New Financial Crisis

[Johnny Mars Bar]

Probably not.

1. Crypto was always a bubble and anyone with an ounce of sense saw this coming years ago.
2. The tech sector has been struggling for over a year and a bank like SV with an over exposure to one market were always going to get hit.

 

[KS55]

That's not quite true. NR was praised as an innovative lender and even in August 2007, the FT and other commentators, and many analysts, were saying that it was likely to be a short term problem, with NR squeezed a bit till the markets settled down again. Bank shares were affected across the board when the sub-prime market issues surfaced, although NR's business model made them more vulnerable to volatility in the bank-to-bank lending market.

One month later, the shit hit the fan.

Well, I was involved in that market then and I can tell you we all thought those praising NR were bonkers. Put simply, they went on a dash for growth in mortgage assets by lending 125% of value with some very dodgy underwriting on mortgages sourced from 3rd parties, mainly mortgage brokers operating in the self certified sector. ( cf Fanny Mac and Fanny Mae.)
That circle could never be squared and, as you said, they ran out of liquidity.
They also used a charity based tax scam. Needless to say, the spivs who ran it did very nicely, thank you, the CEO buying himself a nice country mansion.

 

[inbetween]

I work in financial services like you PB and the conversations we've had with alot of the lenders we introduce clients to is that they are worried about market share as they have not lent enough money since the pandemic. UK banks have much more liquidity than they did pre the 2008 squeeze but government debt levels should be a concern for us all in the next number of years.

The liquidity they hold though is from printed money. The £ has dropped in value by 30% against the $ over 10 years so the banks do hold more money but it's 30% more worthless than it was 10 years ago.

The biggest threat at the moment is not the banks going bust and running out of money as in 2008. Instead it's inflation and the effect on currency and interest rates which makes lending extremely expensive to consumers. If people can't borrow then the economy collapses whilst indeed of course the banks are sat on full coffers.

At the moment unfortunately we have a government and economic policy which is focused on the performance of the FTSE and city as opposed to the stability of the monetary system which everyone participates in. If they were bothered then they'd tackle inflation at source, for example through energy policy changes but they don't give a toss.

 

[I'm With Stupid]

The gold price is sky high at the moment. I remember it rocketed in 2008 too as people lost trust in financial institutions.

 

[Prestwich_Blue]

Well, I was involved in that market then and I can tell you we all thought those praising NR were bonkers. Put simply, they went on a dash for growth in mortgage assets by lending 125% of value with some very dodgy underwriting on mortgages sourced from 3rd parties, mainly mortgage brokers operating in the self certified sector. ( cf Fanny Mac and Fanny Mae.)
That circle could never be squared and, as you said, they ran out of liquidity.
They also used a charity based tax scam. Needless to say, the spivs who ran it did very nicely, thank you, the CEO buying himself a nice country mansion.

Sorry, I thought you were referring to their overall business model, rather than to their lending criteria. It did become clear in hindsight that their risk criteria were very dodgy.

There were a lot of crazy lending decisions back then. Back in the early part of 2008 I was doing some work for one of the big banks who were hurriedly reviewing and tightening LTV ratios. That's why I reckon the Glazers had to use their united shares as additional collateral.

Later on I went into Northern Rock itself, as part of the programme to slim them down and get them ready for the Virgin takeover. We put in place a really effective risk and assurance model that needed fewer than half the people who'd operated it before. So I'd also say that they weren't that clever about their operating model or cost controls.

 

[Brooklands Blue]

The liquidity they hold though is from printed money. The £ has dropped in value by 30% against the $ over 10 years so the banks do hold more money but it's 30% more worthless than it was 10 years ago.

The biggest threat at the moment is not the banks going bust and running out of money as in 2008. Instead it's inflation and the effect on currency and interest rates which makes lending extremely expensive to consumers. If people can't borrow then the economy collapses whilst indeed of course the banks are sat on full coffers.

At the moment unfortunately we have a government and economic policy which is focused on the performance of the FTSE and city as opposed to the stability of the monetary system which everyone participates in. If they were bothered then they'd tackle inflation at source, for example through energy policy changes but they don't give a toss.

Some great points well made. I'm not a Tory or ever will I defend them but the alternative economic plan from Labour is very unclear and I believe when they return to office next December we may see market disruption akin to when Truss and Kwartang had their time in power. As my dad once said that the 2 main political parties in this country are just the different cheek of the same bottom!

 

[denislawsbackheel]

Some great points well made. I'm not a Tory or ever will I defend them but the alternative economic plan from Labour is very unclear and I believe when they return to office next December we may see market disruption akin to when Truss and Kwartang had their time in power. As my dad once said that the 2 main political parties in this country are just the different cheek of the same bottom!

December?
There is no requirement for an election in 2023.
The deadline is January 2025.

 

[talkativesprout]

The gold price is sky high at the moment. I remember it rocketed in 2008 too as people lost trust in financial institutions.

Just listening to a tech in Canada and they said similar, a lot of rich people are just buying land to protect their cash.

 

[aguero93:20]

Just listening to a tech in Canada and they said similar, a lot of rich people are just buying land to protect their cash.

Bit more sinister is the super rich with interests in fossil fuels, munitions, weaponry etc buying land in New Zealand since its the best insulated country from both climate change and political/military upheaval to the point that the Kiwis had to legislate to limit it.

 

[KS55]

Some great points well made. I'm not a Tory or ever will I defend them but the alternative economic plan from Labour is very unclear and I believe when they return to office next December we may see market disruption akin to when Truss and Kwartang had their time in power. As my dad once said that the 2 main political parties in this country are just the different cheek of the same bottom!

I can’t see a repeat of Truss, but you are right that Lab has not yet developed a strong policy. They will need one as our gov debt is still 98.9% of GDP.