Sandler and Rock nationalisation
If anyone doubted that the Treasury is serious about taking control of Northern Rock, were a commercial rescue to prove impossible, those doubts must now be dispelled.
The recruitment of Ron Sandler to be executive chairman of a Treasury-controlled Northern Rock shows that a full plan for nationalisation of the troubled bank is in place.
Mr Sandler a former chief executive of the Lloyd's of London insurance market, is well known to the Prime Minister, Gordon Brown, and has done lots of the work Treasury as an adviser.
All of us as Taxpayers are exposed to the Rock to the tune of 拢55bn through direct loans made by the Bank of England and guarantees to other lenders made by the Treasury.
On Tuesday, recalcitrant shareholders risk annoying the Treasury by voting to restrict the ability of the company's board to sell assets.
Shareholders are voting too on whether the newish chairman, Bryan Sanderson, and some recently recruited non-executives should remain in place.
If they were voted off, the Treasury would regard that as a sign that the company is now ungovernable - and that nationalisation had become the least worst option.
A decision will also be taken imminently by the Treasury on whether competing proposals for a commercial solution to the Rock's ills are worth pursuing.
The Chancellor would prefer not to take this business into formal public ownership.
But if all the competing deals turn out to be either impossible or prohibitively expensive, Mr Sandler would find that he had taken on a huge and challenging job.
That momentous nationalisation decision is probably only days away.
I'm 
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So Mr Bean formerly known as Stalin prepares for the expropriation of the expropriators
"Mr Sandler a former chief executive of the Lloyd's of London insurance market, is well known to the Prime Minister, Gordon Brown"
Oh well-thats the taxpayers goose truly cooked then!
this may all be proving to be extremely exciting from a journalistic viewpoint, but please dont forget the small shareholders who have a lot more to lose individually than the great british taxpayer collectively. it is all very well quoting 55 billion exposure for a hard hitting headline, but we all realise that the likelihood is that the taxpayer will lose much much less, if any at all. but i for example invested in 1000 shares in a british bank because i felt that, despite accepting that the value of my investment, as in any investment, could go down as well as up,i considered the investment to be as safe as putting money in a british high street bank. if the government nationalises and returns the bank to profit, having given the shareholders next to nothing, how can that be fair?both the government and the bank of england acted too little and too late to protect an institution that should never have been allowed to get in such a mess. the potential worldwide sub-prime problems were a danger all banks should have been well aware of, and poor management is almost inevitably to blame, but if the government is to regain the trust of the small investor on the equity markets, they have to be very careful not to try and sell them short.
I wonder how much (Darling and Brown are going to spend trying to save their faces. Of course, it'll be done under the guise of trying to ensure that the tapayer's loan are repayed. Let's not forget, in passing, that nobody actually bothered to ask taxpayers or their elected representatives whether it was a good idea to bail out the busted bank in this way.
How much (of taxpayers' money) Darling is going to spend to save the bank is a reasonable question to ask because we all know how dishonest ministers can be, given half a chance. The point is that the advice of an investment bank like Goldman Sachs, an organization that well understands how to make money out of the misjudgements and follies of others, doesn't come cheap.
I doubt the taxpayer will ever know the true extent of the sums thrown at the problem of Northern Rock "in order to secure repayment of the tapayers loans" because the Chancellor will do everything in his power to make the cost of rescuing the bank appear inexpensive.
Loans given by Fed, ECB and BoE do not count as State Aid or taxpayers money. Fed et al are legal entities granted independence by respective governments.
These loans are open market operation to maintain financial stability and liquidity, similar to foreign exchange rate intervention.
These do not act as treasurers to governments. Their loans are independent of governments.
Future court room dramas and lawyers' fees will be minimized by taking control of Northern Rock before the shareholders' meeting.
All that is left to be decided then is where Ron Sandler is to be domiciled.
Northern Northumberland looks favourite. After all it wouldn't do if he were to bump into Adam Applegarth in the local.
I hope he has got some warm clothes!
It is about time someone took this matter seriously.
We have had the attempts at putting the blame on the poor old BofE when it was the FSA at fault all along.
We have had all the propaganda from those with their heads in the sand blaming the media for the collapse of the bank.
We have seen all the prevarication from the City bankers who, supposedly are advising The Treasury, but seem to be looking after what the Marxists would call their `class interests'.
We have had all the balderdash from those who have said none of this is costing the taxpayer a penny.
We have had to watch speculators buying into Rock shares and block the propsect of any takeover unless they get their pound of flesh.
And recently we have seen the attempt by those same City bankers to get the taxpayer to guarantee junk bonds under the guise of `saving' the Rock.
It is now time to cut to the chase and deal with this matter as it should have been dealt with in the first place.
We have been for months in the realms of a Monty Python sketch. The Northern Rock is an ex-bank, it has ceased to be, it has drawn down the curtain and joined the choir invisible. The bank is bust, it must either go into liquidation or be nationalised in the public interest.
I vote for nationalisation without compensation. I will feel sympathy for the shareholders, bond holders and employees but nothing else. We must now consider the greatest good for the greatest number.
If the Government Nationalises Northern Rock, surely that means the Crown becomes the Freeholder. If that is the case is it not but the first step of a return to Feudalism in that those "subjects" with a mortgage are back to paying the head of State (The Queen) a fee for living on the States land? If so would this not be a worrying return to the Sherrif of Nottingham (aka Mr.G.Brown)and his cohorts collecting a tythe upon the surfs? Could this also be start of the thin wedge getting ever thicker? Or have I got it completely wrong? In anycase, the Nationalisation of Northern Rock would potentially provide the Government with a nice pool of properties once once the large number of repossessions start later this year, and because of selling off (and failing to build) more council houses for the past two decades, this would allow the Government some flexibility to rehouse the poor unfortunates. Robbing Peter to pay Paul. What interesting times we live in? Truth is stranger than science fiction, methinks my Lord!
Robert,
This might be something you've covered before, so forgive me. But it's something that has been bugging me. It might seem an obvious question, but the Rock is not in administration, so why does a buyer need to be found for it (or it need to be nationalised)?
Derek 3, the company you invested in ought to have gone bust long ago and your investment worth nothing. As a result of government intervening with taxpayer's money your thousand shares are still worth 拢875. Why don't you sell Monday and cut your losses? If its to be nationalised with taxpayers money, why should taxpayers pay a premium over the free market valuation?
So this is the final result of the Ballsian - Brownian Tri-Partite FSA/Treasury /BOE compact ?
A small bank/mortgage lender is in hock to the taxpayer for 55/56 Big.big ones - (Good News we have flogged off some trinkets for 拢2.3 big,big ones) and massive 拢100 Mn plus fees have been showered on the City snake oil salesmen.
Small shareholders (as well as the hedge fund hyenas (let's all laugh at that) will lose their shirts, and now we discover the company pension fund is in trouble ... "Black Hole" says the Times.
..or was all this part of the Balls/Brown plan ?
Robert,
This might be something you've covered before, so forgive me. But it's something that has been bugging me. It might seem an obvious question, but the Rock is not in administration, so why does a buyer need to be found for it (or it need to be nationalised)?
Come on! All of us who send in comments should remember the simple maxim that VOTERS GET THE GOVERNMENTS THEY DESERVE.
Instead of whinging, we should be taking action. Hold on a moment, though: surely there must be something lacking (is it backbone?) in the constitution of the British electorate.
Why else would we allow two 鈥渢op managers" to earn millions in bonuses for clearly reducing the quality of one of the UK's vital services, the Royal Mail? Yes, yes, I know, they improved its financial results. Pshaw! Ever been had?
Why else would the electorate in Greater London put up with the directors of Thames Water blatantly ignoring the Regulator's instructions, the result of which was that the Regulator fined Thames Water's shareholders (but not the culpable directors) ?
Why else would electors put up with Network Rail being fined while the directors, whose actions or omissions caused the problem, carry on regardless? Fining Network Rail means the taxpayer is fined. Wake up!
Why else would they stand by, inactive, while being robbed of their pensions?
Is anybody out there beginning to feel that we deserve the treatment we're being given?
Just nationalise it now, which will serve those greedy share holders right for not taking on the Virgin deal. Its about time that the government stopped messing around with this.
Maybe while they are there, they could think about slowing down the privitisation of other services like schools, and get our national commodities back in the national hands for the national interest.
Robert - Brown and Darling may take us back to communist era where everything run by state and bureaucracy and corruption sky rocketing :(
Ron Sandler, good pedigree, the same man that set up stakeholder pensions for the Gov in 2000, what a resounding success they were (not)!
Now that the Gov have realised they do not work, they are to bring in Personal Accounts in 2012/13/? just take a look at the minefield they will create with the ultimate benefit means tested, what is the point.
Ron will be due to retire early so this job will set him up for 3/4 years, he will then leave after they have sold NR off at a loss and he will go away with a Golden Bye Bye,
Jobs for the boys again
Mr Small, 3, is falling into a well known trap. Shareholders participate in potentially relatively large returns in exchange for taking a big risk over which individually they have little control. While I have some sympathy for his situation (his 1000 NR shares were once worth a modest amount) if he can't afford to lose that sum he should have put it into a more secure place and tolerated the low (and highly taxed) return that he would have got. He can't have it both ways, and taxpayers are not in the business of bailing out ignorant shareholders who don't understand risk. Personally I don't believe direct shareholding is for Small shareholders because they can't invest enough to have a diverse, risk-minimising portfolio. There are of course many well-known ways around this... and they are well used by others.
Derek -who says that the value of share can fall as well as rise but does not like the falls!!
NR is bust. It should be allow to go into administration. Shareholders will lose out. Depositors may lose. I dont see it to be HMG role to prop up this institution.
The only reason this has not been allowed to fail is that is it NORTHERN Rock. Had it been Southern Rock, with Tory seats vulnerable then it would have been sunk a long time ago.
Mr Darling you cant polish a manure heap. That is what you have got. This New Labour bank like the New Labour Project is bankrupt, morally, intelectually and financially.
Monday: Northern Rock nationalised.
Tuesday: Northern Rock chopped into bits and Britain's largest 7 or 8 banks persuaded to buy a bit each.
Wednesday: OFT/Banks test case due in court to decide if the Banks have been acting unlawfully to the tune of 拢20 billion or more. OFT and Banks do a deal and case does not proceed.
Perfect timing.
9. Graham - NR is bust in that if its loans (notably the BoE's) were called in today, NR could not pay. So, it is far beyond administration, which is just a case of keeping the business going, while debts are paid off.
These shareholders keep whinging and making threats, but the Govt must call their bluff: tell the s/holders that their shares are worthless and close NR down. Santander are obviously looking to expand Abbey (hence the talks with A&L and saying they want 300 more branches), so they would take some offices. The mortgages can be sold off as bonds if they are any good and the rest will just have to take their chances.
9. Graham - NR is bust in that if its loans (notably the BoE's) were called in today, NR could not pay. So, it is far beyond administration, which is just a case of keeping the business going, while debts are paid off.
These shareholders keep whinging and making threats, but the Govt must call their bluff: tell the s/holders that their shares are worthless and close NR down. Santander are obviously looking to expand Abbey (hence the talks with A&L and saying they want 300 more branches), so they would take some offices. The mortgages can be sold off as bonds if they are any good and the rest will just have to take their chances.
Graham, post 9, it is a sensible question and for someone who has come into the Northern Rock story late entirely a reasonaable question to ask.
The Northern Rock (NR) is effectively bankrupt. It had a huge amount of loans that are payable to commercial organisations which were raised on a short term basis. There is till a huge amount outstanding.
Imagine that you bought a house using a credit card with a low introductory rate. The low rate expired and you roll over your debt to another credit card company again at a good deal. This is effectively the NR business model as they rolled over short term loans to pay for mortgages they have given out. The so called policy of borrowing short and lending long. In other words going against one of the absolute fundamentals of banking.
Last August when the credit crunch started the NR found it couldn't refinance these loans and couldn't afford to repay them. So it goes to the Bank of England as lender of last resort to borrow from them to refinance some loans.
Word gets out that no banks will loan to NR and that they have had to borrow from the Bank Of England. Not unrationally savers fear for the safety of their money and seek to withdraw it in huge numbers.
Once it becomes clear that lots of people are withdrawing money many more follow them. This was the bank run people referred to.
This is a big problem for NR as their assets are generally in mortgaged properties which means they struggle to raise enough cash to pay their savers.
In order to bring a degree of order the government steps in and guarantees the savings to try to stop the withdrawals. Once part way in the Bank of England has two options.
First option is to let NR go bankrupt as it cannot pay its debt without their support. The government, planning for an upcoming general election and fearing for their majority decide to keep helping out the bank.
The loans grow up to 拢 26 billion and them the government decides that to try to allow for a private sale it will also guarantee loans from banks to the NR. Hence the potential liability of 拢 57 billion.
The second option is to let them go bust causing potential contagion to the rest of the finance industry plus damage to the UK's financial standings.
The NR is bust in all but name and it is only the goodwill of the UK taxpayer via the treasury that is keeping it afloat.
Small shareholders.
They must realise that they have no power and are dispensable.
The American sub-prime setup was the catalyst for what happened to Northern Rock.
The American politicians encouraged financial institutions to lend mortgages to high risk house buyers.
The lenders then carried out all sorts of financial wizardry with the resultant loans.
It has been well known in financial circles (including UK treasury/FSA), what was going on with these sub-prime loans.
Warren Buffet even stated how it was a financial disaster waiting to blow up.
Result for small shareholders....
If they had carried out such dodgy dealings at street level, they would have been prosecuted.
Meanwhile the banks and hedge funds, which made lots of money from these dodgy sub-prime loans, are not seen as guilty.
The people who run the Northern Rock are not being prosecuted. Like the bankers / hedge fund managers, they just take the money and move on to the next victims.
The phrase 'sub-prime crisis' is used to cover up the dodgy dealings by banks and hedge funds and our Prime Minister and Chancellor of the Exchequer act as if they knew nothing about it and hence are blameless.
Just like our Prime Minister and Chancellor of the Exchequer state that there has been low inflation for the past 10 years. In that case, what was the rise in the cost of one of our basic needs (housing) if not hyper inflation.
So, small shareholders, if you want compensation for.....where does the compensation culture stop? Perhaps the governor of the Bank of England was correct with his first stance.
Good luck.
I agree with Robert that we are surely approaching the end-game with NRock and this fascinating economics story may be finally drawing to a conclusion. Well done for hosting this debate throughout Robert and providing us with a desperately needed forum. My own fear for a while now has been that, entertaining though it has been, perhaps this story should have been a political one instead.
Personally I believe the Govt knew the gravity of NRock from July onwards and knew that 'rescue bids' by Branson et al were nothing but publicity stunts to buy them time, I think nationalisation has been certain since at least Sept and the sale of the 'crown jewel' mortgage book this week suggests the break-up has started already.
But loans of 拢55 Billion make this a huge political story. And with many of his front-bench representing seats in the North East in both 1997 & 2001 administrations the defining event of Tony Blair's first year in office may therefore turn out to be the demutualisation of NRock rather than the death of Diana. This 'carpet-bagging' of one of Labour's spiritual heartlands begat a Weimar-style cheap loan economy and made buy-to-let the chief engine of UK 'growth' between 1997 - 2007.
Now we've learnt Tyneside developers have been secretly funding Labour perhaps we need to ask who the Govt has been bailing out, NRock or their own supporters? If the latter then the govt may be about to 'nationalise' not a bank but a UK-wide 'Poulson Scandal'.
Perhaps Michael Caine could be persuaded to remake 'Get Carter'?
I agree with Robert that we are surely approaching the end-game with NRock and this fascinating economics story may be finally drawing to a conclusion. Well done for hosting this debate throughout Robert and providing us with a desperately needed forum. My own fear for a while now has been that, entertaining though it has been, perhaps this story should have been a political one instead.
Personally I believe the Govt knew the gravity of NRock from July onwards and knew that 'rescue bids' by Branson et al were nothing but publicity stunts to buy them time, I think nationalisation has been certain since at least Sept and the sale of the 'crown jewel' mortgage book this week suggests the break-up has started already.
But loans of 拢55 Billion make this a huge political story. And with many of his front-bench representing seats in the North East in both 1997 & 2001 administrations the defining event of Tony Blair's first year in office may therefore turn out to be the demutualisation of NRock rather than the death of Diana. This 'carpet-bagging' of one of Labour's spiritual heartlands begat a Weimar-style cheap loan economy and made buy-to-let the chief engine of UK 'growth' between 1997 - 2007.
Now we've learnt Tyneside developers have been secretly funding Labour perhaps we need to ask who the Govt has been bailing out, NRock or their own supporters? If the latter then the govt may be about to 'nationalise' not a bank but a UK-wide 'Poulson Scandal'.
Perhaps Michael Caine could be persuaded to remake 'Get Carter'?
Perhaps the timing of the release of the possible new Chairman鈥檚 name is the important thing; at least just at this moment, and not the actual fact itself
Maybe the main idea right now is to get a message to shareholders (especially the two hedge funds leading the activity) ahead of the EGM on Tuesday, that would make some votes seem a lot more dangerous now the Government is being seen to be contemplating 鈥榲ery seriously鈥 the 鈥榥uclear option鈥 of nationalisation
But if this is more about a short term 鈥榮pin鈥 calculation on timing, rather than actual substance (apart from Mr. Sandler鈥檚 name there seems to be no other detail on 鈥渢he plan鈥 as yet)---- is it just a 鈥渞eturn to the politics of Spin鈥? 鈥.. Surely not!!
> please dont forget the small
> shareholders who have a lot more to
> lose individually than the great
> british taxpayer collectively.
I know. Can they be surcharged for
failing to govern the firm properly?
Surely there must be some way to get to
them?
The whole episode reveals the tripartite system to have failed at the first hurdle.
Twice the annual defence budget saving a broken business model? The government should have taken note when it was told this was a problem eighteen months ago but it ignored warnings.
Brown always did stick his head in the sand at the first sign of trouble but this one will show him to be the man of strraw Tony Blair knew all along.
has any one sat and done any kind of evaluation on the damage that would have been done to the banks and economy if the rock had been liquidated back in september vs the damage it actually has caused being dragged along in its current state?
it would be intresting to see the outcome, i don't recall the world financial markets collapsing when barings bank went bust...
hex
As Saturday's FT explained, NR's fundamental problem is that it has a mortgage book which, best case, yields 6% and it cannot obtain funds at a cost of less than 7% (and then only from the Bank of England - no commercial lender would lend it money at any price). It is therefore a non-viable business, and the only way it can be made viable is by someone offering it enough of a subsidy for its cost of funds to be lower than the net yield on its loans. All the rest (Virgin, Olivant etc...) is just smoke and mirrors. And the 拢100M fees paid for by the taxpayer are just a face-saving device.
The only reason the shares as trading at more than 0p is that traders suspect that, having wasted 拢100M in fees and put 拢55bn on the line, this Government will be prepared to pay another few 拢100M of OUR money to avoid further embarrassment. And, alas, they may be right. Meanwhile Police are cheated out of their independent pay rise, the Armed Forces are starved of necessary equipment, and funding is cut for adult education.
The Northern Rock is still advertising, on its website, 'a mortgage which allows you to borrow up to 125% of your home's value'.
I consider this to be incredibly irresponsible.
At long last perhaps the sorry saga of the demise of Northern Rock will soon be put to bed, once and for all. That might be bad news for the shareholders but they should have known that holding shares in todays volatile markets is a very risky business.
Perhaps now is the time for the "Rock" shareholders and city editors to let go of the matter and move on. So the people charged with running the business can get on with the job, without too many outside distractions.
Maybe all shareholders will now better understand that in most respects the manner in which company shares are valued and traded on the stock markets is little more than a game of charades from which the average shareholder is excluded.
If the Government is serious about nationalisation of Northern Rock, one wonders how many other financial institutions they will have to do the same for when the whole sector goes into meltdown later this year.
There will come a point when even Far East & Middle East governments, currently "bailing out" major U.S & European banks, come to realise that their own markets will be heading for a resulatant crash very soon.
Northern Rock is in trouble due to an incompetent management strategy. The Treasury's handling of this whole situation has been worse. Nationalising Northern Rock is a massive mistake what should have happened after the Bank of England stabilised the situation was administrators should have wound up Northern Rock in an orderly manner. all that has happened is several months of finger pointing and blaming while at the same time the global credit situation has got worse the result of this will be more difficulty in selling the loans on Northern Rocks books for an acceptable level and the increased likelihood of a slump in house prices that could push many borrowers into negative equity, this coupled with tightening in lending policies, increased costs for selling (HIPS) and a general rise in the cost of living could see the value of Northern Rocks Assets plummet. Also there is the interesting make-up of the Rock Financing engine called Granite, I for one would like to see a disclosure of what assets and liabilities this has.
The bit I find interesting is that this mortgage sale took place the day after it was announced our former Prime Minister was joining the bank in question as an advisor ....
Moi cynical? Certainly not .
guy 10, with all due respect, we are not talking here about letting any old company 'go bust'-Northern Rock is a british 'high street' bank with one of the largest portfolios of british peoples houses in the uk.this housing stock doesnt just 'disappear'. at the current time with unsettled financial markets it appears less attractive to investors, but can you really believe that this institution cannot be turned around once (and they certainly will in the u.k) more favourable housing and financial markets return. richard branson, never the one to fight shy of a challenge that turns to gold, can see further than todays difficult times for northern rock. it is really unrealistic to assume we could as possibly the major nation in the financial world allow a major bank of our own to collapse. what if this were lloyds tsb? have faith oh ye of little- and everything in the garden may yet turn rosy, for the taxpayer, the government and even 'maybe' for we small shareholders!(and of course lets not forget those employees and pensioners too)
Graham, post 9, Northern Rock are being kept alive by the UK taxpayers.
They are bust in all but name as no one will lend them any money apart from Gordon Brown and Alistair Darling.
If the treasury wanted it's money the liquidators would be in charge of Northern rock within minutes.
All of this is wrong - the Government has no business interfering with a Private Company, even if it is a bank.
I didn't agree with them saying that they would secure all personal accounts in Northern Rock, but I can see why they did it; but nationalisation is ridiculous - if the bank is bankrupt, let people transfer their accounts to other banks and building societies then simply let the bank go out of business.
(I realise it's a whole lot more complicated than that, but this should be the final aim).
It's not the job of the public to bail out Private Companies.
Nationalisation of the rock, inevitable as it may be would likely be the final nail in UK Plc's coffin. Only in the very worst of times do private companies get nationalised. Still, anyone who thinks we aren't there is completely deluding themselves.
Derek (3) wrote:
"I invested in 1,000 shares in a British bank because... I considered the investment to be as safe as putting [the] money in a British high street bank".
If you really thought this then you shouldn't be playing the stock market. Next time try googling for "Differences between equity and debt", "structural subordination" and "Tier 1 Regulatory capital and its purpose". Presumably you bought the shares rather than deposit the money because you thought you'd get a better rate of return - did you not understand that higher return equates to higher risk?
Virtual Nationalization:
Sandler is now gilt edged. Perhaps Sanderson now appoint Sandler as Co-Chairman could suitably:
- look after taxpayers money
- make Goldman proposed bonds gilt edged
- bring back depositors
- staff, creditors and shareholders will all get more from a well represented orderly transition
- taxpayers will be first in the queue
- shareholders will still get long term value, but will be last in the queue
Brown and Darling's state run unit concept may push as back pre Thatcher era which means no personal holidays, unemployment and high inflation!
If NR is nationalised there would be no safer place for the public's money. Over the counter funds should pour in, (with extra deposits moving from customers leaving fee-charging commercial banks) and NR can do what it did well before the credit-crunch - lend to credit-worthy home buyers.
The government should use nationalisation as a unique opportunity to grow the bank, with a revised business plan of taking more deposits from the public, then sell it off in a few years at an enhanced value - not as a distressed sale as it is now.
3. Derek Small - As a word of advice, I would suggest doing some due diligence before purchasing shares in any company, and not just buy into any high st bank. Simple stress testing would show that lending long and borrowing short does not work when the liquidity in the market dries up (which it does cyclically). Banks seem to have a license to print money, but every so often, the market moves in a manner to reveal that the emperor really isn't wearing any clothes! A famous wall st saying goes..."Bulls make money, bears make money, but pigs get slaughtered!"
Employees, shareholders, bond holders of NR all seem to cry out in unison about their livlihood being affected by this fiasco, but they seem to forget that the rest of the nation has put NR on a life support ventilator via the indirect loan of 拢2000 each or 拢56bn collectively, and why should the majority prop up a bank with such a poor business plan?
Also arent the Goldman Sachs and the Treasury simply compounding the effect by repackaging the NR debt and selling it off? This is what happened in the US Sub-Prime Market, investing in NR is Sub-Prime, and fancy mathematics won't change that. I for one, am enjoying the markets shake, as it is all based around a flawed system of interest and derivatives, which is quite frankly fools gold!!
The argument for administration is now an irresponsible one. If NR goes bust the taxpayer is immediately exposed to Granite and its multi-fingered dike operation.
If Granite goes, many other financial organisations will have their bad credit exposed and will be forced into write downs.
That's the govt's perspective is not petty electioneering for once, but a pragmatic view of the dangers bad credit poses to the financial and banking industry. You see, they can be serious and realistic when wealthy interests are at stake!
It's a shame to see that Tories are trying to make political points out of this - they have, until very recently, been claiming that the credit fuelled asset boom was 'Ken Clark's golden legacy'. They would have done nothing differently - except retain interest rates as a political tool, which, going by their past record, they would have used to fuel booms on the upswing and deepen recessions on the downturn.
Don't get me wrong, I'm not a Labour supporter by any means - I'm a socialist!
I would like to see this nationalisation used as a basis for financing a diversified energy generation scheme, a council house building programme to end the bubbles for good, and low interest extension of credit to the poor and low paid - to exclude the loan sharks, I mean businessmen, operating at the lower end of the scale.
What do Ron Sandler and Derek Wanless have in common? Derek Wanless was the Chief Exec who effectively lost NatWest its independence, when the Bank of Scotland and the Royal Bank of Scotland were fighting it out for control of NatWest, Derek Wanless was replaced by Ron Sandler as Chief Operating Officer. (He failed to save its independance, NatWest is now a brand name owned by Royal Bank of Scotland). At the Rock, Wanless chaired the audit and risk committee, which would appear to have made interesting risk assessments. Sandler coming to the rescue again? The omens don't look good to me...
Anyone who believes that property is a good investment (especially in the Northeast where Northern Rock are based and you would expect to be heavily involved in their local market) should think about these figures the Average family income in the North East is 19,130 and the average house price in Newcastle is 172,000 which tells me for the average family in Newcastle to buy the Average house they will be borrowing 9 times earnings for the property market in this region to become viable and that to change to the more traditional 3 to 4 times earnings you would have to see the average family income increase to 55,000 a year in Newcastle (not very likely) or the average house price to decrease to approx 55,000. I f I had just mortgaged myself up on a self cert mortgage in Newcastle I would be preparing myself for a long long time of negative equity.
Derek Small. I feel for your loss on the Northern Rock shares, and it's always easy to be wise after the event. However, the events surrounding the Northern Rock show that equity investment is for sophisticated investors (and that term excludes some fund managers too). The Northern Rock's funding gap was visible and quite widely reported and if investors didn't understand the risk associated with that funding gap then they shouldn't have been buying shares in the business. Many other banks took a decision to build their businesses more slowly and based on a greater level of deposits - they and their shareholders suffered lower returns as a consequence. It's not the government's responsibility to ensure that investors properly understand the businesses in which they're investing.
Mike Murray said "I would like to see this nationalisation used as a basis for financing a diversified energy generation scheme, a council house building programme to end the bubbles for good, and low interest extension of credit to the poor and low paid - to exclude the loan sharks, I mean businessmen, operating at the lower end of the scale."
Sorry, Mike, this is not that sort of nationalisation. This is the 'bailout' sort of nationalisation, used to make sure that all the big companies who lent money to Northern Rock dont lose their investment due to its bankruptcy. There wont be any money to finance any of your worthy schemes. On the contrary, a lot of worthy causes such as Health, Education, etc. will probably end up having their funding cut in order to pay for the bail-out.
Robert - one of the points made when this mess first developed was that other banks running similar business models on mainland Europe, hitting the same global credit shut-down, have survived quite happily with the timely support of the European Central Bank. It has been said that if Northern Rock had had a single branch in the eurozone, it too would have sailed through intact, thanks to ECB support. You have told us a lot about the effects of the Northern Rock crisis and you have been critical of the management of the Rock itself but you have done less to investigate and lay bare the fundamental causes and where they lie - in the different regimes governing the respective roles of the BoE and the ECB. Time to get your teeth into this?
I'm a little lost, i was given some shares when my nan died, what does this all mean for me? Will i lose them? Or will i have them brough off me and for how much. Would it be best to still try and sell them now?
Ron Sandler is a fake!
"CREDITED WITH..." ??? He was a Johnny come lately to the rescue of Lloyds of London. The hard work and strategy was already in place and then came an updraft in the insurance cycle to make everyone look good.
He doesn't have any of the right experience or qualifications to get Northern Rock back on track. Looks like Al and gordon have fallen for the 'spin' for once and embraced a fast-talking aspirant.
Get Olivant on board, let the long-suffering shareholders share a slice of any upturn (rather than Branson and cronies taking all the upside), slicel up the debt and leak it into the debt markets over time...
Whats the big rush to Nationalise Gordon? Scared that the bad news will keep tarnishing your image.
Hi,
I'm reasonably intelligent but not about 拢!
If one believes in capitalism, then wht didn't the Government just let Northern Rock sink?
If the rest of the banking sector were that bothered and worried about the consequences about a 'run on a bank' wouldn't the market settle itself.
That's always what capitailists preach - market forces find theri own levels etc.
RE NORTHERN ROCK? I AM NOT A SHAREHOLDER BUT A PEASANT? IF PEOPLE INVEST IN COMPANIES HOPING TO MAKE LOADS OF MONEY? WHEN IT GOES BELLY UP THAT'S TOUGH, AND THEY SHOULD NOT WINGE, IF SOME BODY GAMBLES ON A HORSE" DOG" WHATEVER AND IT LOSES, THEY DON'T WANT THE GOVERMENT TO GIVE THEM THERE MONEY BACK, SO NORTHERN ROCK INVESTOR'S TOUGH?
Let's just get rid of this government as soon as possible. They are a disgrace to our nation.
Northern Rock was able to pursue its aggressive, some would say irresponsible mortgage lending, thanks to willingness by other banks to provide it with finance much of which one understands was short term. They were or certainly should have been aware that Northern Rock's ability to repay on time depended on its ability to borrow from someone else rather like many overdrafts which are repayable on demand.
These lenders of short term funds were not innocent Tynesiders but I assume streetwise city bankers who, unlike financiers of sub-prime lending in the USA, are getting their money back thanks to the benevolence of the Chancellor of the Exchequer on behalf of tax payers.
Why on earth is this cowboy going to be paid 拢90,000 per month.....