Interesting insights into a fascinating period,
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This review is from: The Crunch: The Scandal of Northern Rock and the Escalating Credit Crisis (Paperback)
This version of the book was written before the story of Northern Rock (and the other banks) had completely unfolded but is still a good read.
The interesting thing about the Credit Crunch is it's not simply about right or wrong. Admittedly some of the players must have known they were disingenuous to say the least, but for a lot of them (like Northern Rock) it was more a matter of how much risk you should be taking, and how much you actually were. Adam Applegarth I'm sure still thinks today he was caught out by circumstances no-one could predict. This book reports that people in the know were worrying about the impending crisis 7 years beforehand.
It also answers the question (that other books don't cover) of why credit disappeared. Surely you can always get anything you want - at a price? Well it seems Northern Rock could have got funds but the tiny 1% increase in the cost was too much for their business model to cope with. In other words it wasn't a credit crunch but a market price adjustment outside the interest rate risk capabilities of Northern Rock. Northern Rock was therefore selling stuff too cheap. It was buying market share by ignoring risk. Ryanair could undercut competitors if it went down to one pilot and one stewardess per flight but of course the regulators won't let them. This book shows how the financial regulators were unable to bring the same order to the banks.
I've only given it 4 stars because it totally ignores the other big question - how much of the bank's problems were caused by the reckless funding behaviour versus how much was caused by lending to bad risks? There is no discussion on the quality of the loans. What was the good bank/bad bank split? How much money was lost due to 125% mortgages?
Ironically I was talking to someone from Virgin Money and they felt that although Adam Applegarth is painted as dominating Northern Rock, power is even more centralised on the new top man Jane-Anne Gadhia.
In the near future, Virgin Money is likely to be floated. At that point I hope Brummer writes another book so we can see where all the money went. I suspect into the pockets of Richard Branson.