite quickly, the economy was stable again, and the banks etc were functioning normally. The end result was that all the banks were returned to private ownership, with a loss to the state of just over $2 million. The state still owns about 20% in the Nordea concern.

The government do what they do. What I don't want to see is the government bailing out the buy to let landlords for that is not helping homeowners in a time of cris. That is helping businesses who are failing because of a poor business model. If the landlords find they cannot pay the mortgage they should be treated like any other business. It's just tough and we are adding your house to the national stock.

$700bn

This figure, I think, will be remembered for a long time, it will stand for stupidity, greed and ego. The stupidity of us all for believing we could afford the mortgage repayments, greed of the financial advisors, the mortgage and the banks. The ego of the politicians especially George W Bush who has had to make this bill go through to ensure his place in history. Without this bailout the Bush legacy would have been; disastrous wars and global economic failure. It will now just be disastrous wars. But let’s not blame Bush entirely.

Gordon Brown and many other leaders across the globe did not foresee any of this. But, Gordon, Mr. prudent, the man who put his ability as Chancellor of the Exchequer above everything else should have done better. He spent the last 2 years before becoming PM fighting Tony and brooding. He stopped doing the day job and everyone knew it. Even then the likes of Adam Applegarth, MD of Northen Rock was realising that he could borrow just about any amount of money from other banks and still make a margin. As a salesman all he had to do was sell more mortgages and this he did expertly and to such and extent that just before they crashed last year Northern Rock were selling twice as many mortgages than their nearest competitors with incredible incentives. By then every other bank, and building society and sub prime loan company was on the same bandwagon. Websites appeared everywhere offer loans underwritten by merchant banks and really anyone who could raise money used it to sell money. The motivation, of course, was the fees that they made from the not just the consumer but the all the way up the food chain to the top.

Greed drove the market. The intermediary fees, the commission, ripped all the profit out of the deals at the front. There was no personal liability for the directors of theses business. The amounts were just too big. It’s a well know law if you owe enough to a bank it’s no longer your problem, it’s the banks problem!! Any way if you get your commission and bonuses who cares what the value of the business might be (Even though at the time they were valuing these banks at incredible PE’s but it was all conjecture). So the market was driven harder and harder because it was easy money and you got it immediately. Sell long borrow short was the rule. Incredible but true.

So what does Bush do throws $700bn at the market and every single banker will working out ways to get their hands on this money through, salary, bonuses, shares you name it. (They really don’t care about the consequences they are gambling) It will be the biggest feeding frenzy of all time, because we are capitalists.

Governments are not supposed to interfere, we are not supposed to Nationalise companies. The markets and economies are supposed to work alone without intervention. If we have fundamentally got it wrong how have we survived since the War? Do we want to return to the days of British Leyland or is this the dawn of a new era. Where does Cameron stand on this, Gordon will Nationalise the Bradford and Bingley Bank tomorrow, and the bank of England will start printing money (or that will be the effect). I was always led to believe Newton’s Law existed everywhere. Energy cannot be created or destroyed. Once the money’s in the system you can’t remove it and this increases inflation. On Tuesday Gordon will announce, via the Bank of England, a UK rescue package how much… start placing your bets!!

The outcome of all this I don’t think anyone has a clue. But we still have global warming, crazy oil prices, and a world at war. Something’s gotta give!

It would be a disgrace if anything >20p was paid, per share (and thats assuming they wouldn't have continued falling). As with NR, the shares are effectively worthless now.

Unless you recently bought your shares, you had every opportunity to bail when the price was better!

I would find it hard to accept that additional taxpayer money was used to placate shareholders!

#91

Why don't these under 30's want social housing, are they snobs or just brain-washed, many families started out in living in local housing stock at break-even rants whilst they SAVED for a deposit to get a mortgage - rather than burdening themselves with 100% or greater mortgages at repayments of 50% of their monthly earnings. As John Major once said, we need to get back to basics...

At #56 Boilerplated wrote:

"The foundations to the current problems were laid in stone well before either Blair, Brown or 'Nu-Labour' were known of. As for cutting interest rates, one of the things that has caused this fiasco was the ease at which credit was available (banks making money out of selling other peoples debt), if anything interest rates are way to low - they are most certainly not to high."

With respect, it was entirely possible for Gordon Brown to progressively tighten lending rules and credit availability over the last 10 years. This crisis was entirely avoidable.

However I think there was a growing belief that, just perhaps, this time things would be different, and to try to rein things in might risk bursting the bubble. If so, very stupid indeed.

Furthermore, cynically, without the easy availability of consumer credit, there would have been little money from which to obtain tax receipts...

#97 apollo_mcqueen

The price that is paid to shareholders may well be higher than 20p.

The reason is the legislation it used, some believe, is in contradiction of EU rules on human rights, therefore there are dounts as to whether this will stand up in court.

FOR ALL SHAREHOLDERS
If you are unsure what this means or would like to know what acton you can take, visit the uk shareholders association website.