From: M Holmes 
Newsgroups: uk.finance
Subject: Re: Northern Rock yet again.
Date: Mon, 17 Sep 2007 16:12:35 +0000 (UTC)
Bytes: 2846


whitely525@yahoo.co.uk wrote:

>> I keep hearing all this wittering about US subprime. In fact NR's
>> problem is that it can't sell three-month paper the way it used to. This
>> is because people do not want to buy three-month paper fron Northern
>> Rock. It has nothing to do with whether Homer Simpson is paying his
>> mortgage on time.

> AIUI it is because banks are more reluctant to lending to each other
> and liquidity has dried up following the fallout from sub-prime
> mortgages in the US.  That is not specific to NR.

> No doubt NR is more exposed than others because of it's strategy.  But
> it it is not as if the dead bodies have been found at NR, or that
> anybody has discovered a large asset hole in NR akin to Mr Maxwell's
> pension scheme.

NR is in trouble because it lends long and borrows short, but now people
are reluctant to lend short to them. If they can't borrow, they can't
stay in business, ergo they have a problem.

Wittering it being about the markets fearing this or that isn't very
relevant. The markets do fear this and that and NR don't have a strategy
in place to deal with that problem. Thus, they're screwed.

No matter how much the cry about how they didn't expect this and how
it's all so unfair, the state of play is that they weren't ready for the
iceberg and they're now holed below the waterline.

You're right that they're not special though. It probably won't stop
with them.

FoFP

-- 
"On Thursday, Darling gave the City a stern lecture on how it wasn't the
 government's job to bail out banks which had indulged in irresponsible
 lending and borrowing. It was time to get back, he said, to "good
 old-fashioned banking". The very next day, Darling bailed out Northern Rock"