Quote:
Originally Posted by Taf
Loaners can't loan if savers don't save... usually.
But then the loan companies started to loan more and more off each other... buying debt.... and once that debt turned bad (when people who had loaned beyond their financial means were unable to make repayments) the stuff hit the fan.
Voila Northern Rock.
The banks are taking too big a cut of the profits and not rewarding the savers enough, so their cash supply is drying up.
|
Not quite how Northern Rock panned out.
Northern rock had savers and it had lending. There was a gap between these that it funded with short term borrowing, like you or I using an overdraft, thing was they had a GBP24Bn Overdraft with other banks.
The other banks decided they wanted that money back but NR could not go to it's mortgage customers and ask for it back so it ended up in the pickle it is in.