Tuesday 24 February 2009

Northern Wreck rides again


Covered in depth elsewhere I know, but the sums mentioned just do not add up and I have not seen too much coverage of that. Wreck received a loan of £27 billion upon nationalisation, then it has received a further payment of £3 billion as I understand, plus another of £2 billion which has been hidden as an equity loan.

In return the Wreck has repaid £18 billion of the loan; benefit to the taxpayer but not the mortgage market the Government has now realised (screw the market I say, it needs to fall, but that is for another post)

It has also made a loss of £1.4 billion this year.

So, Wreck still has just under £9 billion of our money, £3 billion of which I understand is really accounted for as good will impairment and so gone forever. Wreck may have lost £1.4 billion, but the taxpayer has really lost £3 billion.

Now we are going to pump another £5 billion in for mortgages of up to 90% - given even the average consensus is for house prices to decline 12% this year, then any money lent at 90% will have to be accounted as a loss in the short-term. More capital will then have to be put in to balance the books.

Hence Northern Wreck is still on course to cost us up to another £15 billion in losses, having already accounted for £3 billion. Plus more money put into it in the future is guaranteed by this 'business plan.'

It is a disaster, the nationalisation of it was a disaster as I said at the time, the new policy of subsidising a falling house market is utterly without merit.
Why are the people doing this not being held to account? Why are the mainstream media not seeing the insanity and wanton wasting of billion in these ill-thought out measures?

20 comments:

Mitch said...

But with this train set gordon can try and influence the market and hence the election.
how many votes will 14bill get you?

Richard Elliot said...

Getting very passionate there CU! However, I have to agree that the numbers just don't add up.

I think Mitch is right and it has to do more with politics than anything else..

Nick Drew said...

One imagines there will be all manner of carefully orchestrated dancing in the streets of Newcastle, Sunderland & Hartlepool

Divvunt ya knoor, the Rokkk is bakkk ! And they say its aal wor Peeeter's doin' ! Aye bonny lad, I'll be vootin' Leebour, fa shoor !

Anonymous said...

I think it should read, "without merit"

Good post and yes it is as always about power and G.B

Anonymous said...

And the Tories remain silent. I know they mustn't frighten the sheep, but this is ridiculous.

Unsworth said...

It's the sheer size of the figures. Very few people can even begin to understand the scale of the disaster. It's only when they are directly and personally affected by this profligacy that we'll see any public concern.

We'll witness a slow but steady decline in our standards of living for the next five years or so - maybe longer. You see, life goes on - more or less. All the time that it does selective blindness is the order of the day. But everyone's horizons are shrinking day by day. Instead of planning for next year we will be planning for next week - without the faintest idea of what may happen next month.

Anonymous said...

As has been posted on this blog before, this is the scorched earth policy in action. Liebore know they are going to lose the next election anyway & they are going to ensure the shit really hits the fan once the tories are in.

CityUnslicker said...

Mitch - a lot, but mainly in labour areas, this is ill-thought through as per usual.

Ken - amended!

Unsworth - I can't disagree with much of that. Things do turn though and I think 5 years is a stretch. mr inflation is going to be asked to help sort out the debt situation shortly.

SW - Exactly. All this is pure politics, not even dressed up that well as economic policy.

Anonymous said...

It's certainly politically informed, and there has to be an element of putting off the problems for the next lot to sort out.

However, I think there's also a large element of operating in headless chicken mode. They react to the current problem, but they don't actually know what they are doing or what the consequences of the next fix are likely to be. The main thing is to limit the immediate pain.

There was an old woman who swallowed a fly....

Anonymous said...

"Why are the people doing this not being held to account? Why are the mainstream media not seeing the insanity and wanton wasting of billion in these ill-thought out measures?"

Because overwhelmingly, people don't want to admit that property prices were possibly twice what they should have been, especially if they bought recently.

So propping up the housing market is seen as a good and worthy thing.

not an economist said...

Re Richard Elliot abov3e:

"I think Mitch is right and it has to do more with politics than anything else.."

Politics comes into it but remember there are serious economists who genuinely believe that printing money to bail out banks and countless other insts IS the right thing to do. Paul Krugman in the US (recent nobel prize winner, journo on the New York Times) is a case in point: He argues Obamja's stimulus package does not go far enough.

Mark Wadsworth said...

Why? You have to ask why?

Rather bizarrely, Polly Toynbee answered that question today, I shit ye not.

Demetrius said...

Yeah, yeah, and how many politicians have been hyper active in the housing market on the basis of their expenses entitlements? And for that matter their financial friends and media mates? The taxpayers and the pensioners are being made to make up the losses, and some of them to lose their homes.

Anonymous said...

Came dangerously close to agreeing with poly there.

CityUnslicker said...

Demetrius raises a key point. Politico's themselves have been fiddling allowances to make hay from the property bubble. take it away and they are £60k a year middle-management.

With it the likes of Miliband can live in a £1.5 million house despite never having had a real job or a large inheritance.

MW - haha, Polly agrees with you. Does that ruin your day or not? I would agree with Land value tax were I not considering in the fullness of time to engage in wanton property development myself.

Steven_L said...

"Politico's themselves have been fiddling allowances to make hay from the property bubble." (CU)

Wouldn't it be funny is a couple of them got reposessed after losing their seats at the next election!

AntiCitizenOne said...

> Why are the mainstream media not seeing the insanity and wanton wasting of billion in these ill-thought out measures?

It's not just Anthea Turner; They ALL have BtL empires.

AntiCitizenOne said...

> I would agree with Land value tax were I not considering in the fullness of time to engage in wanton property development myself.

If your going to be a good landlord then you still should. Your out-performance of lesser landlords will not be punished.

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