Friday, 23 November 2007

The Northern Rock debacle continues

Information keeps leaking out and once again I have to thank the Guardian for this piece. The Guardian today reveals that:

"A Guardian examination of Northern Rock's books has found that £53bn of mortgages - over 70% of its mortgage portfolio - is not owned by the beleaguered bank, but by a separate offshore company.

The same investigation reveals just how vulnerable the bank is to a cooling property market and demonstrates the scale of Northern Rock's exposure to mortgages where customers have borrowed heavily against their homes.

The mortgages are now owned by a Jersey-based trust company and have been used to underpin a series of bond issues to raise cash for Northern Rock. It means the pool of assets available to provide collateral for Northern Rock's creditors, including the Bank of England, is dramatically reduced, calling into question government claims that taxpayers' money is safe.

This week the chancellor, Alistair Darling, told parliament taxpayers' money was safeguarded. "Bank of England lending is secured against assets held by Northern Rock. These assets include high quality mortgages with a significant protection margin built in and high quality securities with the highest quality of credit rating," he said.

The first tranche of the Bank's emergency lending to Northern Rock in September has been secured against specific assets. But the second tranche is secured only by a more general floating charge, which would mean the Bank would be vying with other creditors for repayment if Northern Rock failed. It is not clear how much money was loaned in each tranche, but the emergency loans are thought to have been for about £11bn each."

It would appear that although Alistair Darling has already served for too long to get the record as the shortest serving Chancellor of the Exchequer in UK political history, he still has a chance of being judged the most inept.

The shortest serving Chancellors of the Exchequer of the Great Britain were:

Sir John Pratt Whig 2 February – 3 April 1721 (60 days)
Sir William Lee Whig 8 March – 6 April 1754 (29 days)
The Baron Mansfield Whig 13 April – 2 July 1757 (80 days)

The shortest serving Chancellors of the Exchequer of the United Kingdom have been:

The Lord Tenterden Tory 8 August 1827 3 September 1827 (26 days)
The Lord Denman Tory (caretaker gvmnt) 14 November 1834 15 December 1834 (31 days)
Iain Macleod Conservative 20 June 1970 20 July 1970 (30 days)

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