Posted on 02/17/2008 3:24:27 PM PST by oblomov
LONDON — The British government announced Sunday that it would bring Northern Rock, the struggling mortgage lender, under its control. It was the first nationalization of a bank in more than a decade and a huge blow for the government of Prime Minister Gordon Brown.
The government rejected two takeover proposals for the lender, which ran into trouble last year because of a funding shortage that followed the subprime mortgage crisis in the United States. The government was forced to shore up the company with about £55 billion, or $107 billion, in loans and guarantees.
“The government has completed its review of the two detailed proposals received,” Alistair M. Darling, chancellor of the exchequer, said at a news conference in London on Sunday. “But in current market conditions, we do not believe that they deliver sufficient value for money for the taxpayer. The government has therefore decided to bring forward legislation to take Northern Rock into a period of temporary public ownership.”
Richard Branson’s Virgin Group and the current management of Northern Rock both submitted takeover proposals to the government’s adviser, Goldman Sachs, ahead of a deadline earlier this year. Both suggested repaying the loans partly by issuing new shares. Mr. Darling said Sunday that neither proposal met all of the government’s objectives of securing financial stability, depositors’ money and taxpayers’ funds.
(Excerpt) Read more at nytimes.com ...
Everybody have fun tonight!
Bad idea.
They sure could. Although it isn’t quite necessary. All they need to do is is create a federal 1st home loan program that would underwrite and/or guarantee the loans made to first home buyers, at subsidized rates.
Why should 2% be a “teaser”. Just make 2% the rate for primary residences, period. Everyone can have a home. We’d have a perpetual housing boom.
Only evil landlords would get hurt under such a scheme.
It is a bad idea, except for the depositors. Apparently they don’t have the same kind of FDIC insurance we have. If you had money saved in that bank you’d be quite angry if it wasn’t insured by the government.
During the S&L crisis our government took over close to 1000 S&L’s, paid off the insured accounts, liquidated the assets and then shut them down.
Wonder what this will do to the markets tomorrow here (if anything).
No markets tomorrow.
They can pay off the depositors (didn't say that was a good idea either) without taking over the bank. Hopefully they'll sell it quickly.
Oh yeah, President’s Day.
>>The government rejected two takeover proposals for the lender, which ran into trouble last year because of a funding shortage that followed the subprime mortgage crisis in the United States. The government was forced to shore up the company with about £55 billion, or $107 billion, in loans and guarantees.<<
This isn’t quite as terrible as it sounds since the Government is their largest creditor - its not unlike when the U.S. takes over a business that owes more taxes than the business is worth.
But the precedent is not positive.
‘nationalization’ = subsidy
financial sector lobbyists = bailed out
taxpayer = screwed.
Everybody Wang Chung tonight!
Not much of a market for Northern Rock/British Gov’t to liquidate into.
We’ll see. I’m surprised the Sovereign Wealth Funds haven’t bought up a bunch of these mortgages/properties since their dollars are worth so little in comparative purchasing power the best thing is for them to buy depressed US real estate.
Could be that there are serious problems with the record keeping. I had heard about some homeowners who were able to avert foreclosure because the lenders, who packaged and resold the loans, couldn’t prove they still had the right to foreclose. These things have been sold and resold so many times, it may be difficult to find out who actually holds the notes on these homes.
Yeah I don’t think the UK wants to hold onto the bank for eternity. They’ll probably do what they have to do (the politically expedient stuff) and then either sell it off or shut it down.
Well you can’t give away houses, because that would be communism. But you can charge 0% interest with government backed loans. This, along with a $2 million per person economic stimulus package, and our country will be on the road to recovery.
May I suggest a novel idea? Let it fail. The market will sort it all out.
Oh, and if you (collective "you") disagree with me...be very careful.
5.56mm
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