The state of the financial press today

We all know you shouldn’t believe what is in the papers but this is Reuters for fuck’s sake:

Both were two of Britain’s customer-owned “building societies” which were nationalized in the run-up to the 2008 financial crisis.

Err, no. Both were shareholder owned banks after their respective demutualisations.

11 comments on “The state of the financial press today

  1. erm, 1 all score draw I think. They missed the demutualisation bit, but otherwise spot on. northern rock and bradford and bingley were definitely mutuals before they converted to banks, and they were both sort of taken over by the government.

  2. “northern rock and bradford and bingley were definitely mutuals before they converted to banks”: well I was definitely an egg before I became a human. So what?

  3. I think a lot of us may be thinking, if they’d still been mutuals they wouldn’t have needed rescuing.

  4. The clue that they don’t know what they’re writing about is putting building societies into quotes as if that means something special. Building society is a known term, it doesn’t need quoting.

  5. bnis,

    “I think a lot of us may be thinking, if they’d still been mutuals they wouldn’t have needed rescuing.”

    If they’d been building societies, probably true.

    There’s rules about where building societies can get money from and half of it has to be from savers. Crock expanded rapidly by switching from using savers to borrowing on various money markets.

    Borrowing cheap, short-term money from markets and lending it on longer-term fixed rates is what killed them. When I heard about it I was gobsmacked that any regulator that is guaranteeing savings would allow that.

  6. @TS

    ‘When I heard about it I was gobsmacked that any regulator that is guaranteeing savings would allow that.’

    I try to avoid conspiracy theorising, because I think people are largely too self-interested, stupid and/or disorganised to conspire effectively, but think of it like this: if doctors could cure all ills overnight, would they?

  7. Interested,

    If you want to get into why the FSA did it, you can either put it down to incompetency, or that it was a Labour-created organisation trying to keep a boom going for Labour and didn’t want to do anything to stop a mortgage boom.

  8. “… were nationalized in the run-up to the 2008 financial crisis.”

    Could’ve been a really long run up.

    I think it was a general level of incompetence or disinterest by regulators. Not just here but elsewhere. Mortgage markets came to be a massive bet on house prices continuing upwards.

    The churn of mortgages being renewed as their introductory period came to an end should have been viewed as unsustainable, as at the time it effectively created mortgages several percent lower than interest rates.

    There was also the issue of collateralisation based on optimistic insurance policies and a naive view of what credit ratings mean.

    I don’t think they engineered a boom. I don’t think they even understood it was a boom.

  9. Frontpage of telegraph today (or times) twice asserted gdp of uk @600,000,00 – about half the correct value.

  10. Has anyone else actually read the Northern Rock accounts?
    I did because after my father died my mother liquidated all her investments (she thought that I was incapable of managing them) and put a lot of cash into Northern Rock, which at the time,offered the best returns and promised to match changes in rates offered on other accounts.
    I cannot go into further details lest Applegarth sue me for libel – I should certainly win but cannot afford my lawyer’s fees which I should have to pay if he was bankrupt.

  11. The problem with our lovely former building societies was that they were borrowing short and lending long – rule 101 in bad banking. Perfectly fine of course so long as you can get continued access to wholesale money markets. Except that ran into a bit of trouble with that in the crisis and the institution that was supposed to come to their rescue, the Bank of England got a sudden fit of righteous indignation about so called moral hazard and delayed long enough to turn a drama into a crisis – aided and abetted of course by Peston and his leaky pals at the Treasury causing a run on the bank with sensationalist reporting. No casino banks, just poor regulation from the FSA and BoE, naïve and or mendacious reporting (you chose) from the BBC, woeful incompetence from the BoE and Gordon “I saved the world” Brown presiding over it all.

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