UPDATE :As pointed out in the comments, this was a different dossier. Now corrected. Guido never read any of them. Not a fan of fiction…
It is worth taking a moment to reflect on how we got here. When Northern Rock’s troubles became critical there was no systemic risk to the financial system. There was a risk to 6,000 regional jobs which was a political risk in a period of election fever in Labour’s North East heartlands.
If Northern Rock had been put into administration the shareholders and probably the employees would have lost out. No mortgage holders would have been worse off, depositors would, since we are told by the government the bank’s assets are good, have got their money back.
The only cost to the taxpayer would have been the unemployment benefit payments to redundant Northern Rock staff – most may have kept their jobs with new owners of the business (Lloyds TSB was said to be interested). Instead of the normal commercial and legal run off process taking its course, the government intervened. The result is the biggest nationalisation of the century.
Many would argue convincingly that depositors would have not been able to extract their money in the event of a liquidation, or at least not in good time. The government could have in that case guaranteed the deposits and collected the money back as a normal creditor. For a moment in the beginning that did seem to be a real possibility. That would have been a much smaller risk to the taxpayer.
Now we have a situation where £100 billion of taxpayer’s money is being bet on the UK property market as it teeters on the edge. Gordon Brown repeats the mantra that the public’s money is secured against the bank’s assets. The bank’s assets are what exactly? The equity in mortgagee’s homes belongs not to the bank, it belongs to the homeowners. The only properties Northern Rock has an interest in are it’s own branches and offices. The only homes it owns are those where it forecloses, usually and increasingly at a loss due to negative equity (remember all those 125% offers). The other major asset the bank owns is it’s profit stream from the spread it makes on lending versus borrowing. That has disappeared because of the credit crunch. Right now there is no profit stream to speak of, that is why the bank is bust.
What is most disturbing about the new legislation being proposed is that it will empower the state to nationalise more banks. Which seems to contradict Darling’s claim that this is a “temporary and exceptional” measure. It has always been the objective of British socialists to nationalise the banks. Thirty years ago they wiped out the British owned car industry, now they are coming for the banks. New Labour is dead. Socialism is back…
UPDATE : Anatole Kaletsky agrees – wind-up the bank.
Speaker Fiddled Family Flights on Taxpayer’s Airmiles
Gordon’s Undeclared Rent Under Investigation
Wendy Praised Campaign Donors in Parliament
24 London MPs Claim £20,000+ Overnight Accommodation
Has Guido missed any sleaze? Answers in the comments please – will update above.
So they will need Darling to suffer meekly for another 2 years…
Britain is to become the first Western nation to issue bonds approved by Muslim clerics in line with Sharia law, which bans conventional loans involving interest payments as ‘sinful’.
The scheme would mark one of the most significant economic advances of Sharia law in the non-Muslim world.
It will lead to the ownership of Government buildings and other assets currently belonging to British taxpayers being switched wholesale to wealthy Middle-Eastern businessmen and banks.
No. It was down 0.8 points, some 0.0136%, which is what market experts call “flat”. Stephanie Flanders, Newsnight’s economics editor, said after the last time this happened that it was “unforgivable and embarrassing”. Clearly it was forgivable because it was announced yesterday that she has been promoted and will now be the BBC’s chief economics editor. Jeff Randall is on Sky…
Hat-tip : Musing Markets