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G-khan
09-15-2007, 01:47 PM
Customers have ignored pleas for calm and spent a second day queuing to withdraw money from branches of Northern Rock as the bank's shares crashed.

Around £1 billion was already withdrawn yesterday despite the bank's attempts to reassure panicking customers that their money is safe.

Long lines formed at 72 branches across the country even before counters opened this morning, after the bank admitted having to ask the Bank of England for emergency funding.

In Sheffield city centre, more than one hundred savers outside the Pinstone Street branch urged the company to think again about closing at noon.

The line stretched around the corner for about a hundred yards after forming as early as 6am.
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The majority of people queuing were middle aged or retired with some describing how their entire life savings were in the hands of Northern Rock.

One woman said: "I'm at the back of the queue and I can't see myself getting in by 12. "It's a disgrace. I just want to get all my money out and close my account."

A man who was further back said: "I don't care if the risk is small, there's plenty of other places to put my money and I just don't believe what they are telling me."

Customers had been handed a two page letter from Northern Rock describing why the bank had acted as it did and assuring them their savings were safe.

The company's phone lines were jammed yesterday and its website crashed as the financial turmoil that has engulfed the money markets in the past month spilled on to the High Street.

The Daily Telegraph understands from sources close to Northern Rock that the panic generated by news of the emergency funding led to customers withdrawing about £1 billion from their accounts. However, it is believed the bank privately feared that this total could have been higher.

As widespread concern over the economy grew:

• Northern Rock's shares fell by 31 per cent, leading to the bank - the fifth largest lender - being put up for sale.

• Other major lenders, including Bradford & Bingley, Alliance & Leicester and Paragon, issued statements insisting they were not in similar trouble.

• The Chancellor appealed for calm and insisted that both the banking system and the economy were stable.

The Bank's decision to help Northern Rock - by guaranteeing funds of up to £31.5 billion - is the first time since 1973 that it has bailed out a High Street lender.

Northern Rock tried to reassure its 1.4 million savers, 800,000 mortgage holders, as well as its thousands of shareholders, that it was not in serious danger.

Adam Applegarth, the chief executive, said: "In these extreme times we are pleased to have a high-quality asset base and remain confident in the excellence of our strong customer franchise, our efficient business platform and our well-known brand."

However, his words failed to reassure thousands who queued outside the bank's branches from early morning.

The bank has deposits exceeding £20 billion, so with about 1.4 million savers, yesterday's withdrawals amounted to an average of about £700. Some branches stayed open late to deal with the crowds and there were reports of fights in one queue and even a confrontation with staff where police had to intervene.

In Cheltenham, Christopher Howard, 64, a former hotelier, and his wife Fiona, 48, refused to leave the bank until staff transferred their £1 million savings, held in an online Northern Rock account.

A spokesman for the mortgage lender, which had £24 billion of savers' deposits at the start of the week, said it had anticipated the customer reaction when it approached the Bank of England.

"It is understandable that customers are concerned but the Bank of England, the Treasury and the Financial Services Authority have all confirmed Northern Rock is solvent," he said.
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The company said it had yet to use any of the Bank of England's facility but analysts said it was only a matter of time.

Adam Applegarth, chief executive
Adam Applegarth, chief exec

Northern Rock is still writing new mortgages "albeit at a lower level than usual", the spokesman said.

Savers' money was safe, financial experts said. But Martin Lewis, of the website MoneySavingExpert.com, said this did not mean people should necessarily keep their money with the bank.

"Almost all of Northern Rock's savings rates can easily be beaten by the best buys on the market anyway. So this is a good occasion to check their rates and ditch and switch to earn more elsewhere."

Rival lenders rushed to take advantage of the chaos in the mortgage market, with both Abbey and First Direct offering eye-catching fixed rate deals.

However, others including Bradford & Bingley and Alliance & Leicester felt compelled to issue statements saying they were unaffected by the chaos.

Paragon, a buy-to-let specialist, saw its shares fall 17 per cent but quashed City rumours that it was next in line, saying it had "adequate" funding until 2008.

Opposition MPs said the crisis was the culmination of 10 years’ mismanagement by the Gordon Brown-run Treasury and "reckless lending" by banks.

Angela Knight, the chief executive of the British Bankers’ Association, hit back: "Everyone should calm down and refrain from making simplistic comments in a very complex area which cause unnecessary concern. The British banking system is carefully regulated and overseen which ensures that all banks operate safely and prudently in the interest of their customers."

Northern Rock’s shares fell 201p to close at 438p, as the company said its profits would be almost £150 million lower than expected this year.

Its troubles caused a sell-off of banking and property company shares and the FTSE 100 index of leading shares closed at 6,289 — a fall of 74 points or 1·17 per cent.
http://www.telegraph.co.uk/money/mai.../cnrock715.xml (http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/15/cnrock715.xml)

http://goldismoney.info/forums/showthread.php?t=177562

Northern's dilemma will rock markets


14 September 2007
Reader comments (1) (http://www.thisismoney.co.uk/news/columnists/article.html?in_article_id=424324&in_page_id=19&in_author_id=2046#StartComments)

Those arrogant investment bankers who dismissed the crisis in the credit markets as a temporary blip will have their heads in their hands this morning. http://img.thisismoney.co.uk/i/std/pixel.gif (http://www.thisismoney.co.uk//news/columnists/article.html?in_article_id=424324&in_page_id=19&in_author_id=2046#endpromo)
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The near-demise of Northern Rock (http://www.thisismoney.co.uk/nrk), Britain's fifth largest mortgage company, because it can't secure funding for its mortgage customers in the wholesale markets, will rock financial centres around the world.

Aside from the expected plunge in Northern's shares, along with the rest of the banking sector, consumer confidence in the stability of our financial markets will be shattered. The Bank of England has agreed to be the 'lender of last resort' to Northern. This is an unprecedented move, certainly in my memory. It follows a week of crisis talks between the Newcastle-based lender, run by Adam Applegarth, the BoE, the Financial Services Authority (http://javascript%3cb%3e%3c/b%3E:self.name=%27main%27;PopUp%28%27you_popup%27, %27/pages/jargon/index.html?in_jargon_term=Financial%20Services%20A uthority%27,%27350%27,%27150%27%29) and the Treasury

The BoE makes it very clear that such an offer of support to a financial institution 'is expected to happen very rarely and would normally only be undertaken in the case of a genuine threat to the stability of the financial system to avoid a serious disturbance in the UK economy'.
Earlier this week, Governor Mervyn King hinted in his letter to the Treasury Select Committee, that he would only provide such a crutch in exceptional circumstances and when the situation appears to be a short-term problem.
The Bank did not manage to draw up a rescue package to stop Barings from collapsing in 1995 because it was impossible to put a cap on the losses that Nick Leeson had incurred at that time.
With Northern Rock, it clearly believes that the circumstances in the markets are so extreme that it should not be abandoned to the predicament it has found itself in. Clearly King is also aware of the grave consequences that there would be for the government and the BoE's credibility, were Northern Rock to go under.


Even now, questions will be asked about whether King's tough love stance with the banks was too severe and whether he should have taken a cue from the US Federal Reserve and the European Central Bank and considered offering cutprice loans to stricken financial institutions.


> Lucy Farndon: Northern Rock customers - don't panic! (http://www.thisismoney.co.uk/news/article.html?in_article_id=424333&in_page_id=2)


Northern Rock will confirm in a statement to the stock market this morning that it has been forced to go cap in hand to the BoE.
It will paint itself as a victim of the freezing of the debt markets, rather than a lender which has a flawed long-term business model because it relies on wholesale funding for 75% of its loans.
Going to the BoE would not have been its first choice. Northern is likely to have approached a number of high street lenders to see whether they would be prepared to be a 'white knight' and take it over. However, given most banks are still preoccupied with their own problems and trying to assess their exposure to the sub-prime collapse, buying up Northern would have been the last thing on their mind.

angelatc
09-15-2007, 02:20 PM
Is that a European institution? In America, you're insured for $100,000 per bank, maybe more.

G-khan
09-15-2007, 02:34 PM
Is that a European institution? In America, you're insured for $100,000 per bank, maybe more.

You are correct they are insured for 100,000 FDIC if a few of them start going belly up they will not be able to print the money fast enough there are 100's of trillions in derivatives that could bring the whole house of cards down at one time.

The point is do not think anything is a for sure bet and about the safest is gold and silver that you hold and own.. History has taught us that fiat/paper money has always failed and goes back to its true value = paper.. When IMO is the question - not if!

http://goldismoney.info/web/inflation.jpg

angelatc
09-15-2007, 03:00 PM
I do think that fiat money is a bad idea, but the government would have to bankrupt before our deposits weren't insured.

Oh wait.....

LOL! I haven't kept up, but back in my day, the securities industry had to keep 110% on hand. We called it the death spiral.

G-khan
09-15-2007, 03:10 PM
I do think that fiat money is a bad idea, but the government would have to bankrupt before our deposits weren't insured.

Oh wait.....

LOL! I haven't kept up, but back in my day, the securities industry had to keep 110% on hand. We called it the death spiral.

I have no idea how long they can keep the dollar from collapse - who knows maybe 100 more years? I doubt it will last that long and when it does collapse the entire house of cards comes down with it? My guess is it will happen in the next 10 years?

They keep on fixing any problems by issuing more paper and thus far it has worked?