[1andrew1]

Originally Posted by nomadking

A building society such as Northern Rock, may have lent out money, but then they SOLD that mortgage. The buying company now owns the debt, as if they were the ones that issued the mortgage in the first place, and NR has money to lend out. In essence they were acting more as a self-appointed and self-serving mortgage broker. The first mortgage won't be on NR's accounts. From their point of view, the mortgage debt has been paid. You can only count the bank(etc)s current outstanding loans, not all the past ones added up together. The money for the 2nd mortgage has come from the buyer of the 1st. In turn the buyer has had to raise the money from somewhere. That will have come from investors or loans.

With no "parasites" prepared to buy NRs mortgages, NR was stuck. The banks weren't bailed out, it was the banking system that was. Confidence for depositors had to be propped up. Without the money from the depositors, loans of various sorts, couldn't happen.

This is why banking is so heavily regulated otherwise banks could keep on lending until the cows came home. Hence deposits v loans ratios etc and why Royal Bank of Scotland was bailed out and Woolworths wasn't.