Sales of Northern Rock nets £11 BILLION

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Sales of Northern Rock nets £11 BILLION

Post by Guest on Tue Feb 28, 2012 5:35 pm

Northern Rock is expected to return a profit of up to £11bn to the taxpayer over the next 10 to 15 years, the body which manages the government's bank investments has said.

The government provided £37bn of funding to bail out the two companies that comprise the former Northern Rock.

UKFI now says that the return of cash from the two companies is expected to total between £46bn and £48bn.

Northern Rock was nationalised in 2008 after struggling in the credit crunch.

After experiencing funding problems when banks stopped lending to each other in 2007, the Newcastle-based lender suffered the first run on a British bank in more than a century.

It was later split into two, Northern Rock plc and Northern Rock (Asset Management), into which was placed its bad debt.

In November 2011, the government announced the sale of Northern Rock plc to Virgin Money for £747m.

UKFI said that the expected cash return included the recent sale, as well as loan repayments, interest, guarantee fees and the winding-down of Northern Rock (Asset Management).

"This means that, in cash terms, the companies are expected to more than repay the original funding provided by the taxpayer," UKFI said.

"However, this cash is expected to be returned over a period of around 10 to 15 years from 2012 as Northern Rock (Asset Management) plc is run down and the remaining government loan is repaid.

"This is equivalent to receiving an annual rate of return on the government's intervention of 3.5% to 4.5% per year and compares to the government's estimated notional annual funding costs during the period of intervention of 3.9%."

http://www.bbc.co.uk/news/business-17195562

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Re: Sales of Northern Rock nets £11 BILLION

Post by Guest on Sat Mar 03, 2012 12:24 pm

The bailing out of Northern Rock had more to do with politics than bailing out the other banks. That we will make anything is a relief.

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Re: Sales of Northern Rock nets £11 BILLION

Post by Guest on Sat Mar 03, 2012 12:39 pm

Drinky wrote:The bailing out of Northern Rock had more to do with politics than bailing out the other banks. That we will make anything is a relief.

That is very true

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Re: Sales of Northern Rock nets £11 BILLION

Post by Guest on Sat Mar 03, 2012 2:32 pm

Nems Again wrote:

That is very true



Hello Nems nice to agree for a change. Yes I read some background to this and Labour was very committed to this bank politically. It was a political rather than a policy decision unlike some of the other ineterventions where they had to act to stop an implosion. Northern Rock was so exposed to the sub prime market it would have been better for UK Plc to simply underwrite peoples savings in accoirdance with the scheme and let this bank collapse.

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Re: Sales of Northern Rock nets £11 BILLION

Post by Guest on Sat Mar 03, 2012 3:40 pm

Drinky wrote:



Hello Nems nice to agree for a change. Yes I read some background to this and Labour was very committed to this bank politically. It was a political rather than a policy decision unlike some of the other ineterventions where they had to act to stop an implosion. Northern Rock was so exposed to the sub prime market it would have been better for UK Plc to simply underwrite peoples savings in accoirdance with the scheme and let this bank collapse.

Wasnt RBS horribly exposed too though? scratch

Mums taxi is required drinky but I will reply properly to your post as soon as I can Very Happy

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Re: Sales of Northern Rock nets £11 BILLION

Post by Guest on Sat Mar 03, 2012 4:27 pm

RBS exposure was through it's acqusition of ABN Amro. The double whammy for RBS was that one it bought a dud and two it borrowed heaviley to buy it.



Northern Rock on the other hands was directly getting into it big style in it's own right.The point is about the sub prime thing wasn't the fact it was greed fuelled it was just plain stupid.Banks simply forgot to apply the most basic principles of banking i.e. never lend more than a person can afford to repay you. It was that simple.What occured was close to a big Ponzi scheme (the man famous for creating pyramid selling).



Less scrupulous banks and dealers were packaging up big tranches of sub prime customers and selling on the debt. Northern Rock bless em (not really) were buying it thinking they were going to make a killing.



Once the housing market turned around the system collapsed just like a pyramid selling scheme. As house prices plummeted trillions were written off.



That said it wasn't the banks who got us into the govt debt problems which dwarf sub prime. Thats another story of smoke mirrors profligacy and supreme stupidity.

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Re: Sales of Northern Rock nets £11 BILLION

Post by Guest on Sat Mar 03, 2012 5:52 pm

I remember it being sold to us at RBS as a licence to print money,I remember it all came down like a pack of cards too. What happened in America? Fanny Mae and Freddy Mac, did the Us government step in like the British Government did? What happened to all that real estate that these mortgages were on?

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