Northern Rock to be Nationalized

[Mega]

http://news.bbc.co.uk/2/hi/business/7249575.stm
Mike

[Tulpen]

Re: Northern Rock to be Nationalized

A black day for capitalism.

[Jim Nickerson]

Re: Northern Rock to be Nationalized

A black day for capitalism.

Was it not in the name of "capitalism" that all this shit happened?

[Honzajs119]

Re: Northern Rock to be Nationalized

I think, we can see it as way how another potential bank failures will be solved in the future.
Depositors and government will be saved, shareholders punished for their investment.

[Tulpen]

Re: Northern Rock to be Nationalized

Was it not in the name of "capitalism" that all this shit happened?

What shit? The bank made capital mistakes. That means the bank should fail.

[Mega]

Re: Northern Rock to be Nationalized

I had a vested intrest here, are my bank. If Daring had not do what he did with in a week EVERY Bank in the UK good or bad would have crashed..............he had ZERO choice.

The thing which everyone missers is:-
1. Llyods TSB looked over their books.........and did a runner
2. Brown dashed to China, who just laughted at him.

Just How much is NR worth?...............By the time Housing market shifts, not much!
Mike

[Jim Nickerson]

Re: Northern Rock to be Nationalized

What shit? The bank made capital mistakes. That means the bank should fail.

Wasn't it unchecked "capitalism" that allowed the banks to make "capital mistakes"?

In no way do I disagree that the banks should fail, but at some point the unfettered greed many institutions exhibit in this society needs to be seriously controlled.

[GRG55]

Re: Northern Rock to be Nationalized

Wasn't it unchecked "capitalism" that allowed the banks to make "capital mistakes"?

In no way do I disagree that the banks should fail, but at some point the unfettered greed many institutions exhibit in this society needs to be seriously controlled.

The title of this thread says "...to be nationalized". For all practical purposes wasn't that status already achieved the day last summer when King "lost" and Brown "won", and the unwitting British taxpayer was put on the hook?

[jk]

Re: Northern Rock to be Nationalized

What shit? The bank made capital mistakes. That means the bank should fail.

nationalization should [and i think will] mean that the stockholders are wiped out, but the account holders are ok. [and so, most likely, are the banks creditors]

[GRG55]

Re: Northern Rock to be Nationalized

nationalization should [and i think will] mean that the stockholders are wiped out, but the account holders are ok. [and so, most likely, are the banks creditors]

I'm not sure this is precisely how it will work out. I believe the biggest creditor, by far, is the UK Government (taxpayer) and that is the reason behind nationalization. Note the code words about "value for money" in this quote below from Chancellor Darling. As I understand it, all the private sector proposals required the government to remain a significant creditor to, and continuing guarantor of deposits at, Northern Rock for years to come, giving rise to the (entirely legitimate!) fear that the government might be forced to bail it out again in future, while the benefits of any constructive outcome were heavily skewed in favour of the providers of the new capital - classic "heads we win, tails you lose".

"...Neither of the two private proposals to take over the beleaguered bank offered "sufficient value for money to the taxpayer", Mr Darling said.
He said the public would gain if the government held on to Northern Rock until market conditions improved..."

In a rapidly softening UK housing market this will be interesting to watch:

"We now have the situation where the government will be making decisions on whether or not to foreclose on people's loans in a falling housing market," he (Conservative opposition shadow chancellor George Osborne) added.

And here comes the best part. It is almost certain that Northern Rock shareholders would have been wiped out under any of the private sector solutions being considered. Nationalization is the only way they will get anything.

...Shares in Northern Rock will be suspended on Monday morning.

Under nationalisation rules, shareholders will be offered compensation for their holding, at a level set by a Government-appointed panel.
Investors could begin legal action if they are unhappy with the amount offered, with BBC Business Editor Robert Peston saying that it was "inevitable" that the government would be sued by shareholders who felt they had been "fleeced"...

BoE Governor Dr. Mervyn King's initial reaction to Northern Rock - government authorities should not be expected to save banks from their own foolishness - may well prove to have been correct, if not politically correct, in the case of Northern Rock.

[c1ue]

Re: Northern Rock to be Nationalized

I think you're all missing an important point here:

Nationalisation will wipe out the shareholders, but the shareholders weren't the ones who screwed up (other than picking NR to invest in).

Nationalisation actually subsidizes the management (as well as employees) who work there.

So the people who made the decisions that got NR in its tough spot are the ones being bailed out by the government. In other words, the bankers.

As someone with unfortunate intimate experience with companies on the way down - what will wind up happening is a lot of employees get fired.

The bosses then will meet their management goals of 'streamlining', get nice bonuses - though not as fat as in the good old days - then move on to another bank/financial institution as a 'turnaround artist'.

[GRG55]

Re: Northern Rock to be Nationalized

I think you're all missing an important point here:

Nationalisation will wipe out the shareholders, but the shareholders weren't the ones who screwed up (other than picking NR to invest in).

Nationalisation actually subsidizes the management (as well as employees) who work there.

So the people who made the decisions that got NR in its tough spot are the ones being bailed out by the government. In other words, the bankers.

As someone with unfortunate intimate experience with companies on the way down - what will wind up happening is a lot of employees get fired.

The bosses then will meet their management goals of 'streamlining', get nice bonuses - though not as fat as in the good old days - then move on to another bank/financial institution as a 'turnaround artist'.

Nothing cleanses the soul like being "born again", eh...:rolleyes:

[GRG55]

Re: Northern Rock to be Nationalized

Easy come, easy go. After all it's just [British] taxpayer's money.

C1ue: Reading the last two paragraphs of the article, couldn't help recalling what you wrote above. No doubt it's a wee bit easier to be "public spirited" when you are paid more than the Prime Minister. And if all goes bad one can take one's severance & gardening leave to "spend more time with the family"

Northern Rock billions 'at risk in a downturn'


By Philip Aldrick and Peter Hutchison

Last Updated: 12:23am BST 21/05/2008


Taxpayers' money tied up in Northern Rock is more at risk than first thought, the nationalised lender's chairman, Ron Sandler, has conceded, as the credit crisis threatens to undermine its restructuring.

Appearing before the Treasury Select Committee yesterday, Mr Sandler admitted: "If house prices decline 5pc, 10pc, 15pc, it would certainly put a great deal of stress on how we would deliver the plan. I don't want to pretend it is without risk and I don't think we should take anything for granted at this stage.

"The key risks are what is happening in the wider economy. If we suffer a downturn and this leads to higher levels of unemployment, then this would place considerable strain on the ability of the company to deliver the plan."...

...Their comments were in sharp contrast to Alistair Darling's confident promise at the time of nationalisation that "as and when market conditions improve, the value of Northern Rock will grow and therefore the taxpayer will gain". Mr Sandler also sounded a more cautious note about Northern Rock's mortgage book, which the Treasury has declared "good quality". He described it as just "adequate" compared with peers...

...Mr Sandler added: "There is a risk of adverse selection. Those customers who represent a better credit risk will get mortgages elsewhere. We do expect it will increase the riskiness of our book." He accepted that the bank may have to create a special category of mortgage "in extremis" for highly-indebted clients...

...Asked why he took the job, he said: "I am not doing this for financial reward. I am doing this because it is something that needs to be done and I was asked to do it by the Government. There is a degree of public-spiritedness, I hope, in my response to that request."

At £90,000 a month, or £1.08m a year, he is Britain's best-paid public servant.
http://www.telegraph.co.uk/money/mai.../cnrock221.xml

[c1ue]

Re: Northern Rock to be Nationalized

GRG,

And yet some call me cynical...

Don't forget the 'leaving to head the non-profit' exit strategy also.

And what's the best way to stay non-profit? Pay high salaries and bonuses.