Sunday, 28 September 2008

B&B - it has gone

According to the Telegraph, the Treasury minister Yvette Cooper bowed to the inevitable and confirmed that the Government was "stepping in" to nationalize Britain’s eighth biggest mortgage lender.

It is not hard to see why the B&B had to join NRK:

  • On Friday, its shares were trading at just 20p
  • Credit default swaps cost 1500 basis points.
  • On Saturday, the bank was in the early stages of a run, with customer are pulling out millions from the deposits.

    The bank had one million shareholders. All are about to be wiped out.

    Here is the sorry list of UK mortgage failures so far.

    HBOS (bought out by Lloyds)
    Alliance and Leicester (bought by Santander)
    Northern Rock (nationalised)
    Bradford and Bingley (nationalised)

    Will the list become longer?

    Rick said...

    Will the list become longer? - Certainly!

    I've said this a few times on other blogs / forums, I think we will look back on 2008 as something of a benign year in terms of what's to come. I'm expecting the really big problems to hit from Q2 2009.

    mike said...

    Good article. I agree the illusion of wealth is a part of this crisis.

    Investors have seen the share prices and bonds/funds perform well year after year. Now it's just dawning on people that it's these very funds which are risk right now. These funds could remain part of the illusion unless they are cashed soon.

    I actually expect the next stage of the crisis to manifest itself as a result of huge withdrawals from investment funds/bonds. This will happen because of mistrust in how the money put into the fund/bonds is being used.

    We then end up in a situation where most people have their money in some sort of easy access current account. This in turn should result in much higher interest rates for savers. Maybe getting to 7% in the next 3 months.

    mike said...

    Sorry guys my comments relate to the first telegraph article.

    Anonymous said...

    Barclays is leveraged 60 times, with liabilities roughly equalling the GDP of the UK. This means that, if the assets of Barclays lose more than 1.6% of their value, the bank is done....

    Anonymous said...

    Fortis is doomed.