Now that Northern Rock appears to be exiting stage left, probably with several billion of our pounds, is it reasonable to ask why the US bankers got the world in this position in the first place? From what I understand, the "sub-prime" market is lending money to people who have proved already that they can't fund their debts. Can it be any wonder then, that they do it again?

Meanwhile, Joe and Jo Public lose money hand over fist, firstly by their investments going down the pan, then having to bail out those who hold mortgages with the bank that's going bust.

I wonder how many of the bankers, even those who have resigned, will be short of a few bob as a result?
The brand Norther Rock is certainly unlikely to last that long though it is pretty likely that it's business will soldier on under a new banner.

Lots of people make serious money out of lending to those with poor money management skills (any one with decent money management skill would never touch these lenders with a bargepole). This ranges from the back street money lenders to the biggest banks. The business is very attractive because as long as the punters can pay the interest rats tey charge are very high, that means big profits if you can get the money you are lending at good rates yourself. The proverbial hits the fan when the number of people defaulting rises above the level you were budgeting for. This has happened particularly in the US. Now those highly paid abnkers took out an insurance policy rather like a booky laying off some of his riskiest bets, so the cold spreads and banks all over the world bought into this so are affected to some extent. The result of this is that all banks have become super wary of lending money to mortgage providers.

How does this affect Northern Rock who were generally considered to be prudent lenders. A bit back they decided they wanted to become bigger, this meant they had to attract more people to save with them so they could lend more and the option they took was to get big banks to save with them as that way they could quickly get lots of money to lend. Now in the UK the mortgage market is based on borrowing short and lending long so one has to replace investers all the time to keep the supply of funds in place. All works very well for Northern Rock until earlier this year when they started to find difficulty in rplacing loans they were having to pay back, at prices they could afford. Add to this the government cocking things up and causing a run on the bank by small investors too and we have a very sick building society.

Now I would agree the concept of a poor banker is difficult to concieve no matter how much he has cocked things up, though I suspect that those who have recently left the NR will have lost a fair ammount in the share options that a significant proportion of their pay comes in.

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