Boss Radio

Well I guess I've written about northern soul, it's time I wrote something about Northern Rock.

In Britain, as, I assume, in most of the other countries of the world, we support our banks. It's bad for the national image if the banks go belly-up. Our method is to use nanny, or as it's more commonly known, The Bank of England. If a bank hits the skids because of something the government's done or not done, in comes nanny with her hands in the purse, all the bank needs to do is ask.

That's what Northern Rock did.

There are many reasons for Northern Rock's trip down the pan, first and foremost is the problem that the US mortgages market is having at the moment. Suddenly banks became wary of 'Spreading the load' and they cut back on lending money to one another. Northern Rock likes to borrow money from other banks. They do this to fund mortgages that they issue on quite ridiculous terms, terms that the borrowers will be completely unable to meet should they suffer any financial setback whatsoever during the run of the mortgage, which is sometimes right up to retiring age. They are, in fact, banking on their victims to improve their financial position in order for them to pay off their mortgages. This is completely legal, but also slightly dodgy, and the other banks have decided they don't want to be a part of it if the mortgage industry is in meltdown.

David Cameron, the leader of her majesty's opposition, has of course got an opinion on this. It's Prime Minister Gordon Brown's fault. This is odd because in the early days the Conservatives were claiming that the reason Brown was so successful at handling the economy was that he was just doing what they had already been doing, and there's the rub. Brown's (And ipso facto the Conservatives) policies are certainly partly to blame, but what is Cameron's solution? Well as usual he doesn't have one, he knows the problem, and gives every indication that he has the answer, but he never actually tells us what it is. Or maybe he does know what it is but doesn't want to say so because it goes against everything he believes in.

The system doesn't work.

It doesn't work because stupid people who can't work out for themselves that if the Bank of England is backing Northern Rock then it won't go bust unless the 5th wealthiest nation in the world goes bust, queue up for hours, days even, just to withdraw their money and put it into another financial organisation that is just as unlikely to go bust. The effect of this is to create a self perpetuating prophecy. The bank's assets diminish and its shares start to fall. But it still has all those mortgages bringing money in, so it still has a regular income, making it a prime target for a takeover. If I had money in Northern Rock I'd whip it out and buy shares in the company right now.

So who's the loser in all this? On the face of it, no one, but when the takeover happens I wouldn't want to be one of the people who has a mortgage with the company...