Between Northern Rock and a Hard Place

In the News over the past two days are two stories that are linked, both are shocking revelations, but the link for me is more personal than they will be for most. Yesterday the Chancellor of the Exchequer, the UK finance minister revealed that the UK treasury has loaned Northern Rock forty billion pounds of taxpayer’s money. In the past when my Blog was on yahoo I have spoken of the over inflated housing market, and as my personal experience will show Northern Rock are all part of this hyped up and grossly inflated market.

However before going there, today I heard that the Chancellor of the Exchequer was going to be making a statement to the commons. I thought that it would be related to Northern Rock, thus I was interested but I would wait until the news latter to find out what had gone wrong now. However the announcement that the government had lost in the post important confidential personal and security details of twenty-five million of its citizens completely floored me. As my ex-wife was and for all I know is, a senior tax inspector, I knew immediately that rules had been broken for this to happen. Also, knowing something about the data protection act, I knew that the law had been broken too.

As I don’t have any children myself, this news doesn’t affect me directly, but as I do have experience of having suffered “Identity Theft”, I realised just how serious this was. Also indirectly, I wondered just how safe are my details, details the government holds about me and everyone else in this country.

When my identity was stolen the term Identity Theft had not even been coined and I was shocked at how easy it had been. In no small part my then bank, Northern Rock, were guilty of gross negligence in allowing it to happen.

I was working away from home, I had a mortgage to pay and I had taken in a lodger. I had gone back to Newcastle for the weekend partly because the lodger had not paid the rent and because something odd was happening with my bank account. I asked the lodger for the rent but he said he couldn’t pay and he wanted to leave. So I went to the bank to try and find out what was happening there. The Northern Rock treated me coldly and quite rudely. It was only latter that I discovered that I was dealing with the same person who had enabled my lodger to have a new cheque book, cheque guarantee card and while I had proof of my identity had done this without carrying out the proper checks on him. Further, had the bank actually told me what they knew immediately, I could have gone to the police and they could have made an immediate arrest, as the lodger was still there in my home.

At this time I was still thinking it was just a stolen or missing chequebook that was the problem, and the lodger was just a non-paying lodger. If it hadn’t been for the fact that I had an empty bank account and I needed to get that sorted before I travelled back to London to work, I don’t know how long it would have taken to discover what was really happening. So on the Monday I called work and explained I had a serious problem that I needed to sort out, and would be back at work the next day. Fortunately, just before I went to the bank again, the post arrived and in it was a Driving licence in my name. This was before pictures were a requirement. Keeping this with me I went to the Northern Rock and got to see the branch manager. It was then that I discovered what the bank had done, and had they told me on the Saturday that there was a suspicion of what’s now called Identity Theft the whole matter could have been resolved strait away. The bank, Northern Rock, even inadvertently admitted that they had not followed their own security procedures and accepted weak and incomplete means of identification by the man that had been my lodger. Therefore I thought the matter would be resolved quickly.

I then took the evidence to the police. A CID officer took my statement and whilst shocked at what I discovered from the police about this type of crime, I was lucky as I had good documented evidence that a crime had occurred. Even the detective acknowledged that had it not been for that evidence, particularly the Driving Licence, there would have been little or nothing they could do.

My problem with Northern Rock continued as they kept on honouring the cheques from the stolen cheque book, and eventually I had to open a new account with another bank, to avoid loosing my pay to an overdraft that was increasing weekly.

Eventually, the police caught the culprit, I even discovered his real name and that the name he had given me was another stolen identity.

Even with the real culprit, Richard Michael Cope, pleading guilty and serving prison time, the Northern Rock Bank tried to pursue me for the several thousand pounds that this guy had stolen. Additionally, I ended up with a poor credit rating because of it. It took several years to recover from that, and I lost my home as a result of gross negligence by Northern Rock and the criminal who stole my identity.

Therefore, I can really feel for all the people who are facing a worrying time because of the gross incompetence of our government.

However the issue that is really worrying, and should worry us all, is the way that the government has supported a Northern Rock, a failing bank.

As Northern Rock is a regional bank its headquarters are here in Newcastle, locally many people don’t want to see the bank fail. Apart from the jobs that would be lost, I don’t see why it should survive. That is not based upon my experience with them, but the hard economic fact that the Northern Rock has been carrying out irresponsible lending. Twice since loosing my home, I have looked at getting back on the housing ladder, and twice I have been told how to get a mortgage via the Northern Rock by committing a fraud. Two different brokers told me how to do it, and Northern Rock would give a mortgage to anyone.

While it may have been tempting to try and cash in on the over inflated housing market, I also have my principals and I will not compromise my ethics for greed.

Also as the housing market is inflated, here in the Northeast the property prices are fifty to sixty percent higher than actual values, this irresponsible lending was bound to cause misery in the end.

When the problems with the sub-prime mortgage market broke here, it was clear that banks like Northern Rock would suffer. However, the government had a really difficult call to make. They couldn’t let this irresponsible bank fail as it would bring about the collapse of the housing market and in consequence the whole economy could fall into recession. Also as all politicians are also property owners, they don’t want to see prices fall for personal reasons too. That makes for poor judgement by governments.

Further, the finance market is not that simple, as the mortgage loans are sold as a commodity amongst banks on the money markets. Therefore, other banks who have been much more responsible and prudent were also at risk. While this method of selling bundles of debt to other financial institutions helped raise more capital for the banks, it also meant that lenders like Northern Rock could and were lending money without even caring if the money would be repaid. They could sell the loans on and it was whoever bought that package of loans to worry about getting their money back. Additionally, when prices are rising even the buyers of these derivatives know that the banks like Northern Rock are making really bad lending decisions, but as long as house prices are increasing, the banks will still make money even if they have to reposes. That is why when house prices stagnated, the other banks refused to lend to Northern Rock.

Step in the Bank of England, but had they known that Northern Rock were lending irresponsibly, as regulator for the banks they would have stopped them making bad loans anyway. So we have the government supporting a failing bank to the tune of thirteen hundred pounds per person in the UK, in a desperate attempt to stop an inevitable collapse in the credit and housing markets. Sooner or later it will have to happen and while I do feel for all the people that will suffer because of it, for the last ten years this country has gorged and consumed on a credit frenzy of one trillion pounds sterling.

Well the party is over and the mess needs to be cleared away.