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Subprime
É impressionante!!!! Existe pânico nas ruas!!!
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Northern Rock Stock Tumbles Further Amid Run on Bank
Sept. 17 (Bloomberg) -- Northern Rock Plc, the U.K. mortgage lender bailed out by the Bank of England last week, tumbled to a seven-year low in London trading after customers lined up at branches across the country to withdraw their savings.
Shares of Newcastle-based Northern Rock fell 34 percent to 290 pence as of 8:10 a.m. in London, leaving the fourth-largest U.K. mortgage company with a market value of 1.2 billion pounds ($2.4 billion). JPMorgan Chase & Co. analysts cut their price target to 370 pence today. Merrill Lynch & Co. halved its earnings estimate for 2007 and said future profit is ``little more than guesswork.'' Both said the bank may be split up or acquired.
Hundreds of clients ignored assurances from Chief Executive Officer Adam Applegarth and U.K. Chancellor of the Exchequer Alistair Darling that their deposits were secure after the biggest rescue by the central bank in 30 years. Savers removed at least 2 billion pounds ($4 billion), or about 8 percent of Northern Rock's total, since Sept. 14, the British Broadcasting Corp. reported without saying where it got the information.
``Until Northern Rock has either been broken up, in the form of its mortgage debt being taken on by another bank or the company taken over as a whole, the negative effect will continue,'' said Howard Wheeldon, an analyst at BGC Partners, an inter-dealer brokerage in London.
Assurances Ignored
Northern Rock required emergency financing because it relies on the capital markets rather than deposits for 73 percent of its funds. The collapse of subprime mortgages in the U.S. drove borrowing costs higher and traditional lenders curtailed loans to all but the safest borrowers.
The stock, which fell 31 percent on Sept. 14, has slumped to one fifth of the record reached in February. The company had 24.4 billion pounds in retail deposits at the end of June, according to its Web site.
The risk of owning Northern Rock debt rose 15 basis points to 170 basis points today, according to JPMorgan Chase & Co.
Applegarth, the CEO, offered visitors to the bank's Web site his ``sincere apologies for any inconvenience,'' and said ``savings are secure and there is no need for you to withdraw your money.''
U.K. finance minister Darling held a series of broadcast interviews, telling Sky News the bank is ``solvent'' and that the support of the central bank ``ought to give people confidence.''
The lender's 100 billion pounds of mortgages may be broken up between U.K. banks, the Sunday Telegraph said yesterday, citing unidentified people close to the company. New York-based Merrill is advising Northern Rock, and possible buyers include London-based HSBC Holdings Plc, Lloyds TSB Group Plc and Barclays Plc, as well as Edinburgh-based Royal Bank of Scotland Group Plc and HBOS Plc, the paper said.
`Long Slog'
The decline in the shares prompted analysts at Credit Suisse Group and Merrill to speculate about a takeover. ``We think the game is over for Northern Rock in its present form,'' Merrill analyst John-Paul Crutchley wrote in a note to investors.
It would be a ``long slog'' for Northern Rock to remain independent, Applegarth said in the Sunday Telegraph. The bank's business isn't viable any longer because of its dependence on financial markets for funding, he said.
Bradford & Bingley Plc and Alliance & Leicester Plc, which also rely more on financial markets than customer deposits to fund mortgages, fell in London trading on Sept. 14. Bradford & Bingley dropped 7.7 percent, the most since 2000, to 329.75 pence and Alliance & Leicester sank 6.9 percent to 873 pence.
Bingley, England-based Bradford & Bingley, which makes one in five loans to U.K. landlords, gets 53 percent of its funding from the markets, a similar proportion to Alliance & Leicester, which is based in Leicester, England.
Funding Rates
The companies said they have sufficient cash and haven't asked the Bank of England for emergency funds. ``It's business as usual,'' said Alliance & Leicester spokesman Stuart Dawkins.
Banks are paying more to borrow as the difference between the three-month U.K. London interbank offered rate and the Bank of England's benchmark rate has climbed to 1.13 percentage points, compared with 0.34 percentage points in the first half of the year, said Sandy Chen, a London-based analyst at Panmure Gordon & Co.
``The high costs of wholesale funding will continue,'' Chen said. ``We also assume that the liquidity crisis will deepen into an insolvency crisis.''
British mortgage lenders have fallen more than commercial lenders this year on the London exchange. Northern Rock dropped 63 percent, Bradford & Bingley fell 30 percent, and Alliance & Leicester declined 23 percent. The FTSE All-Share Bank Index is down 14 percent.
``This is a global squeeze, it is not Northern Rock specific,'' Applegarth told reporters last week. ``It must be difficult for other banks as well. I wouldn't be surprised if this happens to others.''
http://www.bloomberg.com/apps/news?p...YSA&refer=home
__________________
King, BOE Face `Crisis of Confidence' After Rescue (Update1)
By Brian Swint and Jennifer Ryan
Sept. 17 (Bloomberg) -- Bank of England Governor Mervyn King has spent the past month trying to stay above the fray as the U.S. subprime-mortgage collapse roiled credit markets. Now he's getting dragged in, whether he likes it or not.
Two days after King, 59, told lawmakers on Sept. 12 that central banks should avoid giving the impression they will help lenders that made bad decisions, the Bank of England provided emergency funds to Northern Rock Plc in the biggest bailout of a British bank in three decades.
``It's a crisis of confidence, and the bank is confused,'' said Patrick Minford, an economics professor at Cardiff University who advised former Prime Minister Margaret Thatcher. ``They want to be hands-off, but in this situation they can't be. I don't think this has done King any good.''
King's credibility is in question for his refusal to emulate other central banks and take early action to help cash-strapped lenders. With Northern Rock's failure, he is finding himself subject to the same charge of excessive caution being leveled at U.S. Federal Reserve Chairman Ben S. Bernanke, whose office adjoined King's at the Massachusetts Institute of Technology in the 1980s.
``There's no doubt that had the Bank of England acted early, Northern Rock would not have had the same problems,'' said Stephen Bell, chief economist at hedge fund GLC Ltd. in London. ``The idea they can't do anything about it is clearly wrong.''
Talking Down
King, a former London School of Economics professor whose five-year term ends June 30, initially underestimated the threat posed by rising defaults on mortgages to U.S. borrowers with poor credit histories. It was ``not an international financial crisis,'' he said Aug. 8; the next day, credit markets seized up as concern about exposure to subprime losses made banks reluctant to lend to each other.
The European Central Bank has loaned cash to banks in seven special auctions since then, and the Fed responded to criticism its response was too slow by cutting the rate at which it lends directly to banks on Aug. 17. Economists predict the Fed will reduce its benchmark rate tomorrow by at least a quarter point.
King held back until markets forced his hand. Last week he said that too much help ``encourages excessive risk-taking, and sows the seeds of a future financial crisis.'' With three-month money-market rates close to a nine-year high, the bank on Sept. 13 made its first additional cash loan to banks. The next day, it rescued Newcastle, England-based Northern Rock after rising credit costs left the U.K.'s third-largest mortgage provider unable to make new loans.
`Hard Line'
``Is this the right environment to be so sanctimonious and to take such a hard line?'' asked James Knightley, an economist at ING Financial Markets in London. ``If you play this moral high ground, it could backfire.''
The criticism of King could hardly come at a worse moment if he wants to be reappointed. The only member of the Bank of England's Monetary Policy Committee to vote on each rate decision since 1997, King has been overruled by his colleagues twice in the past two years and in March was forced to write a letter to Brown after inflation accelerated to a decade-high of 3.1 percent. It has since receded: Consumer prices rose just 1.9 percent in July.
Nor is the timing helpful to Prime Minister Gordon Brown, 56, who as chancellor of the exchequer gave the bank rate-setting independence 10 years ago.
Extended Growth, Surging Debt
While Brown and the Bank of England have overseen Britain's longest period of economic growth in two centuries, consumer debt has also surged over the last decade: Households are now shouldering a record 1.3 trillion pounds ($2.6 trillion) in debt. In addition, the Bank of England's benchmark rate of 5.75 percent is the highest among the Group of Seven nations, and London house prices fell the most in three years in September, a report from Rightmove Plc showed on Sept. 14.
Now Brown presides over an economy increasingly vulnerable to rising credit costs just as he considers whether to call an early general election to capitalize on the improved prospects for his Labour Party since he succeeded Tony Blair as prime minister in June. Former Federal Reserve Chairman Alan Greenspan said in an interview with the Daily Telegraph published today that the U.K. ``is more exposed then we are'' to tighter credit conditions and that the housing market is ``going to turn
King said Aug. 8 that the discussion with the government about a second term for him is ``a matter for the end of the year.''
Defenders
King's defenders say the Bank of England's stance on the credit turmoil, which he outlined in testimony to U.K. lawmakers last week, will be proven wise over time. ``King is an intellectual colossus, and I'd have no qualms about reappointing him,'' said Geoffrey Dicks, chief U.K. economist at Royal Bank of Scotland Group Plc in London. His statement ``was almost a gem.''
King, an architect of the bank's inflation-targeting strategy, has won plaudits for helping end the U.K.'s decades-long fight with rising prices. He became chief economist in 1991 and was named governor in 2003.
``King has faced lots of tests and come out of them very well,'' said Minford. ``He's done a good job. But on this one he's made a wobbly call and will have to retrieve it smartly.''
http://www.bloomberg.com/apps/news?p...V0s&refer=home
__________________
Começo a ficar preocupado pois tenho tudo metido na netprazo do banco popular
Northern Rock Stock Tumbles Further Amid Run on Bank
Sept. 17 (Bloomberg) -- Northern Rock Plc, the U.K. mortgage lender bailed out by the Bank of England last week, tumbled to a seven-year low in London trading after customers lined up at branches across the country to withdraw their savings.
Shares of Newcastle-based Northern Rock fell 34 percent to 290 pence as of 8:10 a.m. in London, leaving the fourth-largest U.K. mortgage company with a market value of 1.2 billion pounds ($2.4 billion). JPMorgan Chase & Co. analysts cut their price target to 370 pence today. Merrill Lynch & Co. halved its earnings estimate for 2007 and said future profit is ``little more than guesswork.'' Both said the bank may be split up or acquired.
Hundreds of clients ignored assurances from Chief Executive Officer Adam Applegarth and U.K. Chancellor of the Exchequer Alistair Darling that their deposits were secure after the biggest rescue by the central bank in 30 years. Savers removed at least 2 billion pounds ($4 billion), or about 8 percent of Northern Rock's total, since Sept. 14, the British Broadcasting Corp. reported without saying where it got the information.
``Until Northern Rock has either been broken up, in the form of its mortgage debt being taken on by another bank or the company taken over as a whole, the negative effect will continue,'' said Howard Wheeldon, an analyst at BGC Partners, an inter-dealer brokerage in London.
Assurances Ignored
Northern Rock required emergency financing because it relies on the capital markets rather than deposits for 73 percent of its funds. The collapse of subprime mortgages in the U.S. drove borrowing costs higher and traditional lenders curtailed loans to all but the safest borrowers.
The stock, which fell 31 percent on Sept. 14, has slumped to one fifth of the record reached in February. The company had 24.4 billion pounds in retail deposits at the end of June, according to its Web site.
The risk of owning Northern Rock debt rose 15 basis points to 170 basis points today, according to JPMorgan Chase & Co.
Applegarth, the CEO, offered visitors to the bank's Web site his ``sincere apologies for any inconvenience,'' and said ``savings are secure and there is no need for you to withdraw your money.''
U.K. finance minister Darling held a series of broadcast interviews, telling Sky News the bank is ``solvent'' and that the support of the central bank ``ought to give people confidence.''
The lender's 100 billion pounds of mortgages may be broken up between U.K. banks, the Sunday Telegraph said yesterday, citing unidentified people close to the company. New York-based Merrill is advising Northern Rock, and possible buyers include London-based HSBC Holdings Plc, Lloyds TSB Group Plc and Barclays Plc, as well as Edinburgh-based Royal Bank of Scotland Group Plc and HBOS Plc, the paper said.
`Long Slog'
The decline in the shares prompted analysts at Credit Suisse Group and Merrill to speculate about a takeover. ``We think the game is over for Northern Rock in its present form,'' Merrill analyst John-Paul Crutchley wrote in a note to investors.
It would be a ``long slog'' for Northern Rock to remain independent, Applegarth said in the Sunday Telegraph. The bank's business isn't viable any longer because of its dependence on financial markets for funding, he said.
Bradford & Bingley Plc and Alliance & Leicester Plc, which also rely more on financial markets than customer deposits to fund mortgages, fell in London trading on Sept. 14. Bradford & Bingley dropped 7.7 percent, the most since 2000, to 329.75 pence and Alliance & Leicester sank 6.9 percent to 873 pence.
Bingley, England-based Bradford & Bingley, which makes one in five loans to U.K. landlords, gets 53 percent of its funding from the markets, a similar proportion to Alliance & Leicester, which is based in Leicester, England.
Funding Rates
The companies said they have sufficient cash and haven't asked the Bank of England for emergency funds. ``It's business as usual,'' said Alliance & Leicester spokesman Stuart Dawkins.
Banks are paying more to borrow as the difference between the three-month U.K. London interbank offered rate and the Bank of England's benchmark rate has climbed to 1.13 percentage points, compared with 0.34 percentage points in the first half of the year, said Sandy Chen, a London-based analyst at Panmure Gordon & Co.
``The high costs of wholesale funding will continue,'' Chen said. ``We also assume that the liquidity crisis will deepen into an insolvency crisis.''
British mortgage lenders have fallen more than commercial lenders this year on the London exchange. Northern Rock dropped 63 percent, Bradford & Bingley fell 30 percent, and Alliance & Leicester declined 23 percent. The FTSE All-Share Bank Index is down 14 percent.
``This is a global squeeze, it is not Northern Rock specific,'' Applegarth told reporters last week. ``It must be difficult for other banks as well. I wouldn't be surprised if this happens to others.''
http://www.bloomberg.com/apps/news?p...YSA&refer=home
__________________
King, BOE Face `Crisis of Confidence' After Rescue (Update1)
By Brian Swint and Jennifer Ryan
Sept. 17 (Bloomberg) -- Bank of England Governor Mervyn King has spent the past month trying to stay above the fray as the U.S. subprime-mortgage collapse roiled credit markets. Now he's getting dragged in, whether he likes it or not.
Two days after King, 59, told lawmakers on Sept. 12 that central banks should avoid giving the impression they will help lenders that made bad decisions, the Bank of England provided emergency funds to Northern Rock Plc in the biggest bailout of a British bank in three decades.
``It's a crisis of confidence, and the bank is confused,'' said Patrick Minford, an economics professor at Cardiff University who advised former Prime Minister Margaret Thatcher. ``They want to be hands-off, but in this situation they can't be. I don't think this has done King any good.''
King's credibility is in question for his refusal to emulate other central banks and take early action to help cash-strapped lenders. With Northern Rock's failure, he is finding himself subject to the same charge of excessive caution being leveled at U.S. Federal Reserve Chairman Ben S. Bernanke, whose office adjoined King's at the Massachusetts Institute of Technology in the 1980s.
``There's no doubt that had the Bank of England acted early, Northern Rock would not have had the same problems,'' said Stephen Bell, chief economist at hedge fund GLC Ltd. in London. ``The idea they can't do anything about it is clearly wrong.''
Talking Down
King, a former London School of Economics professor whose five-year term ends June 30, initially underestimated the threat posed by rising defaults on mortgages to U.S. borrowers with poor credit histories. It was ``not an international financial crisis,'' he said Aug. 8; the next day, credit markets seized up as concern about exposure to subprime losses made banks reluctant to lend to each other.
The European Central Bank has loaned cash to banks in seven special auctions since then, and the Fed responded to criticism its response was too slow by cutting the rate at which it lends directly to banks on Aug. 17. Economists predict the Fed will reduce its benchmark rate tomorrow by at least a quarter point.
King held back until markets forced his hand. Last week he said that too much help ``encourages excessive risk-taking, and sows the seeds of a future financial crisis.'' With three-month money-market rates close to a nine-year high, the bank on Sept. 13 made its first additional cash loan to banks. The next day, it rescued Newcastle, England-based Northern Rock after rising credit costs left the U.K.'s third-largest mortgage provider unable to make new loans.
`Hard Line'
``Is this the right environment to be so sanctimonious and to take such a hard line?'' asked James Knightley, an economist at ING Financial Markets in London. ``If you play this moral high ground, it could backfire.''
The criticism of King could hardly come at a worse moment if he wants to be reappointed. The only member of the Bank of England's Monetary Policy Committee to vote on each rate decision since 1997, King has been overruled by his colleagues twice in the past two years and in March was forced to write a letter to Brown after inflation accelerated to a decade-high of 3.1 percent. It has since receded: Consumer prices rose just 1.9 percent in July.
Nor is the timing helpful to Prime Minister Gordon Brown, 56, who as chancellor of the exchequer gave the bank rate-setting independence 10 years ago.
Extended Growth, Surging Debt
While Brown and the Bank of England have overseen Britain's longest period of economic growth in two centuries, consumer debt has also surged over the last decade: Households are now shouldering a record 1.3 trillion pounds ($2.6 trillion) in debt. In addition, the Bank of England's benchmark rate of 5.75 percent is the highest among the Group of Seven nations, and London house prices fell the most in three years in September, a report from Rightmove Plc showed on Sept. 14.
Now Brown presides over an economy increasingly vulnerable to rising credit costs just as he considers whether to call an early general election to capitalize on the improved prospects for his Labour Party since he succeeded Tony Blair as prime minister in June. Former Federal Reserve Chairman Alan Greenspan said in an interview with the Daily Telegraph published today that the U.K. ``is more exposed then we are'' to tighter credit conditions and that the housing market is ``going to turn
King said Aug. 8 that the discussion with the government about a second term for him is ``a matter for the end of the year.''
Defenders
King's defenders say the Bank of England's stance on the credit turmoil, which he outlined in testimony to U.K. lawmakers last week, will be proven wise over time. ``King is an intellectual colossus, and I'd have no qualms about reappointing him,'' said Geoffrey Dicks, chief U.K. economist at Royal Bank of Scotland Group Plc in London. His statement ``was almost a gem.''
King, an architect of the bank's inflation-targeting strategy, has won plaudits for helping end the U.K.'s decades-long fight with rising prices. He became chief economist in 1991 and was named governor in 2003.
``King has faced lots of tests and come out of them very well,'' said Minford. ``He's done a good job. But on this one he's made a wobbly call and will have to retrieve it smartly.''
http://www.bloomberg.com/apps/news?p...V0s&refer=home
__________________
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