"Opportune opportunity" - the blustery redundancy is a "tell" that Darling's scared to death right now. Good.

Darling says "Borowers will continue to make their payments in the normal way."

hahahaha

"Our financial advisor Goldman Sachs"

hahahaha

I want to know how many of our MPs have a mortgage with Northern Rock. I'd also like to know how much money flowed from the charitable Northern Rock Foundation into Labour Party hands.

"If you're going to Rock.....Northern Rock."

Here are interesting facts about China. It is NOT THAT DEPENDENT on US anymore:

"China’s real exports to the world increased by 500 percent between 1992 and 2005, from US$84.94 billion to US$525.48 billion. Its share of exports to the US increased from 10 percent to 21 percent over the sample period."

So about 110-120 billion is the total value of exports to the US. (US is claiming 168 billion and China is saying it is only 112 billion for year 2005). China's GDP is now about 2700 billion dollars, at the same level as Germany.

So mere 5-7 percent of their GDP is coming from exports to the US! Mish and other economists should really do their homework again...

Source:

NBER Books in Progress
china07/amiti-freund2-1-08.pdf

"Suzanne researched this!"
-Century 21 television commercial, 2006

"Our financial adviser Goldman Sachs has concluded"
-Alistair Maclean Darling, British politician and Chancellor of the Exchequer, 2008

“It is our expectation that the company can be moved back into the private sector at the earliest and most opportune opportunity,” he said.

In other words, as soon as we have finished socializing the risk in this venture, we will return it to the private sector to reap the profits that will follow.

Tom
Figure out what interests control Goldman and you just figured out who now owns the UK.

Marx and Engels are laughing their arse off in their grave.

Another sign that governments are worried enough to reject the pressure of the emerging celebrity-bailout phenomenon - and that they are even less concerned about the interests of shareholders. Brown and Darling know how serious it is, otherwise they would never expose themselves to the hazard of nationalizing. The very punitive british media is going to fillet them for this.

this sets a dangerous precedence

Is this Goldman Sachs or Glodman Sachs?

I wonder how much GS charged them for their analysis? Anything over $1 was a waste.

This is really, really old news, must be slow here!

Just like Continental Illinois in the 80s.

Not serious? I don't see what the big deal is. My atm card still works, you guys are a bunch of drama queens.

O-Joe

That's horrible. I'm not looking forward to it happening here soon.

O-Joe - What the hell are you smoking?

I agree with Peterbob on this one; people often complain (correctly) about the privatization of profit and the socialization of risk. The British government is finally closing that gap with respect to Northern Rock. Treasury was already on the hook to backstop any losses, so there is no reason for the government not to essentially zero out the share capital and lay claim to any possible upside, however slight that might be.

That NR had to be "nationalized" speaks more to the piss-poor nature of the British deposit insurance system than to the acceptance or rejection of a political philosophy. In the US this bank would have been folded and sold-off weeks ago.

Hey, this is the 70s all over again! Time to get out my platforms and bell-bottoms and do the funky chicken.

PS I hear Larry Kudlow is a founder member of the SATE(Society for Auto-Erotic Asphyxiators).

Now that it becomes a public trust, all the records should be made available for fine forensic sleuthing.

How about instead, since the records would be public, to auction of each and every mortgage not, dutch auction style.... put it out on the net...
let anyone and everyone bid for whichever note you wanted.

Pass the Dutchie on the lef' han' side, O-Joe.

It's rather ironic that an advert for Virgin money is in the rotation on the left side of your main page, CR.

"Think outside the bank box" it decries.

Indeed, I rather think it should say, "Think there's anything left in your bank box?"

Looks like Goldman Sachs is advising the Britts and the Americans.

Isn't Paulson from Goldman Sachs also?

To whoever posted a reference to a Miami Condo bubble blog, I'd appreciate the full name.

Miami Condos For Sale & South Beach condos| Miami Real Estate blog

we knew this was coming-

"Ambac in Talks to Split Itself Up
By Carrick Mollenkamp, Karen Richardson and Liam Pleven
Word Count: 424
Ambac Financial Group Inc. is in discussions to effectively split itself up in a move aimed at ensuring that municipal bonds backed by Ambac retain high credit ratings, according to a person familiar with the situation."

Ambac in Talks to Split Itself Up - WSJ.com

full story-

"Ambac in Talks to Split Itself Up
By CARRICK MOLLENKAMP, KAREN RICHARDSON and LIAM PLEVEN
February 17, 2008 7:18 p.m.Ambac Financial Group Inc. is in discussions to effectively split itself up in a move aimed at ensuring that municipal bonds backed by Ambac retain high credit ratings, according to a person familiar with the situation.A deal could fall apart because of the complexities in such a move, this person said. Bond insurers in recent weeks have become ground zero in the global credit crisis because the companies contractually have agreed to stand behind billions of dollars in securities underpinned by U.S. subprime mortgage loans.A halving of Ambac would create one unit that insures municipal debt and one that would cover rapidly diminishing securities tied to the mortgages in a structure that effectively creates a so-called "good bank" and "bad bank." Bond insurers generate revenue by promising to cover bond payments on debt issued by a range of entities, including local governments. Bond insurers now are under pressure, though, because they also agreed to guarantee payments on mortgage debt or securities to banks, brokers and investors.Ratings companies now are poised to further cut credit ratings on bond insurers because of those guarantees. Ratings downgrades can have chain reactions and lead to increased borrowing costs for municipalities and write-downs for banks that own debt backed by the insurance providers. To avert financial chaos, regulators in New York, including state insurance superintendent Eric Dinallo and Gov. Eliot Spitzer have pressured the companies to find solutions or else face regulatory action.Ambac is one of two bond insurers considering an effective break-up. FGIC Corp. on Friday notified Mr. Dinallo's office, the New York State Insurance Department, that it is pursuing an effective break-up. But according to people familiar with the situation, FGIC's plan came as a surprise to a consortium of banks that had been in early discussions to shore up FGIC's capital. Talks between the two sides be prolonged and litigation may be one outcome. Ambac's plan is much further along and an announcement could be made this week.But the plan to split Ambac is complex and has required tens of hours in recent days. While a "good bank-bad bank" model has existed for decades, there isn't a playbook for halving a bond insurer. A number of issues remain to be resolved, said a person familiar with the situation.An Ambac spokesman wasn't immediately available for comment. Ambac is based in New York and is the second largest U.S. bond insurer behind MBIA Inc. FGIC ranks third.Write to Carrick Mollenkamp at carrick.mollenkamp@wsj.com, Karen Richardson at karen.richardson@wsj.com and Liam Pleven at liam.pleven@wsj.com

Gotta click the link for this gem:

CLEVELAND (AP) - The nation's foreclosure crisis has led to a painful irony for homeless people: On any given night they are outnumbered in some cities by vacant houses. Some street people are taking advantage of the opportunity by becoming squatters.

Foreclosed homes often have an advantage over boarded-up and dilapidated houses abandoned because of rundown conditions: Sometimes the heat, lights and water are still working.

"That's what you call convenient," said James Bertan, 41, an ex- convict and self-described "bando," or someone who lives in abandoned houses.

404 - Error: 404

said James Bertan, 41, an ex- convict and self-described "bando," or someone who lives in abandoned houses.

Band nerds might object to this use of the term 'bando'.

AMBAC NEWS JUST OUT..

Ambac in Talks to Split Itself Up
By CARRICK MOLLENKAMP, KAREN RICHARDSON and LIAM PLEVEN
February 17, 2008 7:18 p.m.

Ambac Financial Group Inc. is in discussions to effectively split itself up in a move aimed at ensuring that municipal bonds backed by Ambac retain high credit ratings, according to a person familiar with the situation.

A deal could fall apart because of the complexities in such a move, this person said. Bond insurers in recent weeks have become ground zero in the global credit crisis because the companies contractually have agreed to stand behind billions of dollars in securities underpinned by U.S. subprime mortgage loans.

A halving of Ambac would create one unit that insures municipal debt and one that would cover rapidly diminishing securities tied to the mortgages in a structure that effectively creates a so-called "good bank" and "bad bank." Bond insurers generate revenue by promising to cover bond payments on debt issued by a range of entities, including local governments. Bond insurers now are under pressure, though, because they also agreed to guarantee payments on mortgage debt or securities to banks, brokers and investors.

Ratings companies now are poised to further cut credit ratings on bond insurers because of those guarantees. Ratings downgrades can have chain reactions and lead to increased borrowing costs for municipalities and write-downs for banks that own debt backed by the insurance providers. To avert financial chaos, regulators in New York, including state insurance superintendent Eric Dinallo and Gov. Eliot Spitzer have pressured the companies to find solutions or else face regulatory action.

Ambac is one of two bond insurers considering an effective break-up. FGIC Corp. on Friday notified Mr. Dinallo's office, the New York State Insurance Department, that it is pursuing an effective break-up. But according to people familiar with the situation, FGIC's plan came as a surprise to a consortium of banks that had been in early discussions to shore up FGIC's capital. Talks between the two sides be prolonged and litigation may be one outcome. Ambac's plan is much further along and an announcement could be made this week.

But the plan to split Ambac is complex and has required tens of hours in recent days. While a "good bank-bad bank" model has existed for decades, there isn't a playbook for halving a bond insurer. A number of issues remain to be resolved, said a person familiar with the situation.

An Ambac spokesman wasn't immediately available for comment. Ambac is based in New York and is the second largest U.S. bond insurer behind MBIA Inc. FGIC ranks third.

Write to Carrick Mollenkamp at mollenkamp@wsj.com Karen Richardson at richardson@wsj.com and Liam Pleven at pleven@wsj.com

In 1999 Fitch Ratings published its first study of municipal defaults, which was updated in 2003.2 The latter study covered 2,339 cases of municipal defaults worth $32.8 billion between 1980 and 2002. It found that the cumulative default rate on bonds issued through 1986 (as they approached or reached maturity) was 1.5 percent, while the cumulative default rate on bonds issued between 1987 and 1994 was 0.63 percent. Municipal bonds issued on behalf of corporations or by municipal entities had a much higher overall default rate because of their exposure to corporate risks such as bankruptcy.

MUNICIPAL BONDS AND DEFAULTS 

So, why exactly are we caring about insurance for the munis? Would a default rate of, say, 1.0% - without insurance - really cause a substantial repricing of the overall market?

Require the GAO to report on state laws enabling mortgage fraud

Well...that might be a problem. David M. Walker just announced he's retiring as head of the GAO. It's a 15 year term.

"That's what you call convenient," said James Bertan, 41, an ex- convict and self-described "bando," or someone who lives in abandoned houses.
Jack | Homepage |

We're all bando now.

"So, why exactly are we caring about insurance for the munis? Would a default rate of, say, 1.0% - without insurance - really cause a substantial repricing of the overall market?"

Because people bought insured bonds and paid for the insurance in advance. The insurers have $6 billion in unearned premiums associated with these bonds.

The premium for the insurance was actually a reasonably efficient alternative to active management of credit risk until the 'insurers' decided to bet it all on structured finance and lost.

The losers if it isn't done are individuals who own a lot of bonds and taxpayers who may have to pay higher rates in the future.

In my opinion, it shouldn't cause a meltdown if it isn't addressed. However it can be addressed at a reasonable cost and it's about time to get rid of this distraction. There are a lot of people that toss this into the list of cascading meltdowns -- Roubini listed in in one of his stages of meltdown, for example. Finally, there are a lot of people that feel like it is a big deal, and that can become a self fulfilling prophesy.

Get the public finance stuff off the table, then let the rating agencies and banks work out the more serious issues without additional distraction.

sam thanks for posting the link to PrudentBear. Too busy this weekend to read Doug Noland until just now and would have regretted missing this beautiful summary of what we have on our hands here: "One Massive, Unmanageable, Highly Correlated, Unhedgable, Undiversifiable Association of Interrelated Systemic Risks." Or, OMUHCUUAISRs.
Yep. That pretty much sums it up.

Hey,

I thought Buffett was to bail these guys out? What happened on that? I thought he was going to pony up $500 Billion?

"Well, isn't that just dandy. Goldman Sachs directing the British government. Goldman Sachs advising how to deal with a collapsing bank. The same Goldman Sachs that was a ringleader in creating the financial scams that led to the world-wide banking crisis."

More directly, the same Goldman Sachs that spent the summer of 2007 aggressively shorting Northern Rock debt, guaranteeing that the bank couldn't raise finance because spreads on perfectly sound mortgage backed securities (better performance than almost every other bank's MBS) were widening by 10bp a week. They're a large part of the reason Northern Rock had to be nationalised at all.

I'm sorry, but the analysis quoted in the last post is utter bollocks and is the sort of uninformed fearmongering that has helped prolong this crisis as much as bad behaviour by banks and other parties.

First of all, Granite does not issue commercial paper, let alone £40bn of it. It issues term debt. More importantly, there's nothing remotely fishy about Granite.

"An abuse of the charity involved, who (I stress) need not even have given their assent to be used in this way;"
My God! A charity hasn't given their assent to be given money at some point in the future! Call the police. Do you realise what would happen to the charity sector if every single beneficial trust had to be agreed bilaterally? They'd be so tied up in paperwork they'd never actually do any charity.

" Granite is actually owned by a Law Debenture subsidiary, not by Northern Rock. I’ve checked."

Yes. This is how securitisation works. It's called true sale, because the assets are sold to third parties. Funny that.

The SPV is specifically designed not to make profits (which would have to be taxed) and all it means is that if and when Granite is wound up, any residual cash will go to charity. How is that abuse?

"In other words that trust is not real. Northern Rock controls Holdings, but pretends not to via complex legal structures for certain purposes to try to avoid some of the risk of ownership arising from doing so, no doubt. Why else do this?"

Northern Rock consolidates its securitisations under IAS 39 and SIC 12, as does every other European bank. There's no pretence here. The point is that the assets are held in trust on behalf of investors in the mortgage backed securities. If NR had legal ownership of Granite, then the assets could conceivably be seized by a bankruptcy court in an insolvency. To prevent that, Granite is "legally isolated" from Northern Rock. Again, there's no pretence here. This has been tested repeatedly in court and is the basis of the entire securitisation industry, whose value has been attested even by critics like Sarkozy. If you want to kill off the entire securitisation industry, get ready to pay much higher mortgage rates.

"The construction of an arrival device to ensure that as few people as possible, almost certainly the Northern Rock directors included, know just how this deal works"

If you want to speak to the person at Northern Rock who is responsible for Granite, so he can explain how it works to you, I can give you his phone number. It's not rocket science, it's a perfectly ordinary master trust.