Saturday, 27 September 2008

Bradford & Bingley 'rescue'

The line has to be drawn; this is a small UK lender. There will be no global impact of B&B going bust.

Let someone buy the good bits (i.e. the deposits) and anyone can get the mortgage book on the cheap, which should make up for the default ratio. The administrators can easily sort this out.

Then the rest can be liquidated, shareholders, creditors and bondholders losing out.

Sadly, my hunch is that it may be rolled into Northern Wreck....

SUNDAY UPDATE: So it has come to pass. B&B will be rolled into Northern Wreck. Watching David Cameron on Andrew Marr this morning the Tories have a better plan than the current Government in terms of re-doing the powers of the Bank of England. However, the essential point remains that there is no need for the country to 'save B&B.'
Where is the systemic risk from this relatively small provider going down?
The Government have a taste of nationalisation now and no doubt will be singing the red flag in the commons again when they next get a chance.

14 comments:

Blue Eyes said...

I took all my money out of B&B a few weeks ago

Lilith said...

So it's YOUR fault Blue Eyes!! ;-0

Bill Quango MP said...

Been wobbling since northern Wreck.
Alliance and leicester or B+B next was the cry.
A+L pulled off a deal with Santander.
B+B have certainly had time to do the same.

Dangermouse said...

You win the prize - it just has been carved up and part rolled into Northern Rock.

What then happens to the bad debt - we, the taxpayer have to underwrite it. Again.

That means anyone who had defaulted on their mortage now will get either a reprieve or a second chance. This is grossly unfair to those who faultered prior to the split and who have now lost their homes, not haveing had the benefit of being underwritten by the so generous taxpayer. The successful part of B & B is to be sold off so again the taxpayer gets stuffed.

This is the height of irresponsibility. DC is right, it is scorched earth.

CityUnslicker said...

BE - well done! still at least we all know now to spread our funds around. I am not so sure another big bank won't go down yet...

Lilith - He is a Jonah!

BQ - Well that is all the building societies now gone except nationwide who are being stuffed with failing ones themselves by the FSA.

DM - thank you. Your points are well made too - clearly Marxism @ work!

Blue Eyes said...

The easy way to avoid getting caught is to have no savings!

dearieme said...

If I'd wanted to own a bit of B & B I'd have bought some shares.

Not only is this nationalisation daft of itself, the government really should be keeping its powder dry for future use on a systemically important failure.

Blue Eyes said...

Peston's take is interesting - he says this should be the last of the likely failures as the remaining banks have diverse funding sources.

CityUnslicker said...

BE - He is taking a punt saying that. It ignores the derivatives problems that HSBC, Barclays and RBS have,

dearieme said...

I wonder whether someone told Mr Peston that the price of staying out of jail was to say something pahsitive?

Anonymous said...

The systemic risk comes from the possibility of the bank going bust, people finding their money trapped inside, other banks delaying paying the compensation, little old ladies losing money that was not covered. The horror stories then precipitates a crisis of confidence in UK banking. There are runs on banks. Deposits held at banks are reduced dramatically. Banks then have to call in loans to re-balance their lending to deposit ratios. People lose their homes and jobs.

All very dreadful, and all precipitated by a second small bank getting into difficulties. Best to do something really. We are teetering on the brink of disaster.

tory boys never grow up said...

"Where is the systemic risk from this relatively small provider going down?"

I would have thought the last thing the mortgage market needs at present would be an administrator/liquidator dumping a loan of buy to let mortgages at panic prices. Better to wait and dispose of in calmer times - probably a lot better for the tax payer as well.

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