Comments on: Bradford and Bingley

By: john b

john b — Wed, 01 Oct 2008 11:16:21 +0000

why risk tax payers money just to “avoid a messy insolvency”?

Because we don’t want all the people to whom B&B owes money, which it should eventually be able to pay back from its mortgages, to be forced to write off their debts as B&B’s mortgage assets go to a fire-sale.

The risk to taxpayers is very small; the damage that would be done if we didn’t do the bail-out is very large. Therefore, it makes sense to do the bail-out.

By: diogenes1960

diogenes1960 — Mon, 29 Sep 2008 20:00:48 +0000

was it just so much easier when there was a lender of last resort? And there were Discount houses intermediating between the banks and the Bank?

By: QuestionThat

QuestionThat — Mon, 29 Sep 2008 13:50:48 +0000

You could start a blog; call it The-Telegraph-Lies.

By: Kit

Kit — Mon, 29 Sep 2008 13:11:37 +0000

Stephen,

“So it’s just a liquidity problem: the assets are probably mostly fine and will probably mostly be repaid in full, but over a long time frame.”

Why do I get a nagging doubt about those “probably” ‘s

And also, why risk tax payers money just to “avoid a messy insolvency”? This does not make sense to me as we now have a messy nationalisation to deal with instead.

By: Stephen

Stephen — Mon, 29 Sep 2008 11:17:53 +0000

Kit, the government has taken on these loan book assets (not liabilities) because B&B was funding itself (ie raising liabilities to match the assets) in the money market, and the credit crunch means it can now no longer do this (no-one will lend any money any more) and it needs to repay its previous short-term money market loans as they expire, without calling in the assets (ie the mortgages). So it’s just a liquidity problem: the assets are probably mostly fine and will probably mostly be repaid in full, but over a long time frame. B&B has just run out of time, so to avoid a messy insolvency, the government has taken its assets and will make good its liabilities, and then over time, if all goes according to plan, realise the assets and cover some or even all of the money spent to settle its liabilities.

By: cityunslicker

cityunslicker — Mon, 29 Sep 2008 10:14:01 +0000

RBS is taking a hit because of Fortis – they were all in the ABN debacle together.

At current rate of loss it would be hard for B&B to eventually cost more than £1 billion to taxpayers. However there is the ‘cost of servicing’ the debt guarantee.

I f you add in NR then the loss is likely to be be around £3 billion at most. Still quite a loss and the numbers would double with every 15% of further house price falls.

By: Georges

Georges — Mon, 29 Sep 2008 09:18:29 +0000

Any thought to these falling bank shares today:

http://www.ft.com/cms/s/0/d925b966-8dec-11dd-8089-0000779fd18c.html

Too bad those new short rules are in place. Those evil short sellers may have been able to pull out a sizable chunk of value to be put back in the system.

By: Kay Tie

Kay Tie — Mon, 29 Sep 2008 09:13:00 +0000

Oh there are lots of lefties at the Telegraph. Yvette Cooper was writing some revisionary nonsense just the other day. And besides, the left has no monopoly on ignorance – plenty of uninformed authoritarianism from staffers (eg the odious Heffer).

By: Curly

Curly — Mon, 29 Sep 2008 08:50:37 +0000

How will B&B be rebranded?

By: Serf

Serf — Mon, 29 Sep 2008 08:41:11 +0000

Or to put it another way, if its going to cost £150 Billion, then can you put me down for all of the repossessed houses, at a couple of pounds a go.

By: Kit

Kit — Mon, 29 Sep 2008 08:41:01 +0000

What I want to know is why the government has taken on these liabilities? Is the £40 billion a simple loan book or does it contain complex and toxic stuff? The fact no private bank would touch it I assume it is the latter.

By: luis_enrique

luis_enrique — Mon, 29 Sep 2008 08:10:03 +0000

lefties at The Telegraph? who knew?

By: Kay Tie

Kay Tie — Mon, 29 Sep 2008 07:52:50 +0000

I’ve made a similar point before but it doesn’t stop lefties chucking those numbers about. Ironic when the similarly sized numbers for the amount of money their precious State wastes (ID cards, anyone?) doesn’t seem to trouble them.

Still, with HMG running off the B&B loans at least they’ve got an incentive to keep inflation under control.