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Northern Rock - The Titfield Thunderbolt
Heisenberg might have stayed here
Northern Rock
I'm not a Northern Rock customer (though I was 18 months ago), but if I was, I would still be taking my money elsewhere, despite the Government's assurances.

In all the media hype surrounging the panic, I haven't heard any commentator mentioning Equitable Life. Maybe it was a very different business, but financial institutions are largely opaque to the consumer, and they generally try to cross-sell as many different products anyway. My understanding is that those who withdrew from Equitable Life earlier, even when there were explicit and punitive penalty charges, generally lost less than those who withdrew later.

If you keep your money in cash under the bed, it devalues over time and you'd better make sure your house never catches fire. There is no such thing as absolute safety. It's all very well for politicians to make goading comments about banks' lending practices after the event. The regulators sit there smugly and argue that, technically, everything is all right - it's this cosiness that smacks of Enron/Andersen and makes one wonder whether the regulation is in fact performed on the golf course.

Northern Rock is sinking, albeit more slowly now than a few days ago. When the share price stabilises - or falls low enough - someone else will buy it. We just have to hope that they were the only ones who really sailed too close to the wind.
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thegreenman From: thegreenman Date: September 18th, 2007 08:43 pm (UTC) (Link)

Sailing close to the wind.

As I've pointed out elsewhere the real problem is that it has been very trendy to parcel up your debt and sell it on as bonds. This only really works well when the sun shines. Now things are looking a bit rocky, suddenly no one wants all that paper any more.

The trouble is this kind of financial technology is really very opaque, even to people who supposedly know what they are doing. All the banks and financial services industry generally have been doing it and nobody really knows how exposed everyone really is to bad debt.

Add in all the businesses that have been taken over by private finance companies who raise money for the takeover by borrowing and then passing the debt on to the company and you end up with a house of cards.

I got wise to this several years ago when I finally started paying attention to my personal finances after I realised I was being screwed by our wonderful financial services industry. Today much of my money is in govt backed bonds and the rest spread out over several banks to minimise my risk.

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