Tuesday, 20 November 2007

Northern Rock open thread; Badger Darling's day of destiny?


So where does the game go from here for all parties?

Anyone agree that Darling will be gone in the first Brown re-shuffle early next year?

Update: Wow...boy did badger's day just get worse. This is the worst ever breach of data privacy and it has happened in his department whilst he was busy wasting billions bailing out a failed bank. A sorry story indeed...His credibility is shot through now and I think even the markets will want him to go. the disaster's the government have suffered since October are going to get a scalp and Badger is the one to be culled methinks...


20 comments:

Anonymous said...

Excuse my ignorance, but what is likely to happen to those customers of the Crock that have unsecured personal loans (ie not mortgages) should the company go to the wall? Would these be regarded as assets and thus sold on to someone else?

Thanks

Mark Wadsworth said...

The whole mess was years in the making. If I were The Badger I'd put the blame fairly and squarely on my predecessor.

FFS, NR's share price had been rapidly declining for months, if these numpties at FSA did not see that as a warning signal much sooner, then, well, that just shows what numpties they are.

One of the things you see time and time again is that businesses that expand rapidly tend to deflate rapidly as well, NR is a classic example of this.

Newmania said...

The thing that I notice is that the calamity had very little to do with sub prime and alot to do with a failed regulatory system organised by Brown. Darling then seems to have lost his nerve , no doubt due to ...Brown ....
The scale of the risk to tax payers is astronimical and brown has his fingers all 0ver it


His reputation for competetence has been his saving and so this is far more important than it appears as psepholigisists will have noticed . It is pivotal.

What i woudlike to knwow is how this level of lending fits with a nartional debt of about £30 billion helkd undert the "Golden rule2 ionly by the mususe of abotu another £30 billion off balance sheet.

In the context of collapsing revenues Darling is toast in the long run either way as is brown I think .Failing to hold that election will go down as the greatest act of poltical cowardice of the century.


Dems de facts Mam

CityUnslicker said...

Anon - yes their loans will be sold on, to who knows whom? Could well be debt sharks. T

The rates will probably be fine though, as they tend to be fixed when you take out that kind of loan.

Some lucky people might find all their details lost in the administration process though as happened with people during the BCCI collapse.

CityUnslicker said...

here was me Mark thinking that Enron was a good example to follow...

As this was all very avoidable I envisage a lot of blamestorming ending up with fingers being pointed firmly at badger, particularly by his neighbour at No10.

Anonymous said...

Rumour has it on the Guido Fawkes blog that he is going anyway - over the loss of 15million child benefit claimant details. We will here more later this pm.

Anonymous said...

Sorry, should be "hear" not here!

Nick Drew said...

Mark, yes the City always knows: that prolonged slow fall in NR's shares from early this year clearly meant something

which makes you wonder about ...

J.C. Ernharth said...

These sorts of things end up blaming whoever was supposed to be watching only if it is politically viable.

Unfortunately, this sort of situation provides perfect cover for the less heinous -- but nearly equally immoral actions of other parties. That'd be the rest of the banking community who gladly earned massive profits without taking as many risks, but still by using the highly inflated credit to do so. That freshly minted credit is unbacked by production, sacrifice, savings, etc., much unlike the dollar you or I earn, yet that credit is an identical claim to wealth. AS such, it gains its purchasing power at our expense. Northern Rock might have been outlandish in its use of credit, but how is the general less egregious use any less immoral?

Moreover, business oneupmanship is part and parcel of any credit bubble. If you are conservative and responsible, your profits sag vs. your competitors. But to suggest regulation is needed to reel in the reckless is shortsighted. Regulators are never aware of what is reckless until long after the problems are firmly rooted and crumbling largely because the momentum within the financial community is such that any critic within is politically ostracized and those on the outside like myself are panned as the tinfoil hat wearing crowd. Hell, in the United States, Sir Alan Greenspan, God of Economics, was encouraging the rabble to to use adjustable rate mortgages back in 04 and 05! Are you telling me some regulator was going to get in his way? Or, for that matter, some Congressman whose constituency included contributors from the real estate and mortgage industries, local politicians salivating over rising property taxes, and the poor with barely an economic pulse now able to afford the American Dream because of zero loan underwriting? Dream on!

I'm meandering with this comment, but let it suffice to say the core problem IS the inflationary banking system. To quote Murray Rothbard on the subject,

It distorts that keystone of our economy: business calculation. Since prices do not all change uniformly and at the same speed, it becomes very difficult for business to separate the lasting from the transitional, and gauge truly the demands of consumers or the cost of their operations. For example, accounting practice enters the "cost" of an asset at the amount the business has paid for it. But if inflation intervenes, the cost of replacing the asset when it wears out will be far greater than that recorded on the books. As a result, business accounting will seriously overstate their profits during inflation—and may even consume capital while presumably increasing their investments. [3] Similarly, stock holders and real estate holders will acquire capital gains during an inflation that are not really "gains" at all. But they may spend part [58] of these gains without realizing that they are thereby consuming their original capital.

By creating illusory profits and distorting economic calculation, inflation will suspend the free market's penalizing of inefficient, and rewarding of efficient, firms. Almost all firms will seemingly prosper. The general atmosphere of a "sellers' market" will lead to a decline in the quality of goods and of service to consumers, since consumers often resist price increases less when they occur in the form of downgrading of quality. [4] The quality of work will decline in an inflation for a more subtle reason: people become enamored of "get-rich-quick" schemes, seemingly within their grasp in an era of ever-rising prices, and often scorn sober effort. Inflation also penalizes thrift and encourages debt, for any sum of money loaned will be repaid in dollars of lower purchasing power than when originally received. The incentive, then, is to borrow and repay later rather than save and lend. Inflation, therefore, lowers the general standard of living in the very course of creating a tinsel atmosphere of "prosperity."


While that quote is not perfect for the context, it is relevant in that whoever's head rolls, complaints about lack of oversight and sufficient regulation is IMO missing the more fundamental point.

Anonymous said...

Will Brown be too stubborn to sack him as he may feel it will reflect on his own poor judgement in choosing him in the first place?

CityUnslicker said...

Anon - yes, a whole new problem

CityUnslicker said...

JC - Welcome, I checked out your blog too. Most interesting and I am sure to return. I will add a link too when I get a chance.

I agree with you that the inflationary problem is here to stay. As for bankers making money of the government I am less concerend about that . Money the government has is always badly spent and is better off in new home.

In any event the UK government could have avoided all this if it had behaved as the Bank of England wanted it too; so the price to the taxpayer is caused by government incompetence.

CityUnslicker said...

Ellee - yes his instinct will be to stand by his man. The Chancellor is a position that requires a lot of credibility. Lamont was an excelletn Chancellor in terms of decisions; but events destroyed his authority and he had to go.

Darling will suffer the same fate; especially after today!

Nick Drew said...

and anyway, who is there to replace him in this GOAT menagerie ?

Ed Balls ?

Milliband Major ? or Minor ?

Jack Straw ?

Suddenly, Osborne (on whom my less-than-flattering views are recorded) looks positively papabile

Old BE said...

I could do a better job than Darling!

Mark Wadsworth said...

GOAT = Government Of All the Twats

Whispering Walls said...

Darling, Darling, Darling: OUT, OUT, OUT!

James Higham said...

Newmania is right on who's to blame.

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