Saturday, September 15, 2007

Northern Rock

Just to say: only John Gapper in the FT gets this right. 
Posted by Bryan Appleyard at 3:39 pm

6 comments:

  1. Bryan AppleyardSeptember 15, 2007 4:31 pm

    I should have added the reason he gets it so right is he sees through the usual British instinct to blame Johnny Foreigner. This happened in the McCann case. In the case of Northern Rock, we're blaming American lenders. In fact, the way NR was structured made it certain that a wholesale money squeeze would hit them sooner or later.

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  2. MarkSeptember 15, 2007 4:55 pm

    Great article, many thanks. But ... er ... in that case, what's the point in having an FSA or BoE if they just sit back patting their tummies while letting it all happen? Northern Rock's deposits-to-loans ratio - and hence their need to borrow - is way out of line compared to most other players and didn't suddenly appear overnight. All those folks queuing up outside the bank yesterday and today will be blaming the government for this, and they'd be right to.

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  3. Bryan AppleyardSeptember 15, 2007 5:07 pm

    Quite, Mark. Any bank increasing its loan book at the rate NR did this year should automatically be suspect.

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  4. AnonymousSeptember 15, 2007 5:29 pm

    Great article - thanks for the "Heads up!," Bryan. As Mark aptly points out, one has to wonder at the unusual passivity of the regulators, not a normal trait of that particular trade.

    IIRC, the German bank that ultimately had to be taken over blamed all its problems on foreigners, too (after having categorically denied it owned any mortgage-backed securities only the week before). Being bankers, I guess it was too much to expect that they had a clue as what they were investing in, or understood the well-established principle that guaranteed higher returns and inevitably higher risks are permanently paired.

    For some reason, the character Desmond Glazebrooke in Yes, Minister comes to mind.

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  5. AnonymousSeptember 15, 2007 11:05 pm

    Apparently the chief-manager (or whatever he's called) of Northern Rock, Adam Applegarth, was paid a bonus of about £300,000 on top of his salary of over £1,000,000 last year. What on earth for?
    One would have thought the directors could have found someone capable of running the business into the ground for a lot less money than that.

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  6. Ian russellSeptember 16, 2007 11:58 am

    all these money geezers are the same. you'd think they were paid to predict but all they appear to have is hindsight.

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