Rock and Nationalisation 2
Having noted my broadcasts and blogs for the past few weeks, a banker asked me last night why the Government is planning to nationalise the Rock, as a fallback if a commercial solution were to prove impossible.
What he could not understand is why the Treasury would not allow the troubled bank to collapse into administration under insolvency procedures.
The answer is simple.
In administration, the Government would have little direct control over the bank’s future, which would be in the hands of a court-appointed administrator.
More specifically, the Treasury could not be certain that all retail depositors would have instant access to their savings – and that could prompt a serious panic, with the risk of contagion to other smaller banks.
One of the flaws of insolvency laws, as it pertains to banks, is that retail deposits rank right at the bottom of the queue of creditors.
So it could well take a while for an administrator to allow the Rock’s retail customers to draw on their precious savings. And even after months of withdrawals, they still have between £10bn and £11bn of their cash deposited at the Rock.
That said, the Treasury has guaranteed that no Rock depositor will lose a penny.
But the guarantee does not eliminate the risk of high anxiety among those depositors if they were unable for a while to actually get their mits on the wonga.
So administration is simply not an option for the Treasury.
However nationalisation is a very real possibility, as I’ve been saying for some time.
Nationalisation is not the Chancellor’s preferred option.
He would much rather have a commercial solution to the Rock’s serious ailments.
But a commercial solution hinges on the ability of one of the putative rescuers to secure a jumbo loan of around £11bn to repay a portion of the taxpayer-backed loans to the Rock – which are around £26bn.
And the tightness of money markets means that the prospects of obtaining such a loan have been receding in recent days.
On the plus side, in an emergency meeting with the Rock and its advisers yesterday, Olivant was persuaded not to abandon its rescue attempt – largely because the giant US bank Citigroup was prevailed upon to finally meet with Olivant and discuss the provision of a possible loan.
What that means is that both of the possible rescuers, the consortium led by Virgin and Olivant, have some residual hope of persuading the duo of Royal Bank of Scotland and Citigroup to provide committed facilities that would allow a deal to be done.
What are the realistic chances of the banks eventually providing those committed facilities?
No better than 50:50, according to one of the rescuers.
Which means that the odds of nationalisation are about the same.
But the Chancellor would not dare to push the nationalisation button unless and until the last rites have been said over a possible commercial rescue.
And his plan is to wait and assess the health of credit markets in the new year, before making his momentous decision.
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Great posts over the last few weeks.
What I am failing to understand is why is every party stalling? Why can a decision not be reached quickly and what is the incentive for some parties to delay this decision?
It would be relatively easy to fasttrack legislation to "confiscate" the savers from Northern Rock and hence guarantee those savers deposits.
Had the Government done that immediately, without making any loan, then the bank could certainly have been left to collapse. For sure, shareholders would have lost everything but that is the nature of equity investment - risk and reward.
As it is, the Government has leant the equivalent of the Defence budget and more to Northern Rock and that is why nationalisation is now being considered. Put another way, poor regulation followed by incredible government indecision has again left the taxpayer at risk of bearing a truly massive bill and hence this mess.
Given that Citigroup have today admitted that they need to take $49bn of SIV trash on their balance sheet and they have already gone cap in hand for petrodollar cash at penal rates, really do they (or other major banks) have any capital for this deal to deploy ?
All the rescue deals look doomed without some sort of back door treasury guarantee.
Why oh why is this stock not suspended .It's a total false market
Doom and gloom AGAIN!
Are you trying to start a second run on the bank?
What is your agenda???
What I find ironic is that the banks most willing to get behind the supply of funds are RBS and Citigroup. Two of the banks who are in the most tenuous financial position of any of the major banks ,because of the depth of their participation in securitised property loans. On the face of this it appears akin to asking a leper for a bedbath.
It's also self reinforcing to see human nature live down to it's expectations in that already people are crawling out of the woodwork to use their laser sighted hindsight on how this NR issue could have been handled better.Try it in real time when most of the facts you are trying to deal with are still unknown and dificult to quantify.Not so easy.
I see nothing in the way this has been handled to date that I could say was terribly wrong given the facts they had to hand at the time.
It's not particularly dramatic ,or newsworthy to say that this appears to be on target to be resolved either in the private ,or public sector with little ado except for the expected verbal flatulence from certain quarters.
Re Post 1 I don't think everyone is stalling it is just that the figures involved are huge.
I believe NR are stalling in the hope that the longer they can drag this on the better their position will be. In fact their position may be weakening. We need to remember that the board and senior managers are likely to have decent sized shareholdings and every month that the NR continues as it is is an extra month that they will get paid.
If you have read the story today re Citigroup and the huge cash infusion they have had to put into their own SIV's there simply may not be the money out there at Citigroup. Or at least not at the terms Virgin and Olivant want to pay.
I believe nationalisation is getting likelier by the day.
but Citibank? things aren't looking so good for them either
... and what has Vince Cable of the Lib Dems been saying from day one? Nationalize! If Brown is forced to do so, it will be (rightly) painted as an embarrassing climbdown.
I hope this banker was just a minion and not a senior person because I'm very surprised and indeed very worried that he/she didn't actually understand this in first place.
Tells one a lot about the standard of intelligence in the banking community and goes some way to explaining how it got into this mess in the first place.
Perhaps we should just nationalise the lot because if they're all this bright you can guarantee they will do it again.
Yes, the government could legislate to meet their depositor guarantees, but much easier then to take the company over, inject enough equity to keep depositors and lenders calm, and then either obtain refinancing for the loans from the market and resell the business (albeit gambling on an improvement in market conditions), or liquidate assets/deposits/loans and take a hit on the shortfall. In either case, it would be very hard to jump the queue on existing lenders, so the risk lands with the public, regardless. But alos in either case, the current shareholders are currently in the black only because they are propped up by a government loan. The government is therefore free to decide between current rescue attempts and nationalisation, and in case of the latter, it is free to name the price of existing equity (ie. somewhere close to zero).
Nationalisation and, indeed the rescue, of Northern Rock provide much greater risks and consequences than allowing the bank to fail.
The bank is not of systemic importance to the financial systemm.
A crisis of confidence may be a consequence of allowing the bank to fail. This lack of confidence will shake the foundations of others who have followed higher-risk strategies or have failed to understand the risks of the business that they are in.
The moral hazard lies not only permitting banks to take high risk approach knowing that, in the end, the government will ride to the rescue. Where should the government stop? Should the government provide farmers emergency cows?
Perhaps nationalisation of cows will be in the next Labour manifesto?
With yesterdays news from Northern Rock, a new CEO appointed, are we slowly starting to see light at the end of the tunnel for Northern Rock.
Also it would appear for yesterdays bank return from the Bank of England this was the first week they have'nt had to borrow from the Bank of England which is great news.
I'm worried that the £10-15bn to be repaid by either of the private bids, would represent a shared risk transferral of debt, or whether Virgin and Olivant are offering to buy back only the higher quality debt, leaving the BoE with 10-15bn of lowest quality debt?
If anything, by the BoE rescuing the bank in order for private institutions to be able to buy it for a song, they should pay back the debt on the riskiest assets first, as the prime debt can hold its value better over the 3 years it will take to pay the remainder back. If not, then the process must be stopped immediately and it should be Nationalised.
The same should be said about the assets offered as collateral for the new injections of liquidity. Central banks must not become the dustbins of unwanted risky sub-prime debt.
I note here as Mr Preston is yet to produce a blog on it specifically, that Citibank have moved SIV's with a value of $50billion onto their balnce sheet. If they were to call on the central banks new fund that would devour 45% of it.
In a credit crunch crisis where is anyone going to get upto £15billion of credit when those would normally offer the credit are the ones suffering the crisis?
I SEE HBOS's SHARE PRICE HAS DROPPED 27P THIS MORNING SO FAR. WHY HAS ROBERT PRESTON NOT WRITTEN AN ARTICLE ON THIS YET???
Robert
History shows that the obstacles you explain to Administration can be easily overcome. The technique is simple - the Administrator proposes a Company Voluntary Agreement with creditors (CVA) which requires approval by only 75% of creditors. This can include agreement that retail depositors are repaid immediately, and can also provide a mechanism for a new run-off business plan. Given the size of the Bank of England loan, it should not be difficult for the government to dominate the negotiation of the terms of a CVA.
This route was used in the 1990s, when both Chancery Bank and Provincial Bank went into CVAs, and in both cases retail depositors were repaid quickly.
Turn it back into a Building Society, and give each share holder an account with some nominal sum deposited in it.
The government could own the majority share, and continue to support existing (but not new) debts.
Any new mortgages would have to be based on conventional sources of money(whatever they are).
Gradually the number of building society members would reduce to a manageable amount, and the government could offer its share to the existing members who remained loyal (in, say, 5-10 years time).
It is nonsense to suggest that allowing NR to fail is unacceptable. The Treasury and Bank of England could very easily put in place a scheme to ensure that retail depositors are paid out. This could be communicated, with mechanism and timetable, to all depositors, and a panic is very unlikely to ensue. It is much more likely that the reason for the proposed nationalisation is that the government has realised that NR truly is insolvent (as some of us have been saying from the very beginning of this sorry mess), that assets do not cover liabilities, and that they are unlikely to recuperate all of the Bank of England's £25 billion loan. So state ownership and a long, painful death for Northern Rock is preferred as a way of muddying the waters and hiding the true losses. How will this bank operate? What deposit rates will it pay? Is the government about to start lending for mortgages? What will the knock-on effect be on other government savings mechanisms - the gilt market, premium bonds? Does anybody know what they are doing? Darling, King and McCarthy should be be the next ones to get the sack for allowing this total shambles.
The poster5 who expresses the use of everybody's laser vision hindsight is very correct. No experts (!?) within banking, media, treasury, Gov whereever predicted any of this scenario in advance or in real time. All finance and banking seems to be giant casino far away from reality with a herd mentality based on speculation, rumour, self serving remarks of the so called Masters of the Universe.
I see more detailed and rigorous calculation, planning, and thought being applied on the 2.40 from Wolverhampton in the nearest betting shop.
My serious question is to find out how other banks and countries in Europe, Asia, US, are faring in this crisis, given their central banks put large amounts into their systems. Who else has got a Northern Rock, which other countries' taxpayers have coughed up +£30bn, anybody else weathering the storm better or worse? See mid-eastern cash rich investments buying all power and control in next few years, as India and China mop up production and manufacturing business. The old world power and control base is being taken apart, with money system collapse the main gates have well and truly been breeched.
I think the government should be very wary of nationalising the bank. By doing so it creates false expectations and cuts the room for manuveure.
We are have seen unprecedented action to avoid a recession. Now, in most people's experience, recession is something that lasts for two years or so then things start to pick-up and the cycle continues. Why is there such great fear about this recession? Why does it seem so terrible that Central Banks have to organise liquidity injections and people speak of the Euro collapsing? Possibly because there is a long way to fall from the heights that credit has taken us to; and there are structural aspects of the global economy that means things could be very difficult in the future.
If we do fall into a recession, and given the events recently, there is a fair chance it will not be shallow, then the Government, by nationalising the Rock, would be in a difficult position vis a vis borrowers, foreclosures and people with accounts in banks under similar pressure. False expectations of the State would have arisen. The Rock, like a cash vampire, would suck more and more money, damaging the Government's ability to borrow (already very limited) and sustain spending as it is - always very useful in a recession. (Free marketeers become very Keynesian when it's their money and business). Confidence in the Government would be damaged (a critical point); the consequences of which cannot be foreseen.
It'll be tough anyway without the Government hanging a concrete albatross around its neck.
The Rock is bust. That is the reality. It cannot function on its own as a businesss. The government should recoup the tax payers money and let NR go the way all unsuccessful business go. BANKRUPT- Closed down. Administration.
If tax payers do not get back money the government lent to Northern Rock,
Who wants to start suing the goverment????
Given the shock that has been administered to the credit markets, I cannot see this sector improving in the short-term. Time must pass to allow recent events to fade (a little) from the memory. That would seem to rule out a viable rescue bid.
Nationalisation might be a feasible option during 'normal' market conditions, but in this highly volatile climate I can't see it happening. This is not the only problem in the Treasury's in-tray.
That leaves insolvency and administration. If this proves to be the case (as I believe it will), Government would no doubt ensure that depositors and mortgagees were adequately protected.
Whatever the outcome, the Treasury needs to draw a line under this sorry affair - and fast!
To be honest, I'm sick of asking this question, but since Robert doesn't seem interested in actually explaining to the public what is going on then I'm going to keep on asking.
Why can't NR itself just borrow the money from RBS and/or Citi? Virgin or Olivant are not going to be able to put in any additional security over and above NR's existing assets.
If new management is needed at NR to make this happen, so be it - change the management. Change the name if you like. But why prompt a fire sale when the only bidders all have to borrow money from the same sources?
Pure madness. Or am I missing something? If so will Robert please explain to the public, as his job?
I find it a bit ironic that in these times of reducing the numbers of council houses available and the government blackmailing local authorities into privatising their housing stock, that the treasury could be just about to take on the mortgages from the Northern Rock!
Please excuse me putting a basic question. I have asked the ´óÏó´«Ã½ by email but got no reply.
When the ´óÏó´«Ã½ is reporting especially when talking about American Companies how many £'s or $'s are there in the billions (bn)that are quoted in the text?
Do the writers use different definitions in different reports ?
Perhaps you think the numbers are just so big the actual amount is irrelevant.
I has previously thought it prudent to ensure that liquid savings were dispersed around various banks/building societies to ensure that the total in any one place did not exceed the FSCS limit of £35K.
Howver, there is a very big flaw in that idea, as Robert has pointed out (and also mentioned in this weeks Financial Advisor magazine), and that is your monies will NOT be instantly returned to you should the institution go to the wall.
You will have to wait whilst the administrative wheels grind, for months and maybe into years before you get your money back.
This is a very poor show and contrasts badly with say the USA, whereby the scheme used there enables depositors to get their funds back very quickly.
Looks like I'm going to have to think again.
Maybe the money is safest under the proverbial bed!
Good reporting Robert.
My conclusions are that the bank will be nationalised.
Re #4 Silly Billy
'Doom and gloom'? 'Agenda'?
Don't shoot the messenger comes to mind.
Peston is one of the few people in the media telling-it-as-it-is at the moment. Our current banking system ties us all in to debt and has inflated housing costs to extreme levels, not to mention the fact that the banks have GAMBLED huge sums of money on SIV's etc.
Get educated about banking.
Robert - Isn't it about time you left this story alone and let all concerned free to carry on the process to get this matter resolved?
The ´óÏó´«Ã½ dropped the Madeline McCann story in a shorter time than you have been reporting on this. For everybody’s sake give it a rest!!
A good analysis here. There is no easy way out now and if anything this is the beginning of the Government's Northern rock problems, not the end.
If it is to be nationalisation then the bank could be in government hands for years given the state of the markets and economy.
this will leave many more difficult questions. what do about shareholders? what to do about staff? To still run a business or to turn to a run off situation?
Luckily our government is chock full of experienced business people able to make these decisions based on their lifelong learnings from industry...
It would be interesting to know how
the credit crisis is affecting other european countries.
Are any other eurpean banks in the the state as Norther Rock ?
Or are we in this alone ?
I has previously thought it prudent to ensure that liquid savings were dispersed around various banks/building societies to ensure that the total in any one place did not exceed the FSCS limit of £35K.
Howver, there is a very big flaw in that idea, as Robert has pointed out (and also mentioned in this weeks Financial Advisor magazine), and that is your monies will NOT be instantly returned to you should the institution go to the wall.
You will have to wait whilst the administrative wheels grind, for months and maybe into years before you get your money back.
This is a very poor show and contrasts badly with say the USA, whereby the scheme used there enables depositors to get their funds back very quickly.
Looks like I'm going to have to think again.
Maybe the money is safest under the proverbial bed!
Hi Robert,
Firstly let me say you are doing a cracking job here in highlighting the daily saga of Northern Rock.. I see you get some flack for this, but these people do not realise just how serious an event this is for the UK, our Backing system and the stability of the current UK Government.
If the Northern Rock saga turns out to be just a one off incident... where a former regional UK Building Society grew too quickly chasing Banking profits and playing on the money markets - then so be it (unlucky for the shareholders of NR).
But if this is indicitive of the way all the financial services in the West have been behaving (well US & UK especially), then we all have a problem!
Given that financial services makes up so much of the workforce in UK/US/Switzerland etc, and it drives a lot of Tax revenues.. It also provides the financial backing for the property sector, another key employer in the UK/US, and property is the asset base of most in the real economy (spending etc)..
On a further point - has anyone taken a look at the UK pension system, and what exposure they have to the toxic CDO/SIV markets.. I would have to see any of these reporting massive losses on investments in their Year End accounts!!
In summary I do rather hope this is saga is just the Northern Rock stretched to far, and got caught.. But I see the news from Citibank/UBS Barclays and HSBC and I don't like the look of what been going on..
PS.. I can't really see any group of banks offering to lend NR £15bn ($30bn) in the comming months (unless it's at a 10% priority interest rate - and that would kill their P&L), so Nationalisation is my bet!
Andy
To be honest, I'm sick of asking this question, but since Robert doesn't seem interested in actually explaining to the public what is going on then I'm going to keep on asking.
Why can't NR itself just borrow the money from RBS and/or Citi? Virgin or Olivant are not going to be able to put in any additional security over and above NR's existing assets.
If new management is needed at NR to make this happen, so be it - change the management. Change the name if you like. But why prompt a fire sale when the only bidders all have to borrow money from the same sources?
Pure madness. Or am I missing something? If so will Robert please explain to the public, as his job?
Are Alistair Darling and Mervyn King shadow directors of Northern Rock plc? If NR's fall out is bad, then there is potentially a case to answer for certain key individuals under UK Companies Act and Insolvency Act law, given the scale and size of the debt support from the Old Lady and from HMG. Perhaps a fellow blogger can enlighten me here.
Robert, your comment about Administration NOT being an option for NR is spot on. Nationalisation is seemingly the only way out.
There is a much bigger iceberg under the surface.
My IP connections in the City have moaned about the lack of corporate failures in the past few years...that is until about 4 weeks ago. The conveyor belt has jerked into action, rapidly. At least some parts of the financial services sector will relish some troubled times ahead.
In my view, you are now seeing the start of the UK corporate failure fall out from US Subprime contagion. This could last several years.
This unintended side effect could, and its too early to say what effect, have major repercussions on both UK PLC and the Balance Sheets of major UK financial lenders. Watch out for good banking and financial service sector 2007 results, but a warning that 2008 and 2009 will be more reserved as lending caution (credit squeeze) and restoring liquidity and capital ratios (Basel II) bite hard. If more companies fail, banks suffer, unemployment rises, and even if interest rates fall, confidence drops and people spend less.
We are in for a UK recession in my view. How deep, long and nasty it lasts is anybody's guess.
To all those people who are wondering if NR is insolvent (ie BANKRUPT), take a look at this cute little vid:
High rates of mortgage defaults in the USA have scuttled the "fractional reserve system" and banks around the world are freaking out in case their depositors come asking to withdraw their supposed savings. Because most of the privately owned "reserve banks" (including BoE which although supposedly "nationalised", does not answer to the government or the people who elected the government) don't maintain enough in reserve to bail out the banks either, the manure is hitting the fan.
If people started queuing up outside their own banks tomorrow and asking to withdraw their money, the terrible truth would come out that NR is not the only bank in trouble, and that our savings do not exist in any real form.
All of this procrastinating with NR is just about keeping joe depositer docile, and stopping yet more runs on other banks which would cause a systematic collapse.
This is insane.
Depositors have had ample opportunity to move their money.
Banks must be allowed to fail, just like any other business. If not, they literally become guaranteed profit machines. They are so very close to that now.
Even leaving NR on Bank of England lending for the long term and allowing it to sink slowly is preferable to nationalisation, the taxpayer now has no money at risk. After nationalisation we will have.
Re No. 36 post
The Google video "Money As Debt" is definitely one to watch.
It will frighten the pants of most investors of any bank.
Take note and act accordingly is the advice.
The Chancelor will still only act in the interests of the Labour Party and all the northern MPs in the firing line.
Why not rename NR as Bank of Northen England as a subsidary of the BOE.
At first sight it must be good for HMG to have the prospective investors put some extra equity into NR. But surely they wouldn't do it if they thought HMG would pull the rug after. So is HMG providing a guarantee not to call in the loan and therefore taking a risk that no commercial lender would. If so that looks like equity too, so perhaps either way its de facto nationalisation.
#36 Many thanks for that video link.. I've been trying to explain this to my son for ages and this does a much better job than I can.
Yes - banks should be allowed to fail and indeed every now and then we should all get together and create a run on a bank.
It would bring home to the industry that people will not allow them to continue to make money out of debt unless they're prepared to put some of that money back into the community.
So why do they prefer a COMMERCIAL solution? Why do they not prefer a MARKET solution? In this allegedly free-market country of ours, capitalism should be allowed to deliver the solution: Northerh Rock needs to RAISE both its MORTGAGE and SAVINGS rates. Those with mortgages will be motivated to move them to other lenders, and those with cash assets will be motivated to deposit them at Northern Rock.
It's really not that difficult, just do the sums:
If the average mortgage is (say) £200,000, then it would only need 50,000 mortgages to be transfered for Northern Rock to gain £10bn cash with which to repay some Bank of England loans. And once NR start reducing their BofE emergency borrowing, I think even Robert Peston would be amazed at just how quickly this so-called "crisis" simply evaporated...
Andy (#33) is absolutely right. In fact it is worse! Why would Citibank lend to NR at 10% when it has just has to seek funding for itself from the Qatari SWF at 11.4% (presumably to maintain capital adequacy). Citi would probably only want to lend to NR at an outrageous 15%.
Citi is facing a storm of multi-billion dollar demands from its SIVs, Sub-prime investments, and Paulson's Superfund for US mortgagees. The absolutely last thing it wants is to underwrite $10 billion for NR. Why does it not just put Olivant, Virgin and Darling out of their collective expectancy and tell them the money-pit already is hoovered dry!
Why not do a 10% Nationalisation?
1) with a government stamp, depositors will return
2) retaining 90%, shareholders will oblige.
3) board and staff will stay, do not blame them, they cannot forecast credit drought better than auditors, credit rating agencies, economists and business editors(!)
4) if the business is indeed profitable, it will get better to pay back creditors
5) a private commercial can be done at a more opportune time, benefiting everyone
Why not do a Morganian meeting?
All bankers meet at Central Bank. Lock the door. Nobody walks out a free man until they fully subscribe to the £25bn syndicated loan among themselves to an SIV. SIV lends to NR.
To add a twist, Central Bank then set up an SIV which provides a back to back guaranteed secured loan to each of them for the same amount at a user friendly rate.
A business is a business...is a business..the Northern Rock is no longer a business..time to fold.
#28 FR
Do not be patronising. I work in (investment) banking and know it to be complex but above all else a confidence game.
Comments like "the Treasury could not be certain that all retail depositors would have instant access to their savings – and that could prompt a serious panic..." are ill-informed and ill-advised. Just what may the average joe in the street think to do for the best after reading this?!
He may have been a messenger but when have those messages been positive or even balanced? EVER? Like a tabloid journo he has his story, his scapegoat and he's milking it. Where are the reports on other struggling banks? I for one expect better from the ´óÏó´«Ã½.
Just maybe a takeover is MUCH further progressed than RP suggests. Are his "sources" real after all?
So why do they prefer a COMMERCIAL solution? Why do they not prefer a MARKET solution? In this allegedly free-market country of ours, capitalism should be allowed to deliver the solution: Northerh Rock needs to RAISE both its MORTGAGE and SAVINGS rates. Those with mortgages will be motivated to move them to other lenders, and those with cash assets will be motivated to deposit them at Northern Rock.
It's really not that difficult, just do the sums:
If the average mortgage is (say) £200,000, then it would only need 50,000 mortgages to be transfered for Northern Rock to gain £10bn cash with which to repay some Bank of England loans. And once NR start reducing their BofE emergency borrowing, I think even Robert Peston would be amazed at just how quickly this so-called "crisis" simply evaporated...
as an employee of NR can somebody please tell me how virgin and olivant plan to repay the loans. NR made their best profits during a rising market when the cost of of their debt was less. Also the number of no status mortgages was too high and therefore the lending criteria would have to be a lot tighter and therefore less easier to get the high volumes previously attained. I could be seeing this all wrong and would appreciate input from anyone who knows about these things. I can't help feeling the successful bidder would simply turn around and start selling off assets a few months down the line to repay debts and make a quick buck. Please post your thoughts because quite frankly I'm just hoping for voluntary redundancy to be announced and I'm off.
You, Robert Peston, have a partial responsiblity for the mess Northen Rock is in because your excitable and alarmist first reports panicked savers in NR to take out their money. The reduction in the saving balances made the position much worse and meant that the goverment had to put in much larger amounts of cash than might have been the case.
Your reporting has done nothing to protect the employment of the NR staff.
ps why is the ´óÏó´«Ã½ so bad at business reporting in general?
Seems to me that we need a saviour. Somebody that has a proven track record of turning basket cases round and we could all trust. Who better than Tony Blair? Think about it; he turned Labour into the leading political franchise of the day. New Labour. We need him to launch the New Pound. At a stroke we could leave all our troubles behind us as we embrace a brand new currency. Guaranteed on his smile.
Hang on a minute though. Have you seen Blair recently? He is morphing into Adam Applegarth.
Leaky canoes anyone?
Leading political editor William Rees-Mogg, former editor-in-chief for The Times and a member of the House of Lords gives enlightenment in the article below:
He reminds us that it was the Labour party of Clement Attlee that committed itself to nationalising the Bank of England and it was, duly nationalised in 1946.
The Uk debt management office gives a time line for the BoE.
Japan has in the recent past considered nationalising failing banks:
If NR is nationalised should it be absorbed by the BoE because the BoE is the NR's principal creditor. If not what role would such a bank play in the market place. In the latter case would it have access to preferential loan rates unavailable to other commercial banks.
Vince Cable's glib answer to this is to nationalise - he has not to my knowledge put pen to paper and explained the pro's and con's of such a move - perhaps as an academic he should do so.
Meanwhile back on planet earth the financial plight of Northern Rock continues to deteriorate. Another day another hit for the taxpayer. As the bill increases by the hour is it really credible for Ally D to tough it out? He is taking a punt with our money and his boss is showing scant interest in the situation. Clearly it is intolerable for a bank to be competiting in the marketplace courtesy of a ginormous public subsidy. Indeed the situation makes a mockery of London as a well regulated financial centre. Untying this Gordonian knot will involve pain for somebody. There is no serious private sector sector bid in place and the prospect of a bank under the stewardship of a Prime Minister who cannot manage his daily diary is frightening. The level of incompetence and indecision is reaching epic proportions. Solution? Is Carey St really the worst deal for the taxpayer?
Be honest Robert. The only reason the bank is not going to be put into administration is this would effectively create a wave of repossessions. Companies owed money from an organisation in administration want there money quickly. Better to get 50p in the pound now than wait and loose the lot. So in a falling housing market repossession becomes the favoured route for repayment. Miss 3 payments and the bailiffs won't be far behind.
You can see the headlines now: "Government leaves homeowners out to dry while the vultures pick over the corpse of Northern Rock". Not exactly vote winning stuff. That said, the root cause of all this financial recklessness is house prices. The sooner they drop by 50%, the sooner the UK can start to turn itself around and reverse the paper pushing industrial decline of the last 20 years.
Northern Rock going into administration might be medicine this country needs.
I am a Shareholder, Employee and Current account and Saver Holder with NR, all i hear from this is politics, tax payers money, and shareholder crying. I work with people who have lost over 30k in shares and still working for the company. People should realise there jobs at stake not just poor shareholders money.
Yes i agree tax payers may foot the bill but is that not what they have done on a so called war of defence for the past 5-10 years, and a so called nhs and school system. Perhaps Capello could become the new Chancellor, Prime Minister and England Manger.
Perhaps a imigrant could run the country better. I mean we tax payers have paid for them long enough is it not time they repaid the favour........
Dear Robert Preston,
Your September report on Northern Rocks approach for a BOE loan is nothing to be proud of.
Television Media is very powerful and I get the feeling you have not only abused your position but it seems you are also very self satisfied in doing so.
Not exactly a claim to fame is it? Irresponsible at best.
Martin
Southampton