It was clear from the start that some form of nationalisation would inevitably end the Northern Rock saga. But yesterday's announcement, far from ending this fiasco, threatened to push the Gordon Brown even deeper in the hole he has dug. The purpose of nationalisation should not have been to continue “business as usual”, with Northern Rock continuing to lend more money and attract retail deposits, with the backing of Treasury guarantees. The purpose should have been to secure £100 billion of taxpayers' money and to prevent any further damage to the British financial system.
What the Chancellor should have announced are the politically difficult but financially sound decisions he will probably have to concede in the end anyway, under the pressure from the financial markets, from European regulations and from lawsuits by the shareholders of Northern Rock.
He should have announced that Northern Rock would be nationalised not to keep it in business, but to close it down; that the bank would stop lending new money or accepting new deposits as of tomorrow; that all the company's retail deposits would be shifted immediately to the National Savings system, while all the wholesale bonds would be replaced with Government gilts. The company would then be put into run-off, with the Treasury recouping its money gradually as existing borrowers repaid their mortgages over the years.
Nationalisation, in other words, made sense only as a necessary legal stepping-stone to the orderly liquidation that Northern Rock required as soon as it ran out of money in September.
To use nationalisation to keep the bank in business and its staff in state-subsidised employment would be a travesty of all the economic principles that “new” Labour has claimed to believe in. It would represent a grossly unfair distortion of Britain's banking business and would make a mockery of all the arguments Mr Brown has vociferously advanced in Brussels against state subsidies and protectionism elsewhere in Europe. Worst of all, the provision of £100 billion of state guarantees to a grossly mismanaged and insolvent mortgage bank would be a gross insult to the hundreds of thousands of workers in businesses from coal, steel and textiles to performance cars and advanced electronics whose jobs could have been saved with Government guarantees or “temporary” nationalisations costing one-tenth or even one-hundredth of the £100 billion that the Government is now devoting to just 6,000 jobs at Northern Rock.
Nobody in Parliament has yet drawn the obvious comparisons between the largesse being directed at Northern Rock and the tough love practised on far more important and famous British companies such as Rover, Leyland and GEC-Marconi. But this silence merely testifies to the political bafflement and financial confusion created by the disaster. Now that the financial uncertainties about who will own and control the company have been resolved, the question is why it should continue to stay in business with public support.
Why should a Government that has consistently refused to offer public funding for potentially viable commercial projects of real national importance - aerospace, public transport, nuclear power - now be spending tens of billions on supporting a bust mortgage bank? Is it because Britain is short of mortgage lenders, lacks employment opportunities for bankers or suffers a deficiency of financial innovation?
Even if politicians at Westminster are unwilling to ask such questions there can be no doubt that others will. It is quite likely that the European Commission will veto the business plans for Northern Rock unless these provide for a rapid rundown of both its lending and deposit-taking operations.
To judge by previous provisional and inchoate Treasury announcements, at least since Mr Darling became Chancellor, there can be no presumption that Government legal and financial “experts” have thoroughly checked the compatibility of yesterday's announcement with EU rules on state aid. And even in the unlikely event that the Commission does approve this unprecedented state subsidy, the Treasury's problems will only just have begun.
For if it turns out that the European Commission does permit Northern Rock to continue doing business as usual, collecting deposits and lending our money, while enjoying unlimited state support, it is almost certain that other banks will demand comparable treatment. Indeed, the entire British mortgage industry has already put forward proposals for the Treasury to guarantee on a new type of mortgage bonds - and given warning of a collapse in loans to homeowners if the Government does not oblige. And almost as ominous there will be Northern Rock's former shareholders demanding compensation in the courts.
If the Government tells the European Commission that Northern Rock was a fundamentally viable company, capable of long-term survival without state support, then the same argument will be used by Northern Rock shareholders to accuse the Government of unjust expropriation and of deliberately engineering the company's failure. And behind, in the long queue of potential litigants and self-avowed victims of Government incompetence and conniving will stand the citizens of Newcastle, deprived of their largest charitable institution, as well as the Northern Rock workers, who sooner or later will surely lose their jobs.
All in all, what Mr Darling announced yesterday was a financial and political disaster of almost unimaginable proportions. The Northern Rock saga did not end yesterday; the fiasco has only just started, with the Government now officially in charge .
100billion pound of underwriting....
Wow, I make that approximately 159 Millennium Domes
Maybe if we stack them on top of each we can build a tower all the way to God.
Ian, manchester, uk
The main cause of the rot. City and financial bonuses. selling mortgages with ever higher debt to pay ratios, longer terms, 125% mortgages. SELL and think of the BONUS. Utter and complete stupidity and lack of foresight. We should make a rule like France limiting the amount of pay that can be used against a mortgage, naturally this will cause howls of protest from the financial sector. ALL existing regulators and advisory bodies to be sacked without compensation being totally useless. As regards, the EU, insist on the same rules France applies when it is challenged. Renault springs to mind. It is obvious to all but the most blinkered that our banking system is rotten to the core with self interest and behind the scenes activities in the club.There is no competition at all. New regulators should be recruited from USA,Australia,Canada, none from the UK because they are most likely to be contaminated. Banking needs savage regulating and jail sentences for wrongdoing, now.
D Bond, Bradford, UK
Whew ! At least it's not blacks, Jews, foreigners or the Irish to blame this time.
For what it's worth I think it's English toffs and their nouveau riche hangers on myself.
Terry, Guildford, Surrey
It is good to see FSA staff responsible for Northern Rock preempting their destiny by resigning. Responsibility for the fiasco also lies clearly with the NR Board, the NR Internal Auditor and Audit Copmmittee and NR External Auditors and include senior staff of the MOF and FSA.
It is hoped that these parties will also be made to answer for having abandoned their responsibilities. What is the status of this?
Peter Hanney, Washington, DC, USA
great article. this disgraced government is finally being seen in its true colours by the man in the street . the pack of cards with which this economy is built, is falling down with the slightest of breeze. for over a decade the global economy has had a very fair wind, now would'nt you have run down some of your debt in those good times?? not this bunch of incompetent muppets. we now have the biggest deficits in europe. as for NRK, a poor business being bailed out by the taxpayer for the sake of "labour votes" in the northeast. whats another 6k jobs in the public sector for the northeast?.
gary, norwich.
gary harvey, norwich, england
Can you please do some research for us readers and print in the paper (on front page) ALL those MPs and people in power who are either Scottish by birth or have a vested interest in Scotland? I have a belief that Blair and Brown have sold England down the drain.
Maurice Lewis, Clophill in Beds, England but now Scotland!!!!
My view is that the Govt should have walked away and let the bank fold. The Govt should,quite rightly have protected savers but this protection of the directors and share holders is a travesty and should not be allowed to happen again.
Mark Quince, Mons, Belgium
Spot on mate. My husband hasn't worked a day since he lost his job at Marconi three years ago. I wish I'd have known that working for a bank that offered 125% mortgages would be more advantageous. Selective about who you support? I hope this comes back to bite you.
judy, Liverpool, England
As a taxpayer and holder of (now worthless) Marconi shares, I shall have to take out a mortgage with Northern Crock. After all, when I default, Brown is hardly going to have me and my family (they can look very pathetic when they try) plastered all over the front pages because an unsympathetic Government has foreclosed on my mortgage and turfed us out on the street, is he? That would be VERY bad publicity with an election coming up!
Anya, Sedgeford,
The Labour Party has always been the kiss of death to business. There is nothing new here.
RB, Aberdeen,
Its all very well to blame those trying to cope with the fall-out from this sub-prime mess, but , let us not forget those greedy bankers who caused this financial disaster. Browns/Darlings attemps to put a lid on this will end in tears. Before they depart they should fire the top floor of the FSA !
Alan , Deeside, N.Wales
Why didn't the government nationalise Rover a few years ago if it is OK to nationalise Northern Rock?
Robert Ward, Hammersmith, London
There is, actually, something we can do about it and that is to vote them out at the next election.
I shall be voting for the Conservatives.
Ross Caldwell, London, London
Its not everyday that the government sponsors a premier league football club -I wonder how long Northern Rock will continue to sponsor Newcastle Utd FC.
If so how could the govt square subsidising premiership footballers exorbitent wages whilst pensionners are having to choose between food or heat and sell their homes to afford care despite having paid tax and NI all their working lives.
Perhaps Gordon Brown will now be able to put some meat behind his proclamation of 'British jobs for British workers' and get rid of Newcastles non British players like he’s getting rid of non-doms.
rob, London,
ye si totally agree, the city was looking into the void, in my view as the much preached maket forces the city should have been left to its own devices, today we have a mutated beast which in the future will call again on the taxpayer cash, brown saved the city so we are told but we now have virtual econamy with a floating floor,just like the lemont sting, the city needs to find its own level all we can do is wait for the next sting and hopefully a government with nerves of steel.
michael joseph heavey, cahersiveen>adams towns, madness
"Absolutely, incredibly, utterly wrong!"
And you Anatole are so "Absolutely, incredibly, utterly right!
But there is " Absolutely, incredibly, utterly nothing that we can do about it!" because Uberfuehrer Brown and his NüLabour cronies can do what they like with the Peoples Money.
If they want to have Volksbank who's main purpose is to create jobs in Newcastle in order to protect marginal seats in the North East, then they can because there is nothing anyone can do about it.
No Annie - you are not a cynic.
Chris, Haslemere, Surrey
The Labour Goverment have stepped in with no limit cash to save their Northern Labour votes.....would they step in to save Cheltnam & Gloucester!!!
Jas, West Midlands,
Is there some reason why George Osborne did not say this, instead of jumping up and down calling 'resign, resign'? Tory critique has been weak, insubstantial, and lacking in expertise.
BigIb, Dalston, UK
The Banking system is a shambles! I have no job and live in a rented house. I have 8 credit cards and a total debt of approximately 30K which i have no prospect of paying. They still give me more, and i will keep using them until inevitable bankrupcy as I am in so deep it doesn't really matter anymore. Who runs these places? Why do the Govt let them operate like this? Are the Govt using the same philosophy as me, in that they know they are in too deep? It suits me but I certainly wouldn't buy shares in a Bank.
Neil, Birmingham, U.K
Maybe this is what actually happened last September
"Prime Minister, Northern Rock are just about to go under"
"So what"
"The entire parlaimentery pension fund has is invested there. We could loose the lot!"
etc etc
Rob Chicken, Hungerford, Berkshire
Pegging pay rises to under 2%, police, teachers and nurses underpaid, a ridiculous minimum wage, endless tax rises, rising energy prices and cost of living - yet we're told to tighten the belt while the Government can pay a man £90,000 a month (offshore) and cover fees of £100,000,000 for advice to deal with a private company's problems! We're being conned. That's the real scandal.
Gordon, Newcaste, UK
I could just be a cynic but I think the word "Northern" is the key.
Annie, Tunbridge Wells,
I can't wait to put all my money into Northern Rock. I'll have them lose all my records in the post, it will take months to sort out any errors, the tax man will no doubt get the OK from Glum Gordon to have a peek at my account to check it against my tax return and if they do go bust I can wait months/years to get my money back. Would you trust this government to run a BANK!!! It's laughable.
michael, Nice, France
I am reminded of an awful night in 1997 when "things can only get better" rang in our ears and the smugness of New Labour insulted our intelligence.
New Labour inherited a full treasure chest from Ken Clarke and for the past 10 years Gordon Brown has basked in the warmth of a benign world economy (maybe that could be called a BOOM) and claimed to be a prudent financial guru. He has spent and borrowed and spent. In Brown and Blair speak they claimed that they were "investing" taxpayers money in the NHS, education,welfare and creating thousands of jobs in the public sector.
Joe public knows the difference between investing and spending. Usually when money is invested there is something to see for it. There doesn't seem much to see for all the spending except, just as we approach a downturn (did I hear someone say BUST) we seem to have been saddled for generations with owning a bombed out bank.
I now have another song ringng in my ears, "you ain't seen nothing yet!"
K Bier, Hitchin, Herts
My guess would be that the government are creating a device along the lines of Fannie Mae and Freddie Mac in the US. They will soon need a lender of last resort and its a good way of socialising bad housing debt.
john, Hemel,
This suggestion sounds fine, bar one flaw. What would happen if, having closed the bank to new depositors, the old ones decided to remove their money from the bulked-up National Savings Bank en masse? The Government would then have a national bank, gaining from mortgage interest and capital, but minus possibly £10 billion of cash. The pay-back for the tax-payer would be long indeed...
John E. Dunn, Edinburgh,
Gordon Brown boldly anounced last year in parlament that he would not leave house prices get out of controle.one big boom was much better than small boom and busts,he was the only person that could have prevented the rocks now! boom time for an election victory that never came his way,Resign now and then appologise, even i knew what he should have done at the time,dont blame this one on hindsight GORDON!
david wyn morgan, llanelli, wales
Why the tax payer has to be responsible for the gross mismanagement and gambles done by Banks on financial markets. This action by the government for NR gives a green light to all other banks to carry on gambling....with the gauranty that tax payer is there to bail them out. Shame on this labour government who have stooped as low as many countries which are run by dictators. PS
peter, Southampton, uk
It seems obvious to me that the government now owning a bank is just another way of bleeding more taxes from the humble taxpayer. And to boot they have a bank to bleed dry also! We might as well hand over our wages to the government, and let them feed, clothe and house us - as if they could!
Paul Kelly, Nantwich, UK
Why do all banks seem to be under the gross misapprehension that we (the public) are here for their sole benefit?
As far as NR is concerned I think that to bail them out is utterly scandalous! Surely there must be a law somewhere that covers misappropriation of taxpayers funds?
Liz Burlace, Suffolk, UK
The range of opinion on this subject sounds so much greater than it is, except from the shareholders whose whines are extraordinary. How can it be "utterly wrong" if some form of nationalisation was necessary but only the aims were different. George Osborne was also totally opposed this morning but unable to clearly enunciate how.
C Tolhurst-Cleaver, Manchester, uk
The one thing that would have helped protect the entire lending industry and helped to stop the run away property market is to ensure some link between incomes and mortgage lending. In South Korea and China the governments have taken steps to ensure that people are only lent money that they can afford to repay.
Establishing a sensible relationship between these two protects lenders and borrowers and avoids the catastrophic effects of an irrational housing market such as Japan or to a lesser extent Germany. It should be a model where only 3.5X gross proven income can be enforcibly lent.
Tom, London, UK
Richard, Dunstable, England will always find it difficult to dump labour without first dumping scotland and wales.
John, Ellesmere Port,
Depressingly high knee-jerk quotient here. Mike Wilson a case in point. Nationalisation is intended to be TEMPORARY - the parallel being with Rolls Royce (1971) Plc which kept the company alive and flourishing to the present day. There may well be a black hole in NR's finances which will now have to be filled by public money. The Judgement of Vince being that it will be smaller if NR can have a period of stability before being offered for sale rather than at the point of a gun as recently tried. A respected City troubleshooter (not a civil servant) will oversee changes which must include ending reckless growth.. The cause of this fiasco was bad regulation - and Brown is in the only one in the frame. One concern is that the government is trying to kick that ball into touch until after the election.
Bob T, London, UK
The Rock during 2006 and first half 2007 was piling on mortgages when other lenders were cutting back-the vast majority of money lent coming from the wholesale market not depositors.The FSA clearly have a major responsibility in not challenging robustly the business model employed ie.for every pound lent they only had 20pence in client deposits .
Nothing was going to stop Aysgarth and his team from ploughing ahead and at 1july 2007 they were looking at booking some further 5 billion pounds of new business to take their total assets to 113 billion -ie mortgages largely to be funded from the professional market-when would this immense growth start to slow?Answer the sub prime debacle was like the ice berg to this Titanic.
Now the private sector will not touch the Rock and HMGov.are talking about the company staying in business and so where does this all stop-Rock deposits guaranteed by Darling and new loans too-this is where i lose the plot-keep watching this space.
john, Bath,
The first person I heard or read to talk sense.The primary cause goes back to Brown's decision to take monitoring of banks away fro the BoE and give it to the appalling FSA.Under the old system the BoE would have facilitated the Lloyds approach and all would have calmly been sorted out.Now , we have a series of cynical political decisions which are going to cost the taxpayer billions and have ruine the reputation of both the government and the financial services industry.
The whole situation has been made worse by the pathetic performance of the House of Commons.
RG James, Brasschaat, Belgium
Here we go again, Labour always manages to bring this country to its knees, then just as we get back into the black Labour is voted in again, do people have short memories or just don't seem to know our history here we are again up to our necks in debt
christine marshall , Cambridge, England
Anatole has hit the bulls eye. We let Rover go to the wall even though their cars were relativeley good (exclude Jeremy Clarkson's comments). We let GEC-Marconi go to the wall and get bought by Eriksson. We do not invest in nuclear technology and in fact sell Westinghouse to the Japanese.
But we give $200 billion dollars to Northern Rock!!!
What next from Labour? The sad part is that Brown had 10 years getting ready for the job.
What next from this duo?
Chris A, Swansea, West Glamorgan
Again, excellent assessment and probably the most astute of any we've read recently. If things were assessed on a mere economic standpoint than i'm sure Darling would have preferred it carved up and gone to the wall and died an honourable economic death. Letting a bank die though, politically, the questions would have came thick and fast; "what kind of joke procedures for looking at leading financial institutions borrowing practices do you have Mr. Darling" ad infinitum on Today until a the poor man melted.
Labour, to be fair, are between a rock and a hard place with regards to economic competence and the cold hard political/social fallout of letting businesses collapse.
Damian, Belfast, NI,
Now the Goverment sees fit to protect the taxpayers by nationalising Northen Rock why do'nt they carry on the good work and renationalise the railways, buses, and the utilities.
Ron price, Burton on Trent, Staffs.
Can't wait to see what a can of worms Granite turns out to be.
William, Torquay, UK
The lunatics are now truly running the asylum!!
Dave Andrews, glasgow, scotland
Whilst in theory free markets are great and assume all markets clear instantly and with equal information available and consumed by all parties, in reality there are a bunch of bankers and traders (wish that rhymed with something too) who are so close to the money markets compared to the rest of us that their 'expectations' actually make markets as well as theirs and the rest of our actual decisions. In nationalising Northern Rock I expect Labour have taken all the sting out of the expectation that NR may fail or be taken over by a private consortium keen to asset strip and not actually service customers, thereby protecting the whole of the banking system ( a lot of banks exposed to subprime are sitting on huge losses) somewhat, not only from the influences of expectationary gambling, but also from a wave of hype about who might be next, which in turn would lead to runs on other banks and other scenarios like NR.
James, London,
The problem is just beginning since Brown will 'need' Northern Rock to be a success which suggests two policies:
1) to re-ignite the housing boom to increase mortgage business
2) with a stronger housing market Brown may wish to either recreate Northen Rock as a lender of 25yr-Fixed Rate mortgages as found in the USA and other countries or a new State Agency to do so which would have as its base the long term mortgages from Northern Rock- probably the home equity release ones.
DM, Eastbourne,
It would have been better if the governement had demanded repayment of the 50 billion which is due in March, and then put NR into administration since NR can't repay the 50 billion. Then the governement could offer 1 penny to take over all assets and liabilities. Since this would be the best offer the administrator would receive the outcome would be the same as nationalisation, but it would leave the British taxpayer less vulnerable to lawsuits from hedge fund shareholders.
Peter, New York
Peter, New York,
As I have said many times, they should have twined this announcement with the intended privatisation of the Post Office, set for 3-years time. The Post office would buy the Northern Rock for £1 and then with the help of top bankers they could have established a strong bank with a branch network across the country.
A Post bank for the people, with a local branch and local home loans.
Peter, Chelmsford, England
I was under the impression that in a market economy, those businesses that get it right survive and those that get it wrong don't !!
Time and time again this government has shown that they are not fit for office.
How can the government hold their heads high when they are prepared to spend millions supporting a failing company, while at the same time send our troops overseas without the proper support and equipment.
Jonathan, Manchester,
The best thing about this piece is the title: "Kaletsky: Absolutely, incredibly, utterly wrong!". I've been saying that for years -- nice to know that your subs agree with me.
James Albert, St Albans,
I wonder how the Angel of the North fits into this scenario? It could be seen as another monument to misguided excess. Perhaps they should be putting up a Rock of the North.
Henry Percy, London, UK
The Gummint needs an escrow bank similar to the Caisse des Dépots et Consignations if they are to move to on-line self-serve conveyancing, as forecast. Using the Land Registry as an actual bank is not a really good idea, if the Land Registry is to operate the actual transfer as well as guarantee title.
Dion Per Sona, Cardiff, UK,
They jumped into this ONLY,because they were engaging the 'we will,we wont call an election' if only the truth would come out.
Now it has repeated history.THEY are incompetent!!.
Paul Rolph, miradoux, France
When can we stop talking about this nonsense, listen to Mr Brown, and get down to the real issue facing Britain?
What will our national slogan be? (Keep it clean Mrs)
tsykes, Leeds, UK
I have zero sympathy for the shareholders. A stock is a risk. If there's something to pursue in the courts then they should do it and stop whinging. Meanwhile, what actions have been taken and which decisions made? So far this is running like one long piece of research slowly headed for liquidation (75%) or re-privatisation (25%). The £100bn is slightly disingenuous as this is the maximum possible liability. If you look at what the realistic cost-to-taxpayer projections are then you might understand why the Government is at least interested in options other than liquidation. I also think most of the current spin is directed towards joe public, where said man in the street is not an economics phd. In the meantime while the treasury and civil service decide what to do, joe public is told first, we guaranteed deposits, second we sought a private solution, third nationalisation as a last resort, before finally liquidation. This is a spin campaign while the real decisions go on backstage.
Ben P., Robertsbidge, UK
Your contributor Anna should know that NR employees will largely be surplus to requirements in this new situation NR finds itself.
Shame the government didn't worry about the 20,000 Rover employees it let go to the great wall.
RTK, London, UK
They should have let Northern Rock fall last year.
By now, half (at least) the old employees would have been picked up by other banks to work for them, and HM Treasury would have £100 million still to work with.
Incompetence on a £100 million scale.
Jon, London,
Do UK people feel embarassed for having this PM and this "kind" of Chancellor?
riccardo, brussels,
The only reason this horribly managed company is still around is because the government has decided – without taxpayers permission – to use taxpayers money to extend this dead in the water companies survival. Northern Rock is no longer worth anything - put it out of its misery.
Arnold Ward, Weybridge,
I suspect the folk knocking the government would have done so no matter what the government had done - let NR fail, flog it to someone ata knockdown price or nationalise.
Therefore could they tell me what Dave would have done to get a better result?
alan`, edinburgh, uk
Nationalisation of Northern Rock is wrong it should be sold asap. A very bad move from Labour!!
Jan Cawthorn, Beadford, UK
I have some good news - I am in the final stages of arranging a re-mortgage away from the Rock. So, in March, Mr.Darling will receieve £70,00 towards his £100 Billion.
Happy days.
Richard Bradley, Northampton, UK
You never know, Northern Rock might generate some useful cash flow. If so, it could come in handy to offset the payments on Brown's other brilliant financial wheeze: PFI. Last time I looked, these amounted to 170 billion pounds in total up to 2031-32, with a peak of 8.9 billion for the single year 2016-17. Don't try to remember the numbers: no point, they roughly double every 6 years.
How about an article on that piece of off-balance-sheet accounting, Anatole?
Michael Woodman, Exeter,
The blame for this fiasco actually goes back to the 80s when a certain M Thatcher unconditionally deregulated the City without extracting any promises on its behaviour.
Subsequent Govts have essentially lost control of industrial strategy - such as it is - and have little or no real influence over what the City now does.
The consequences in terms of the massive trade deficit, the record household debt etc are now obvious for all to see.
DickW, Aberdeenshire, Scotland
They were conned by Branson. At least twice during this sorry saga, it’s been spun as a done deal with his consortium.
Richard Green, Salisbury, England
Anatole, you are absolutely, incredibly, utterly right.
gerry dunlop, exeter, england devon
Nationalizing the Rock is WONDERFUL news as it gives you British the opportunity to FINALLY create your own truly NATIONAL BANK, and take the control of creating your currency and setting your own interest rates away from the Private European families who started the Bank Of England 200 years ago and have been milking your economy since. 5 American Presidents, including Lincoln and Jackson closed the Fed and it and brought prosperity to America each time that lasted until the next time the Banking Cartel bribed their way back into control of the our currency. Brown could become the greatest national hero in two centuries, if he could accomplish this feat. Read your financial history.
victor compton, Cherbourg, France
I can't help but dimly recall some letters once shown to me written by Barings Banks after I think WW2, calling in favours with various foreign governments to support Great Britain financially while she rebuilds post war.... The Barings staff felt (perhaps quite rightly) that they had recieved no similar support in return when their one rogue trader brought them to their knees.
Looks all the more ironic when a failing bank with flawed management is bailed out at prodigious expense by the taxpayer today.
Question:- What good is the democracy that we in the west are so keen to shrinkwrap and export abroad when all we can manage to put in power are complete bufoons like Bush / Brown / Rudd, and their second class teams. We need a system that invites intelligent leadership!
Discuss......
C, Australia,
Thank you Anatole for an excellent article. At last, you have thrown aside your rose-tinted glasses and seen Brown for the incompetent blagger he really is. Now, could you write on what happened between February last year, when the hedge funds started shorting Northern Rock, and August when the poo was in the fan? We'd all love to know - was it Brown, Blair or Darling who told the Bank of England in Spring 2007 to leave Northern Rock alone to carry up on the Khyber?
greg palmer, london,
Darling was at it again over the weekend criticising the remuneration given to workers in the private sector. Something about bonuses for failure, although in my experience failure is more usually followed by sacking.
So while he blows unimaginable sums of our money on the Rock, he has the gall to criticise how private businesses reward the private individuals who work for them, out of money those businesses have earned by dong or making something that other people want.
It defies parody.
Redcliffe, London,
with a little more attention to what was actually going on and the effect of timely and decisive action, this whole debacle could have been avoided or could have been handled with a minimum of fuss.
northern rock is a bit of a distraction from the fact that the prime minister's aura of prudence and economic competence is built on thin air. he's a thief and a juggler.
nationalisation might, ultimately, be seen to have been a succesful move. this, also, would be a distraction.
I trust that when gordon brown eventually hits the lottery jackpot of after dinner speaking, we may claw back some compensation for the rape of our country.
jem, london, uk
And Kaletsy voted for this shower!
Colin, London,
Yes, everyone esle is an idiot, and Anatole always knew this was going to happen. (I hope he put he money where his mouth is and shorted the shares).
No one has been brave enough to say what they would have done.
Anatole isn't brave enought to spell it out because he knows there isn't any golden solution.
The fact is, many thousands of people stood to lose their jobs, 10,000s of people were going to lose their savings and Northern Rock was by no means the only bank on the hit list. Who can say that Barclays, NatWest, HSBC were immune to a run on the bank in October?
The government did the best it could, shored up the company, and tried to get best value for taxpayer and shareholders by selling it as a going concern. They were then brave enought not take the easy way out with Virgin as the price was too low.
Now they will sell off NR piece by piece and the shareholders will get nothing (except a fat legal bill) and the NR client/employees will have been saved. Sounds ok by me.
Anna, London, England
Now that the :Financial Dwarf: Brown has accomplished this he has to stand by the British truckers who maybe missing a payment on his semi, the Fish & Chip shop owner who isn't doing too well duting the low season... etc....
Banks are NOT irreplaceable!!!
cheers.
nevket240, werribee,
"...While public sector workers have to fight for every penny they earn..."
Shaun the only 'workers' we see are Lifestyle Advisers, Discrimination Advisers and Lampost Counters...
Austin Tassletine, South West, UK
It is fashionable to blame Brown for disasters that this country is now encountering, like Northern Rock, but the real villain is Blair for allowing Brown fo introduce ill advised policies which will cause inevitable financial meltdown for this country in the next few years.
Because so many people now work directly or indrectly for the government, it will be the rest of the world pulling their investments out of the UK, so that the Uk gets rampant inflation as the value of the pound plummets, that will cause an election and see the demise of Labour..
Every generation has to learn the hard way that Labour financial policies always end in ruin.
Tony Blackman, Southampton, UK
Scratch New Labour and find the old attitudes underneath - especially when potential labour voters in their public funded heartland are involved.
But even knowing that fundamental about Messrs Brown and his grovelling subordinates does not allow ordinary people to comprehend how this bunch could use such extraordinary amounts of public money to shore up a minor failed bank based in the North East.
What else don't we know?
Rob Green, Braintree, Essex
The first comment from Bob T in London made me laugh out loud. Dear, oh dear.
Does Bob want a banking system where one of the players is owned by the government and subisdised by the tax payer? Is this fair? How can other lenders compete? If he thinks the government will manage Northern Rock better than the last bunch of eegits. If he thinks they will miraculously restore the bank's fortunes and return them to private ownership refreshed and strengthened, in even better fettle than before, keen and eager to take their rightful place as the UK's most lenient and lax lender - well he is more detached from reality than even his post suggests.
It is time people accepted Northern Rock's business model was insane. Lending people 125% of the value of an asset is nuts. Always has been, always will be. Same with lending people massive multiples of their mortgage. HIGHLY RISKY and I'm picking up the bill.
The silver lining? Nail in the coffin of New Labour.
Mike Wilson, Winchester,
This government, like others, has proved that it cannot run simple, low key operations. They fail to safeguard data, they lose track of large sums of money, they dishonestly change statistics and when individuals are caught out in a scam they have to be forced out of office kicking and screaming.
The answer to Northern Rock-and-a-Hard Place is for the Bank Of England to administrate its orderly deconstruction: parts worth anything being sold off. If Rock shareholders lose money then, that is the risk of the market.
UK taxpayers should not be asked to stand any losses.
Finally, Brown and his "Darling Dodo" chancellor should do the decent thing and fall on their sword.
leigh vernier, riyadh, ksa
I don't believe this has anything to do with national interest whatsoever.
Railways, public services etc - fair enough. But a cowboy bank outfit that everyone knew was taking risks years ago?
Sorry but no. Nationalisation to be broken up and get the public money/ guarantees dealt with.
6,000 jobs is nothing - certainly not worth £100 billion in guarantees.
The amount of subprime and dodgy lending NR have on their books is truly terrible.
The ONLY sale should involve no guarantees at all - which is why nobody has bought it.
The real story here is GB and AD trying to stop a house price crash. That is all this is about and nothing else.
John S, Worthing, West Sussex
Well there is at least one precedent for a company - admittedly of much more national importance - being nationalised, returned to the private sector (albeit 16 years later) and then moving ahead to be regarded, 20 years after re-entry, as thriving: I refer, of course, to Rolls-Royce plc.
Charles Evans, Geneva, Switzerland
I'm not at all "financially minded" but as the (wo)man in the street ,it seems so wrong to me to be baling out a failed business like this.Having read AK's article above,it sounds like good common sense to me!
HD, WsM,
Difference between previous bankrut blue chips is the large stake in Northern Rock held by government.
Bransons offer was not good enough I suspect, and why would you return a company back to the management that put the bank in crisis in the first place.
Government had no choice here. Was probably duped by NRK directors over the extent of the help required back in Sept..
Case for criminal law against directors?
Langley, London, UK
Typical New Labour.
All spin and political expediency.
The lunatics are running the asylum.
Situation normal.
What's next on the agenda?
Is that a new Clause 4 I see before me?
Come back Maggie all is forgiven!
Stephen Green, Correns, France
This sordid little tale is more about the "nationalisation" of the North-East Labour voter. How do you feel being bought by the government? Don't forget to pay your debt to the part y by voting Labour at the next election.
The reality is that you have been disenfranchised and have become part of the ever growing state-dependent clientele of new labour.
Nigel Wroe, Doncaster, Yorkshire
Nationalisation's strongest prompoter was and is a Lib-Dem - Vince Cable so AK should not portray it as purely party political expediency - or simply incompetence. The purpose of temporary nationalisation is to avoid the low price if it was auctioned on a fixed date effectively with no reserve. Once nationalised NR's lending and borrowing policies presumably come under government control and it will then operate on a more reasonable business model and become a "normal" building society with a maximised market value - and be completely returned to the private sector by being sold. AK does not indicate the effective cost to the taxpayer of his scheme.
Bob T, London, UK
Really, now, why is anyone surprised by such an action that is strictly in keeping with the bungling New Labour/Old Socialist Government?
Oh, well, at least we need not worry that they will nationalise the coal or car industries. The problem is, there are fewer and fewer businesses left in operation for them to nationalise! Oh, wait, why not nationalise the corner stores? A true overlooked opportunity to bring nationalisation closer to the home of everyone in the land!
Bob Evans, Anaheim, California
When Blair handed power to Brown it was like giving a child a loaded gun.
It's since gone off in Browns hands several times and the devastation to this country is horrendous!
While public sector workers have to fight for every penny they earn and our soldiers have to fight with broken, useless or even no equipment, the government sqaunder tax payers money on useless hair brained ideas like confetti, only to be washed away. Our industry and enterprise are suffering too.
Somebody needs to take it off him, and soon! He has proved beyond all reasonable doubt or rational argument that he simply cannot be trusted to run errands never mind a country!
It is further evident that he is the bully his peers said he was before he was handed power because I don't see many labour politicians calling for his head. The silence is eerie!
Those who stand against him now will find surprising support from Joe Public. Maybe the Labour party can survive. With Brown though I doubt it.
Shaun, Newcastle, Tyne and Wear
Great Move... the private sector had a chance to reap the "entire proceeds" from a future sale- but in a true penny wise/dollar foolish fashion, they chose to put up a "Warren Bluffet bid"
Buy_American, Englewood Beach, Florida
Absolute shambles that blows wide open the Pandora's box.
If only Darling and Brown had listened to King. The only person who emerges with any evidence of foresight and intelligence.
Share holders should get about 30p and they should persue the former the directors of this wholly inappropriate business model in the Courts.
Carl, Hull , Yorkshire
Dave P
The buisness model may ahve proven useless but it was approved by the FSA how if it cant trust the industry regulator can a small shareholder have any level of confidence to invest in anything
Pete Roberts, Mid Wales,
This was expected, this corrupt Labour Goverment is still buying votes with OUR money. Look who's constituency this bank is based in !
David, Chesterfield, UK
Does this effectively mean UK tax payers, through our goverment, have lost money on US sub-prime mortgages?Does this make it a 21st century style lend-lease, and if so, do we ship the seized US sub-prime houses back to the UK on liberty ships? Will this solve the UK housing shortage?
Hawkins, Dorset,
Perhaps, just perhaps, the Government will tell the busybody EU to take a flying leap and say we will do what any other EU government would do under the circumstances - what is in the government's own short term interests and its none of your business. If they wre to take that symbolic act, then the nationalisation of Northern Rock would be a small price to pay.
oldasiahand, Guildford, UK
I agree with Mr Kaletsky. Brown and arling have been wrong-footed on Northern Rock from the begining, and their statements are all spin. They don't give a damn for the taxpayer, rather they care for their political necks.
What intrigues me is how they will deal with the next bank to go under. This will happen soon in my opinion
Alasdair Macleod, Sidmouth, UK
Thank heavens there is still another couple of years to the next election. Time for Labour's desperate lash-up of the NR business to become thoroughly undone. The hustings will then be their scaffold and we will be able to start to repair the damage. Anything, anything, to get rid of this dreadful government!
Richard, Dunstable,
Option one is to liquidate the bank. Option two is to take it into public owenership, cancel its debts with public money, and then sell it as a going concern.
I don't see a big difference here, because the government has already effectively guaranteed all creditors under option one. Given that, option two sounds marginally better because there is probably still a bit of intangible value left in the company. Competitors will prefer option one, but then they would.
Malcolm McLean, Bradford, UK
"...the fiasco has only just started, with the Government now officially in charge."
Situation normal, then.
Peter Lloyd, BLACKER HILL, South Yorkshire
Are Northern Rock customers who default on their mortgages safe from repossession?. If so, I will apply immediately!
sophie, london,
Shareholders should get nothing as the bank was worthless with a stupid business model.
Davie P, London,
Excellent assessment Mr Kaletsky. Labour's foolishness has set a dangerous precedent.
Will, Lincoln, UK