Comments on: Between a Rock and a load of Granite - how to pay for mortgages http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/ Conservative Party Member of Parliament for Wokingham Fri, 08 Aug 2008 18:17:17 +0000 http://wordpress.org/?v=2.6 By: Chuck Unsworth http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/#comment-17645 Chuck Unsworth Mon, 25 Feb 2008 10:37:42 +0000 http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/#comment-17645 "A Director may have positive views of his own company but be pessimistic about the market - or he may need to raise cash for other purposes." (Personal allegation removed) Caveat Emptor, perhaps, but if the vendor did not sell (for good reasons - ed), then what? Of course in order to be certain one would need to know what Applegarth's motives were - clearly virtually impossible, now. However, he and his colleagues were (words left out) unheeding in their actions - indeed it was their agreed strategy to take substantial risks. Did they explain to their employees and shareholders the extent of the potential for disaster? For that matter did many of the Board actually understand that? I doubt it. Nonetheless, Directors should take all steps to fully understand the actions and strategies which they approve. Reply: The Directors and the Regulators all approved the business model, and for some time it worked. The question is why did credit dry up and why did the Regulators do nothing to alleviate it until after the run had started? How many foresaw the seizure of the money markets? “A Director may have positive views of his own company but be pessimistic about the market - or he may need to raise cash for other purposes.”

(Personal allegation removed)

Caveat Emptor, perhaps, but if the vendor did not sell (for good reasons - ed), then what? Of course in order to be certain one would need to know what Applegarth’s motives were - clearly virtually impossible, now.

However, he and his colleagues were (words left out) unheeding in their actions - indeed it was their agreed strategy to take substantial risks. Did they explain to their employees and shareholders the extent of the potential for disaster? For that matter did many of the Board actually understand that? I doubt it. Nonetheless, Directors should take all steps to fully understand the actions and strategies which they approve.

Reply: The Directors and the Regulators all approved the business model, and for some time it worked. The question is why did credit dry up and why did the Regulators do nothing to alleviate it until after the run had started? How many foresaw the seizure of the money markets?

]]> By: Chuck Unsworth http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/#comment-17591 Chuck Unsworth Sat, 23 Feb 2008 19:37:57 +0000 http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/#comment-17591 Sorry, for Aysgarth read Applegarth. Slight excess of Pomerol, I'm afraid. It's been an exhausting week... Sorry, for Aysgarth read Applegarth.

Slight excess of Pomerol, I’m afraid. It’s been an exhausting week…

]]> By: Chuck Unsworth http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/#comment-17590 Chuck Unsworth Sat, 23 Feb 2008 19:34:43 +0000 http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/#comment-17590 Banks got jittery in the States long before Northern Crock happened. The whole sub-prime nonsense was exposed and discussed many months beforehand. Adam Aysgarth sold his holdings right at the beginning of the rumours surfacing - so he, at least, probably saw it coming. It has been said that his sale was on the first opportunity open to him. As evidence, one might question why - given his glowing prognostications as to the bank's performance - he didn't hang on for a few more months. Of course some of his fellow Directors didn't do quite as well. Reply: A Director may have positive views of his own company but be pessimistic about the market - or he may need to raise cash for other purposes. Banks got jittery in the States long before Northern Crock happened. The whole sub-prime nonsense was exposed and discussed many months beforehand. Adam Aysgarth sold his holdings right at the beginning of the rumours surfacing - so he, at least, probably saw it coming.

It has been said that his sale was on the first opportunity open to him. As evidence, one might question why - given his glowing prognostications as to the bank’s performance - he didn’t hang on for a few more months.

Of course some of his fellow Directors didn’t do quite as well.

Reply: A Director may have positive views of his own company but be pessimistic about the market - or he may need to raise cash for other purposes.

]]> By: Bazman http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/#comment-17586 Bazman Sat, 23 Feb 2008 16:04:17 +0000 http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/#comment-17586 The first time I have read in simple, but interesting terms as to what happened. The plan seemed quite solid, so why did the other banks and financial institutions get so jittery? Did they know something? Or was it just panic? Reply: The markets dried up, and the Bank of England/government failed to take action to keep them working. The Fed, on the other hand. made cash available to its market so there was no run on a bank. The first time I have read in simple, but interesting terms as to what happened.
The plan seemed quite solid, so why did the other banks and financial institutions get so jittery? Did they know something? Or was it just panic?

Reply: The markets dried up, and the Bank of England/government failed to take action to keep them working. The Fed, on the other hand. made cash available to its market so there was no run on a bank.

]]> By: mikestallard http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/#comment-17572 mikestallard Fri, 22 Feb 2008 16:41:33 +0000 http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/#comment-17572 Thank you for a really outstanding and simple explanation of how Northern rock made its money and why it crashed. What is becoming increasingly clear is that the very last person/s to run any bank must be the government - let alone the FSA. The government is meant to be a slow place where ordinary folk discuss difficult problems that affect us all. That should take a lot of time and thought so that the result is generally agreed upon and trustworthy. Banking demands specialist knowledge, instant decisions and a lot of risk. Getting the government to run Banks is like asking an elephant to play squash. Thank you for a really outstanding and simple explanation of how Northern rock made its money and why it crashed.
What is becoming increasingly clear is that the very last person/s to run any bank must be the government - let alone the FSA.
The government is meant to be a slow place where ordinary folk discuss difficult problems that affect us all. That should take a lot of time and thought so that the result is generally agreed upon and trustworthy.
Banking demands specialist knowledge, instant decisions and a lot of risk.
Getting the government to run Banks is like asking an elephant to play squash.

]]> By: Martin Cole http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/#comment-17565 Martin Cole Fri, 22 Feb 2008 12:58:59 +0000 http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/#comment-17565 I wonder if you can explain the following sentence at the end of the Press Association report on the nationalisatio finalisation issued an hour ago: "MPs have 40 sitting days to lodge an objection to the nationalisation order" This strikes me as unusual and I presume is a provision of the new act which I understand covers a wide range of finance providers. Is it worth anything? reply: I assume it is a reference to usual negative instrument procedure - if the government lays an Order under the negative resolution procedure, it is only debated if an objeciton is lodged within 40 days by an MP requiring a debate. I think I heard that Ministers have now accepted there has to be a debate on the Order. I wonder if you can explain the following sentence at the end of the Press Association report on the nationalisatio finalisation issued an hour ago:

“MPs have 40 sitting days to lodge an objection to the nationalisation order”

This strikes me as unusual and I presume is a provision of the new act which I understand covers a wide range of finance providers.

Is it worth anything?

reply: I assume it is a reference to usual negative instrument procedure - if the government lays an Order under the negative resolution procedure, it is only debated if an objeciton is lodged within 40 days by an MP requiring a debate. I think I heard that Ministers have now accepted there has to be a debate on the Order.

]]> By: A. Headhunter http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/#comment-17561 A. Headhunter Fri, 22 Feb 2008 10:40:04 +0000 http://www.johnredwoodsdiary.com/2008/02/22/between-a-rock-and-a-load-of-granite-how-to-pay-for-mortgages/#comment-17561 It is interesting to note that the Senior Independent Director (Who sat on the Audit, Remuneration and Risk committees) was a member of the Court of the Bank of England until 2004, is it not? It is interesting to note that the Senior Independent Director (Who sat on the Audit, Remuneration and Risk committees) was a member of the Court of the Bank of England until 2004, is it not?

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