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September 14, 2007

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Laban Tall

http://maverecon.blogspot.com/2007/09/northern-rock-paper-tiger.html

Apparently their problem is that they lend long-term to the housebuyers, but borrow short term - which means they have to keep borrowing even if they don't do any new business. And none of the banks want to lend them money even at high interest rates.

"Northern Rock said in a statement on Friday that the Bank of England had agreed to provide it with as much funding “as may be necessary” as it warned that it would otherwise be incapable of refinancing maturing liabilities and flagged that full-year profits would be 20 per cent below consensus forecasts."

Those maturing liabilities are three year loans where the money's gone on 20-year mortgages. But those three year loand will need renewing a fair few times before 20 years are up.

Dave Hill

I love you, Laban Tall

Peter

Once in the 1970s, there were rumours and a public run on a bank in Adelaide, South Australia, and people queued for hours to withdraw their savings (in the days before widespread ATMs and the WWW). The state Premier (prime minister) of South Australia at the time, a colourful Labor Party leader named Don Dunstan, got hold of a megaphone and took himself down to the queue outside the head-office branch in central Adelaide. He harangued the people in the queue until he convinced them all to go home, and the crisis was over.

I can't imagine GB interacting with real people like that. TB maybe; John Major, certainly.

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