Northern Rock to be Nationalised

EalingSaver

Aegis wrote: »

Well, the government has already pumped so much money into NRK at taxpayer expense, and nationalisation brings the loans directly back under the control of the government. If you ask me, this is the safest way for the government to proceed, and is actually quite a good decision.

Yes, it's going to annoy a lot of shareholders, but there has never been any guarantee from the government that shareholders would make money out of this stock. A lot of people tried to catch the falling knife and will suffer for it, and others held on to the stock through false hope. It's tragic if people have lost a lot of money, but investors always come after creditors in terms of priority.

quite right. Lets be clear - although it seems harsh to say it, the last people who should be considered in any 'rescue' here are the shareholders. One can argue as much as one wants over whether the NR crisis was handled correctly by the BOE, the FSA, the treasury, and ultimately the goverments dithering etc. But fundamentally the root cause of NR's problems was its business model. Its objective was to aggressively grow NRs share of the UK mortgage market. It did this by borrowing short on the money markets to lend long on mortagages. This left is with a massive mismatch of short time liabilities offset by long time assets, so when the money markets seized up its business model was in flames. This was the cause of the problem - not the run on retail deposits. And those money markets are still seized up. Even if their had been no run on retail deposits, it would still be in the same mess.

Yes it was a 'management' problem. But who approves the boards plan each year, and who approves the make up of the board? The shareholders. The smaller shareholders may not have understood the subtleties, but I'm afraid that's life - no reason why they should be bailed out by other people i.e. taxpayers. I don't suppose many shareholders complained - or questioned the business model - when the shares were going up.

The Economist has been saying for many weeks that the only real solution was to nationalise, stabilise, reduce the business and either get it healthy or dispose of its assets. And I don't see the economist as a normal fan of nationalisation. But with all the liabilities underwritten by the treasury, it was nationalise all but in name and in where actual control lay. I'm sure the likley outcome of shedding jobs in Labour strongholds has had no influence on the dithering by the goverment.

And no none of this excuses the FSA for its inability to spot the problems with NRs method of operating, nor GBs responsiblity for setting up a regulatory regime (by splitting responsbility between the FSA and the BOE) which singularly failed in its first real test.

And no doubt there will be a long saga in court with the shareholders, and no doubt the taxpayer i.e. everyone else who is not a shareholder, will end up losing out again.

Calchas

bristolleedsfan wrote: »

Someone refresh my memory please, When Railtrack Shareholders went to court, what did they get was it the float price.? :think:

http://www.timesonline.co.uk/tol/news/uk/article578458.ece

Commenting on the ruling,Alistair Darling , the Transport Secretary, said: "This judgment totally vindicates the government’s position. The claimants’ allegation of wrongdoing has been completely dismissed.

This, if I remember correctly is where it finished up although I stand to be corrected by those with better memories!

bristolleedsfan

Calchas wrote: »

http://www.timesonline.co.uk/tol/news/uk/article578458.ece

Commenting on the ruling,Alistair Darling , the Transport Secretary, said: "This judgment totally vindicates the government’s position. The claimants’ allegation of wrongdoing has been completely dismissed.

This, if I remember correctly is where it finished up although I stand to be corrected by those with better memories!

Interesting exchanges here.

http://hansard.millbanksystems.com/commons/2001/nov/13/railtrack


This was where it finished up to best of my knowledge.

http://news.bbc.co.uk/1/low/business/2069613.stm


This is Times response to todays announcement. :eek:

http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article3386753.ece

Interesting Blog here. http://tonysharp.blogspot.com/2008/02/northern-rock-is-now-national-crock.html

EalingSaver

Calchas wrote: »

http://www.timesonline.co.uk/tol/news/uk/article578458.ece

Commenting on the ruling,Alistair Darling , the Transport Secretary, said: "This judgment totally vindicates the government’s position. The claimants’ allegation of wrongdoing has been completely dismissed.

Interesting - had forgotten that little point. Alistair Darling again......perhaps not the luckiest of politicians?

rainbowtrout

From what I recall the mainstay of railtrack shareholders' argument was that the government drove railtrack into nationalisation by refusing to give it 'promised subsidies'. The judge ruled the government had no obligation to prop up a failing business and did not award any compensation to the shareholders.
The government certainly can't be accused of giving insufficient subsidies in NR's case! I have no doubt should the case come to court, the judge will rule once more that a)the UK government does not owe shareholders a penny and b) NR only has its own management to blame over this.

nrsql

I don't see how a nationalised NR will be able to attract new business or retain depositors.
They can't add penalties to stop people moving mortgages so as soon as people are free to move and they are on a higher rate they will go. The only ones left will be high risk.
No one would want the brand so I can only see the bank slowly dissappearing or being bought out cheaply as a dead assett.
Can't see anything that wouldn't mean a big loss to the taxpayer.

ffacoffipawb

EalingSaver wrote: »

Interesting - had forgotten that little point. Alistair Darling again......perhaps not the luckiest of politicians?

Captain Darling to Gordon Brownadder!

bristolleedsfan

nrsql wrote: »

I don't see how a nationalised NR will be able to attract new business or retain depositors.
They can't add penalties to stop people moving mortgages so as soon as people are free to move and they are on a higher rate they will go. The only ones left will be high risk.
No one would want the brand so I can only see the bank slowly dissappearing or being bought out cheaply as a dead assett.
Can't see anything that wouldn't mean a big loss to the taxpayer.

1. NR will be wanting borrowers to remorgage elsewhere once their fixed rates come to an end, and will be ( and are already) offering uncompetitive morgage deals to encourage this occurrence.

2. Will be the high risk borrowers that will be harder to get rid off. ( many will be defaulting anyway)

3. Depositers will deposit in NR as a 100% safe haven, although NR will find it hard to offer top savings rates due to European state aid laws.

4. I agree that NR will die a slow death, with no apparent new capital being injected into it and with European laws preventing aggressive deposit taking due to state aid, their can be no other outcome, Government merely want to avoid the spectacle of people queing outside branches to get their money again :eek: and Branches shut due to staff on strike.

http://www.ftadviser.com/default.aspx?m=11173&amid=127129

http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=430574&in_page_id=3&ct=5

http://www.thisishampshire.net/news/national_news/index.var.185908.0.union_urges_rock_staff_protection.php?

In the short term, is good news for saving rates competition. :beer:

Paul_Herring

In the short term, is good news for saving rates competition.

With one less player in the market, how is this good? It's one less to 'beat' in the league tables.

(Not that towards the end the NR Bonds were anything other than mediocre. Issue 3 only being 6.35% for example.)

alan99_2

It is said that we are all liable for up to £100bn in the Northern Rock fiasco.
How many schools or hospitals (or MPs expenses claims) could we have bought for that.
Remember not all the loans are covered by borrowers property. Some have been used as collateral by NR , so other banks now have the properties as security.

What this government should have done as soon as NR couldnt repay their debts was PULL THE PLUG. Should have let them go into administration. Pay off the staff , say 1 year tax free pay (cost say 30k times 6,500 = £200 million, nothing for the fat cats, their hopeless borrowing caused the problem) Home borrowers will then pay the liquidators directly . Savers covered for 95% upto 35k anyway.

Simple. Why should the government support a hopeless business case. Put them in the knackers yard.(NR and the government)

Massive needless liability for us all.

Alan