It is not often these days that you hear about a run on a bank – it is all very reminiscent of the United States in the 1930s – but that is what happened a week or so ago when the news got about that the Newcastle-Upon-Tyne-based Northern Rock Bank was facing difficulties. The bank, the fifth largest mortgage lending concern in Britain, found itself having to approach other banks for a loan and the reports of such a state of affairs induced panic in many of the bank's depositors.
The crisis had its origins in the United States where several banks and financial agencies have begun to experience the consequences of what are called 'sub-prime' loans, that is loans to people who would not normally have been considered as the best risks. The whizz-kids in the banking business, ever anxious to increase the profits of their employers, went after this market and, because of the high degree of risk involved, upped the amount of interest on the loans secured in the mortgage market.
When such mortgage holders predictably defaulted on their payments, the lenders concealed these debts in packages that they sold off to other banks and loan companies, many of whom were not aware of the extent of liabilities they were purchasing. This idea of farming out the collection of debts goes back to the ancient Romans and beyond, when lenders would take a cut in what they were owed by selling their uncollected debts to other agencies which had their own methods of making the debtors pay up. In the old days the inheritors of the debts knew what they were letting themselves in for. Today, the picture is not at all so clear and, across the world, banks are carrying out their own investigations to assess the extent of their exposure to bad debt. If a grocery store was selling rotten eggs along with fresh ones in the packs, or tainted oranges along with sound ones in the net bags, the authorities would soon be on to them, but there is apparently no mechanism to deter financial institutions from selling the cockle with the wheat.
This has put all banks on their guard and, whereas money was easily accessible over recent years, the supply will tighten up from here on in. Many people will believe that that may be no bad thing for a nation living on tick, although that will be of little consolation to those seeking mortgages.
The banks and the politicians, including Chancellor Alistair Darling, had been making reassuring noises but the public, in the main, were sceptical about what assurances the government was giving. It was not until the Chancellor weighed in with a cast-iron guarantee that deposits were safe that the pressure eased up on the hapless Northern Rock and on other smaller undertakings which had suffered collateral damage.
But, not everyone was happy. Some people alleged that Mr Darling's intervention had created a 'moral hazard' by encouraging banks to loan money recklessly and without a care to the morrow, bolstered in their profligacy by the fact that the government would always be there to bail them out. The banks point out that no bank in its right mind would put itself through what the Northern Rock Bank has been through, what with a very public loss of confidence in its viability, the loss of millions of pounds taken out of its coffers by wary customers and the inevitable loss of jobs that will follow upon their misadventure. The Northern Rock is quick to point out that no taxpayers' money is being spent: the Bank of England will reclaim its loan, and should it happen that these monies are not forthcoming, then the Bank's overall assets will more than meet its liabilities. There was never any possibility that the Bank of England would let a bank such as the Northern Rock go to the wall, thus bringing about a collapse of confidence in the British banking system and a subsequent serious disturbance in the UK economy.
The Northern Rock is out in the open about the state of its financial standing. When it comes to off-shore accounts, or fly-by-night operators, the picture is less clear, as these latter bodies are largely un-regulated.
It has not gone unnoticed that on the very day that the panic began, Margaret Thatcher, the champion of the unrestrained free-market jungle economy was in 10 Downing Street having tea with the Prime Minister. This move is believed to be a stunt pulled by Mr Brown to thwart the Tories rather than a sign that the Prime Minister has embraced Mrs Thatcher's economic policies, which are at the foundation of today's turmoil. 'Greed is good' is a a very 1980s catch cry.
In evidence, the court heard that the defendant was one of a gang who had been causing much annoyance to residents in local housing estates by engaging in a childish prank. He and his mates would attach a length of black thread to a door knocker on a dark night and,then, from a distance, would activate the knocker by tugging on the thread. The householder would answer the door and on finding no one there would close the door again, only to have the process repeated. A solicitor appearing for the defendant explained that the young man had never been in trouble with the law before and that he had been led astray by bad company, from whom he had acquired some bad habits. "It could be said," said the RM, "that he had been knocking about with the wrong crowd."
An English provincial newspaper has reported the case of a pub landlord who has been fined £500 for "failing to display a no smoking notice in his brassiere". I take it they meant "brasserie".
You can buy anything on eBay these days. A citizen of Belgium has put the entire country up for sale. Retired journalist Gerrit Six adds a health warning to the effect that the purchaser will be liable to inherit £208 billion in state debt. The highest bid so far has been £7 million. Mr Six explains that this is his protest at the failure of Belgian politicians to get a government together after the June elections.
After a young man had been injured at the Ould Lammas Fair this year, the owner of a horse-drawn vehicle has been charged with "furious driving". A police officer explained that the term is not much used today, but is the equivalent of "careless driving" when applied to those in charge of horses, or horse-drawn vehicles.
Fianna Fáil are said to be casting about for a Northern partner. After the recent developments at the Giants' Causeway, it would appear that their natural soulmates are the DUP.
Is there nothing that can be done about people riding bicycles on the footpath? They are known in the trade as "cyclopaths".
