these banks make massive profits .so where is the money?do you now feel that you cannot trust your bank.?
2007-09-20 01:10:54 · 3 answers · asked by steven e 7 in Business & Finance ➔ Corporations
As far as can be discovered Northern Rock did very little that was 'wrong' except borrow money from the short term cash markets in order to finance their loans to UK Mortgage holders (NOT US sub-prime Mortgages .. which they have NOT financed).
When the short term funds dried up (because Banks refused to lend to each other because no-one knew who held what liabilities) NR got caught when they couldn't 'roll over' their sort term loans ..
.. of course their loans are all covered by UK Mortgage holders .. however I guess they figured asking upwards of a million UK Mortgage lenders to repay their Mortgages immediately would just make things worse :-) ...
so they went cap in hand to Bank of England .. and as soon as depositors found out, they lost confidence in the Bank and started to withdraw their money ...
and the rest (as they say) is History ..
2007-09-20 01:50:39 · answer #1 · answered by Steve B 7 · 1⤊ 0⤋
Northern Rock invested in subprime loans which crashed (America, esp) and that is why they had cash flow issues. Northern Rock have always been solvent.
As for how do they make massive profits? They invest. Northern Rock just invested in a lot of edgy stuff.
2007-09-20 08:20:55 · answer #2 · answered by CC 2 · 0⤊ 1⤋
why should they be bailed out? they took a risk and it failed.
rewarding bad mangement as usual, its the british way
2007-09-20 08:15:15 · answer #3 · answered by Anonymous · 1⤊ 1⤋