91Èȱ¬

Nice one Robert.

Not content with being accused of being responsible for causing the run on NR in the first place through sensationalist reporting and unbalanced comment, you now want to cause a run on all the other smaller lender/deposit-takers by reporting in a manner designed to encourage anyone who doesnt know better (which on the basis of the last few weeks means almost everyone)to withdraw their funds from anywhere else and put them into Northern Rock.

What is wrong? do you not agree that a stable economy is important?

Is there really nothing more important to comment on?
Presumably you wont be happy until you have caused a bank/building society to collapse.

My understanding and experience has always been that if a business goes bust, then no matter how unfortunate/unlucky/unforeseen, the shareholders lose everything.

I am all for protecting the savers to avoid a run on the financial system, but fail to see why the bank was not confiscated as a quid pro quo given it did, in effect, go bust If the taxpayers are the only reason Northern Rock survived then they should be the sole beneficiaries of the bank continuing in business. That is what the risk/reward of being a shareholder is all about.

Oh for heavens sake - a few weeks ago you were throwing your hands up in the heavens, and wondering why the Bank didn't step in to provide guarantees.

Now three weeks later, you're throwing the same pair of arms up in the air and crying foul play, unfair advantage, and state aid.

Would you please make up your mind what you want??

Why is this not front page news, like the 'crisis' was?

91Èȱ¬, why not help get rid of the financial ruin you helped to cause?

At last common and good economic sense have prevailed.

I am both a Silver Saver and shareholder with Northern Rock. Unlike some other deposit takers, it has always been easy to move funds and I received a superlative rate of interest. A reading of the Accounts has always shown a sound and ethical business.

Removing the corporate aspect, Northern Rock is composed of a diligent work force of human beings that treat their customers correctly and unlike the entities that created the liquidity crisis are not involved in greedy speculation and exploitation.

Unlike many, I believe that Northern Rock, born out of a modernisation of Mutual Societies still has a future. The brand is still alive and kicking.

Alan Chissick

Why do say "Why would anyone not put their cash into Northern Rock right now" implying that not doing so would be stupid.

If you end having to invoke this guarantee from the treasury then how and when you get your money has not been stated. Although I do think the government will default on the guarantee I could see them being very slow to payout and may a bit at a time. Personally I would not wish to be waiting around for the treasury to payout when I might need the money now.

When buying any item a good guarantee is useful but I would not buy a product which is likely to fail and think that’s OK because the guarantee is good.

In other words best place your money in one of the main big high street banks to be on the safe side. If one of these were to fail I do not think we would need to worry about the treasuries Northern Rock guarantee as the banking system would collapse.

The 91Èȱ¬ and its reporters ARE required to report news and give comment upon it. I fully support FREE-SPEECH and also the fundamental right to change opinions.

Keep up the good work Robert.

ps. I have no savings nor debt.

#1 Yes, everyone wants economic stability. But at what price? Artificially creating market stablity is a) illegal (its called market abuse), b) illogical (if the 'fair' price for something is X, why is it in anyone's interest that the price is artificially kept at anything greater than X, except for those that currently have an interest in it), and c), deeply detrimental to the future stability of the economy.

I don't think anyone in their right mind thinks that the current market is anything but over-valued. The question is by how much. By prolonging this state, central banks and governments are delaying what may have only been a sharp price correction, and magnifying the effects into possibly as big a recession as was witnessed in the late 80's early 90's. Is this in anyone's interests?

The 91Èȱ¬'s sensational reporting has had so much to do with the NR problems in the recent weeks. It amazes me how now your trying to call foul play. Be more responsible for heavens sake.

So Northern Rock is now effectively the retail banking arm of the UK government, except the majority of profits go to the shareholders instead of the treasury? Nice work Darling.

So if the security was indeed called upon, where would the money come from to pay back the savers who lost their cash! Has the BoE also bundled/divided this security and sold it on as a seperate loan/s to other investment banks, funds, pensions?

A reality check is needed regarding Northern Rock, it is to all intents & purposes insolvent. It can only operate with extensive government funding, which seems to be around 10% of its current capital requirement, and looks to be heading towards 20% with no apparent ceiling.

As a financial adviser I have seen at first hand how lax Northern Rock's lending policy has been. It beggar's belief that they are still allowed to lend! The FSA/treasury should stop them accepting new mortgage applications at once, as they are actually lending tax payers money.

As for Mr Chissicks post, please take off those rose tinted glasses, I for one do not recognise the institution you describe.
Greed & speculation seem to be very much at the heart of Northern Rock's problems.

What a shambles

The Bank Of England governor says "no bailout"

The government underwrites all deposits

The government qualifies this by saying the guarantee applies to reptrospective depositors only

The government changes the rules again and underwrites all deposits.

Meanwhile Northern Rock carries on mortgage lending at ridiculous multiples of salary, effectively distorting the market and prolonging the credit bubble by a few days or months, but not for long.

Collective resignations - King, Darling, the FSA chief - are in order.

The authorities should have let Northern Rock go bust.

I see nothing wrong with the BoE helping out Northern Rock, why should England, the home of finance have banks failing all over the place. English banks should be the solidest banks in the world. We should all stand behind our banks and so should HGM and so should the 91Èȱ¬.

So it's a case of no change there is it? Everything smoothed over. The chairman, the board of directors, all of whom have earned large fees, bonuses etc and whose business methods have now been heavily criticised in the city, and who have lost shareholders millions, who have caused this crisis and in the case of the board of directors never even had the decency to come out and face press and public, they just on do they holding on to their positions and continuing to earn their fees and bonuses. I'm not asking them to fall on their swords.. although in Japan they probably would have done. But surely for their own pride and a sense of decency some resignations are in order.

Interesting - tax payers money being used by a Labour Government to bail out a company based in its heartland of the North East to provide more dodgy loans which the market hates.

Does the word "corruption" float in somewhere?

The government and BoE did not step in with assistance for Equitable Life - why are they stepping in now?

Whilst many savers will be encouraged by this new guarantee to put their money into NR, I remain pessimistic.

It is common sense to read the small print of any guarantee, but the problem with this one is that the small print isn't even available. What we all want to know is just how quickly the guarantee will pay out in the event of the NR going under. As it stands, your money could be tied up in red tape for months or even years before the treasury pays out.

Without a stated condition that losses will be reimbursed within 5 working days, the guarantee is worthless to anyone relying on either a continuous return on their savings or indeed 'instant access' to them.

I do not know why Robert is being continually lambasted. There are plenty of other lines of thought from the media so if you want to go elsewhere for your news then that is your perogative. It seems as if just because you are not getting your own opinion delivered to you by someone else, it is somehow rubbish reporting. I think for the most part, the information found here is quite informative, especially for those who have little or no knowledge of general business environments. Take from it what you want, I'm sure most of us are capable of that. Keep it up Peston

There is one question that needs to be answered by the 91Èȱ¬. The Bank of England bail out of the Northern Rock was supposed to be confidential. Who leaked the information to The 91Èȱ¬ (or Robert Peston). It had to come from one of the following:
- 10 Downing Street
- 11 Downing Street (or HM Treasury)
- The Bank of England
- Financial Services Authority

The leak caused an unnecessary run on a bank. Good journalism, and poor judgement to leak the information.

I think it is great news that NR can continue to trade until February and hopefully the share price will continue to move sharply higher forcing the short-sellers, who almost drove the company into the ground, to deliver the shares they may or may not have borrowed. With this in mind, I hope the FSA is awake and looking for "irregular trading" behaviour. We all know there was nothing wrong with the NR business model, Mr Sants said so. and its loan book is of much better quality than that of its peers who so desperately wanted to put it out of business. Perhaps NR should offer a reward for information leading to the unmasking of the individual in the BOE resposible for leaking the information to the media.

This is outrageous - Northern Rock should have gone under but the government should have secured peoples savings. They also shoudl have secured all those poor pension holders - but they had a big majority back then so didnt need to.

They shouldnt be proped up by the government, they alone got themselves into this mess and they should go bust.

This is just another example of this current government uturning in their decisions based on polls.

When will we have a party that actually does the best thing for the country ratehr than the ambitions of its leaders? Oh yeah, we do, they are called the Liberal Democrats. High time for a change people.

Another example of sensationalist reporting. Why can't you just explain the good sense of the BoE move without pretending that it gives Northern Rock an unfair advantage. There are no deposit taking financial institutions on the verge of collapse in the UK so the practical advantage the Rock has is totally insignificant. Northern Rock has a strong inherent business and should not be forced into a fire sale of assets to circling predators - hence the good sense of the BoE move.

This new assurance from the Treasury flies in the face of what Alistair Darling said barely a week ago - that there would be no unlimited guarantee.

What has prompted the U-turn? Given the media will be scrutinising Darling's every word of his pre budgie statement is today a good day to bury bad news?

Banks have made record profits the last few years why doesnt the BE,FSA and treasury require the banks to create a bond from these huge profits to protect investors fully similar to ABTA. I know there is some protection but nowhere near enough in these days of high house prices where fairly large sumes are transfered on a daily basis for ordinary savers, who may be unfortunate enough to tranfer funds to the wrong bank on the wrong day.

For the life of me I can not understand why Northern Rock hasn't been nationalised. They only continue to trade based upon the finance provided by the Treasury and the Bank of England. The fact that a private equity firm might be able to buy them at a bargain price is only possible due to the Bank of Englands largesse. The Northern Rock should be taken over by the Bank of England for nothing and then sold on - reflecting the cost of this debacle to the UK taxpayer and the fact the UK taxpayer has become exposed to their corporate stupidity. In addition the Northern Rock "management" have absolutely no right to retain their positions - they have created this fiasco and profited greatly (salaries in the multi million pound range) despite their crass incompetence. Shareholders who lose money should realise that this is what happens when one makes a poor investment - and should they feel defrauded sue the management team that led this organisation down this path to insolvency. Any other support for Northern Rock is unacceptable - else the government should step in to protect any investor against any loss. Northern Rock shareholders are a lot less "worthy" or "deserving" than pensioners who saw their pensions mis-invested and yet received nothing from the state.

Pat is a little unfair to Robert. The commercial banks had already begun a run on the bank... all Robert did was to let us know that this was going on.

There is a fine line to controlling any run on the bank because not even the strongest bank can survive a long term, panic led, flight of depositors. Here are the lessons as I see them.

Lesson One: The Bank of England (BofE) and not the FSA should supervise banks because of its special role as Lender of Last Resort (LOLR). The BofE has to make an instant judgement about the viability of the bank. BofE supervisors used to have this role before these people were transferred to the FSA. They should go back under the BofE's wing because of the special place that banks have in the economy and because the BofE is LOLR.

Lesson Two: If the BofE lends as LOLR it should also be information not revealed to the market.The fact that the BofE had to make a statement made a run by investors depositors and money market lenders inevitable.

Lesson Three: LOLR lending should not be cheap, because banks should manage their liquidity in such a way that this situation is very rare and this is an important factor.

I don't think that Northern Rock (NR) depositors or shareholders have it as easy as Robert seems to suggest because the situation is time limited. It would have been better if the BofE could have stepped in silently as LOLR and allowed NR time to sort itself out without precipitating a run by either institutional or retail depositors. The expensive borrowing LOLR facility would induce a really workable solution - for example, by raising depositors and borrowers interest rates NR could have solved its problems in the medium term given that its reserve situation is, by all accounts, relatively healthy.

Having taken my money out of NR a few days before the run, I am certainly not about to put my money back in there, in spite of BOE guarantees.

For a start, I don't feel confident about how easy it would be to get reimbursed, or how swiftly, by the BOE.

Secondly, even a slight downturn in the economy is likely to lead to a sharp rise in defaults on even non sub-prime mortgages. In such an event I strongly doubt whether NR could remain solvent.

If there are hard times ahead the last place you want to have your money is in building societies, whatever the government 'pledges'.

In response to Dalrymple01, without knowing the full assets and liabilities of NR, would the government really want to own a potential net liability?

Besides, it is unlikely the bank would have gone bust, but far more likely that the shareholders would have sold out to another bank or financial institution. However, this probably would not have occured until the bank run became more serious and NRs cash flows were ruined, which I think would have had a negative impact on the economy as consumer confidence would take a large dip.

In response to Robbie, yes, the 91Èȱ¬ are required to report on the news, I'm not convinced they are required to comment on it though. I'm not familiar with this particular case, but I think it would also be fair to say journalists should avoid sensationalism at all times, especially where the consequences can be so dire.

Ah. All's right with the world then is it?

Yet house prices are still 900% higher than salaries and the government is still encouraging banks to pump 14.3 more money into the economy every year, now, there's a very good reason for not putting your cash into the Northern Rock. You think 5% or even 6% is keeping up with the real level of inflation?

The US is in a huge credit contraction which is almost certainly going to spread.

This is just the beginning.

I am still not convinced more pain is not on the way for the economy as the banking sector that has involved itself in dubious debt vehicles that are not transparent and based on customers who were not creditworthy.
Northern Rock is now safe under the umbrella of state protection. So if the state saved it should not the state have it?
And finally I think journalists do have a duty to say "watch out" when there is a clear and present danger and with the sloppy banking activities of the last few years, thank goodness they do!!

Re: comment 22

I think Robert is continually being lambasted because having put the various other agents involved in the Northern Rock crisis under his microscope, the role the media played, and continues to play, does not warrant a mention.

Other possible media-involved scenarios could have been run through on Robert's blog: how about an enforced moratorium on reporting such issues until more of the facts are in? Surely, this would also have avoided those queues outside the bank?

This is not something I would personally want: as there are also downsides, but the Robert's analysis seems to see himself (and his media colleagues) outside of the situation, rather than being an important player in it.

If savers are protected, what about borrowers who can't meet repayments, (as per NR) are they going to get a hand out from the BoE!!!

No wonder Toby removed his money... Building societies???, Northern Rock is a bank get your facts right before jumping in head first.

Please let me know if I have the facts right. Day one.Northern Rock approaches the bank of England for backing.Question?.Are these meetings not held in private weeks before the required funds are needed?Three Spanish banks were supported by their government but nobody knew.Question? Has the Northern Rock now held onto the £59 million in none divi payments on its books.Question ? How much in fines does N.R. hold on its books .Why does N.R. not give its customers the same rate as the bank of England is charging for deposits of £35,000 and over for a 6 month period only?

The problems with Northern Rock and possibly others are all directly related to another 91Èȱ¬ article - "Is the credit crunch finally over?" The article contains erroneous information which changes perspective. The "loans" in question were NEVER made to people with poor credit. Poor credit or no credit is covered by HUD, up to certain dollar limits. HUD does not have much more a default problem than they usually do. The loans in question are the ones made over the HUD limits and these were made to people with resources and good credit. The defaults are in the 500,000+ bracket and are the work of speculators.
As to fault, do not blame the Fed as they are pseudo-government and have little control over this segment of the banking industry. The only regulatory bodies are the House and Senate financial oversight committees who could do so through intimidation or legislation, if necessary.

All about savers !!! but there are some small shareholders in Northern Rock who live in the North East, not big organisations but the man in street type of person who believed in the company and were using their shares as an investment for their retirement and towards pensions. The government needs to consider the ordinary shareholder who, like the savers, left their stakeholding and confidence with this local company and has been 'sold down the river' again by beaurocracy and a government/treasurary that again was not up front with 'Joe Public'.

Peston,

Give the bank a break, I know sit there with your mystic ball paid to analyse the market, but if your analysis methods were up to scratch I would imagine you would be working for the City with a big pay packet.

Everyone really needs to get a grip here! Despite comments from the likes of Mr English (see post 14), the Northern Rock has consistently had one of the lowest mortgage default rates of any bank in the UK! Analysts have always recognised that NR's mortgage book is of a very high standard.

It has been the overly high dependence on borrowing from overseas markets by NR and in particular the US, following a high degree of securitisation, that has resulted in this crisis. However, it should be noted that the he collapse of the sub-prime market in the US was down to irresponsible lending by institutions there, not by UK institutions.

NR's exponential growth over recent years has been down to having a low cost and extremely efficient cost base, not cheap borrowing. There is no reason why NR can't go back to obtaining a higher proportion of its funding from a higher mixed/retail savings operation.

I would like to see NR avoid a takeover. It can become strong again and if the chief executive and board cant recognise or achieve that, they should resign and allow a more focused team to replece them!

Derek Smart (post 19), what an idiot!! Probably the most inappropriately named person i have come across! Northern rock does not offer 'dodgy' loans, it is a reputable bank with a good loan book.

And with regard to 'bailing out' a company in the North East? Well, firstly you can hardly call the BOE charging a penal rate of 7% interest 'bailing out' the NR! I assume derek is commenting from the 'tory heartland' of the southeast. If so, remember it was the (London based) BOE that changed the system 10 years ago making it compulsory for emergency bank requests to the BOE to become public knowledge. Without this publicity, there would have been no run on the bank which has exacerbated the problem!

The north east receives no favours from this government. The staff in the north east head office of NR are a credit to the company, a company that would probably not be in the position it finds itself were it not for the meddlings of those outside of the region!

Northern Rock is at a much stronger position than most Banks.

NR has it fair share of problems and the board do need to take some responsibility for their actions.

However, blame can also be assigned to the Bank, FSA and Treasury/Governmet and sensationalist reporting like Mr Peston has at times been guilty of.

Im waiting for him to start saying how he predicted (years ago) that 'the London based 91Èȱ¬'s poor business model would get it into trouble..'

I indeed agree with the aforementioned point... 91Èȱ¬! Please start to act responsibly - we all saw where propaganda got the Nazis... I feel your weighting on the emergency funding is far too strong. Lets heare about what the ECB has done for European banking!!!

Barclays and Royal Bank have been given 'emergency funds' of £15 billion by the US Fed. Why is there no panic-stricken reporting of this? Why no talk of 'crisis', as happened as soon as NorthernRock set up a credit facility?

After all, we know Barclays has already had billions from the Bank of England, before the Rock's arrangements, so they were already experiencing difficulties.

So why are they not being subjected to the same type of reporting that the Rock received?

Years ago, UK Banks got into serious difficulties, by chronically overextending themselves with stupid business decisions. This was lending the 3rd World far more than the net worth of the Banks themselves.

They were not forced to live with the consequences of their stupidity. The British public paid a very high price for YEARS bailing the fools out. A Bank bailout, that made the Banks RICH.

Now yet again, they haven't learned from their mistakes, they are in serious trouble yet again, and they expect US to bail them out again?

NO MORE BAILOUTS!

These are SUPPOSED to be Economic 'Experts'. Well any 'expert' should know if you put your hands in the fire, you get them badly burned.

NO MORE BURNING OF THE CUSTOMERS AND TAXPAYERS HANDS INSTEAD OF RESPONSIBILITY FOR THEIR ACTIONS BEING WHERE IT NEEDS TO BE!

THE BANKS MAKE THE MISTAKES - THIS TIME THE BANKS *MUST* PAY.

If that means losing Banks so Financial Institutions learn their lessons, and the necessary creation of new, sane Banks with sane rules constraining them to replace the irresponsible - THEN SO BE IT!

I would like to add my support to comments about the nature of the reporting of financial matters in the last few weeks. For example, on Monday of this week Sky News announced that "all eyes were on the FTSE index" after a fall in the US on Friday. When it became apparent that the anticipated fall in the market did not reach the levels required to "make" a story, the focus switched to other non business matters. I am not for a minute suggesting that we are free of a period of market instability but reporters need to focus much less on the short term and the need for sensational not to mention unsettling headlines - such a slant is unbalanced and indeed causes much worry to the "typical" investor or saver.

£40bn of public exposure?

This is scare mongering rubbish, as you are implying that even if the worst happens that the public purse would lose the lot without getting anything back.

You are shaking this tree more than it needs to be shaken with poorly written soundbites, because it's an easy story. Start looking at something more incisive.

A number of your readers are really losing patience with your approach.

Fake Fake Fake!

Anyone and everyone in this country who has any kind of savings or a mortgage is all for the Government (sic Tax Payer) bailing out a bank. WHY? Oh let me see....

Come on, this is totally obvious, and if and when the day three or four banks hit the liquidation run at the same time what are we going to do. Bail them all out?

Before you know it we will all be paying £100,000 for a loaf of bread carting the cash down the street in wheelbarrows.

The UKs total economic relicance on the housing market prices cannot go on forever. Its fake and we all know it. But as we sit at our dinner parties delighted in the knowledge our house just grew in value by another £1500 that month deep down we know this cannot last forver.

How can a country survive when almost all jobs now are based around someone sitting at a computer making nothing but more data. We manufacture nothing now. yYs there are small pockets of manufactiring but lest face it, its the manufacturing we have passed on to other countries who will survive any major world financial collapse. When the chips are down people will need hardware, not bits of paper and hard drives with information on them.

Im no economist but even I can see how fragile the position were all in.

And those that blame the 91Èȱ¬ for this?????? Eh, did the entire 91Èȱ¬ wrokforcec nip in to Northern Rock, take teh cash and spend billions down the casino...Some of you people can bury your heads in the sand and scream that we should Sssshhhhh so as not to rick any boat. Bottom line is the truth comes out eventually, especially when money is concerned.

I hold the 91Èȱ¬ and the media responsible for the 'run' on Northern Rock with its irresponsible reporting sending customers into panic. The 91Èȱ¬ did not consider the impact their reporting would have on the public - and further reports reinforced the problems!

Tonight - The Money Programme - again was unfair in its discussion. The gentleman interviewed at the beginning was from Stockport and yet the queue shown on the programme was the 'Kingston' queue - previously shown on just about every bulletin. The woman interviewed at the beginning and end of the programme was held up as a prime example of a Northern Rock customer - how far from the truth - most of its customers are Northern 'grassroots' folk - a lot of whom have stayed loyal to the bank. The Northern Rock is not the only bank in trouble - the full impact is not yet known of the American crisis on British Banks

The 91Èȱ¬ stated in the final minutes of the programme that their were 'silent customers' still withdrawing their money - where was the evidence? What about the 'silent rumour' that Bradford and Bingley and some major banks may fall or face the same problems as Northern Rock?

When is the 91Èȱ¬ going to go back to the unbiased reporting it was once famous for?

There are apparently people, to judge from some of the entries in this blog, who believe that an important bank's funding difficulties ought to be kept quiet by the media.

I say "well done Mr Peston", not only for clear reporting of Northern Rock's problems but also for using it to illustrate some of the ramifications of of sub-prime mortgages and CDOs, &c.

NR now has a trading advantage that however probably will not compensate for the stigma of having had to take emergency funding. More importantly, it has the time to decide what course of action is best for its savers and shareholders — though my sympathies are strictly with the former.

Why such concise remarks should lead to words like "propaganda" and "Nazi" being bandied about I have little idea.

The people saying that 91Èȱ¬ reporting caused the run on NR. to my mind are all shareholders/depositers. the former should not be supported.
the latter, are they not protected anyway? Go after the board they are the culprits

Am i missing something with this whole NR fiasco.

A business gets into difficulty through bad management and taking on too much risk than it shoudl have. Why should tax-payers bail them out ?

Has anybody pondered to think that this government of ours has spent billions propping up Northern Rock due to misguided judgement of its management, and yet one year ago Farepack was allowed to go under with no thought to the working classes who used their services and lost money in doing so. Farepack would have cost £40m or so to put right and help the "poor" that were their target market (generally) and yet we have pumped thousands times more into Northern Rock with no sign of any return !

if the goverment take the rock over what are we likely to get for our shares ??