Sunday, Nov 18, 2007
Northern Rock to Receive Government Restructuring Aid
Reuters: Northern Rock to have government loan extended: report
The UK's illustrious chancellor Darling has bowed to pressure from Northern Rock and is working on a plan to change the status of the funding to 'restructuring aid' in order to circumvent EU guidelines in state aid.
Posted by enuii @ 01:49 PM (1066 views) Add Comment
21 Comments
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1. alan said...
This move is a plot to head off the nationalisation plans.
See today's Observer:
http://www.guardian.co.uk/business/2007/nov/18/northernrock.bankofenglandgovernor
If the Northern Rock muddle were happening in Zimbabwe or North Korea, everyone would think it was a farce! How much have we pumped in? And how much must we pump in for the rest of 2007?
2. paul said...
http://www.guardian.co.uk/business/2007/nov/18/northernrock.bankofenglandgovernor
A face-saving exercise that will almost certainly be labelled illegal in months to come. Oh dear - what a miserable governmental failure.
3. shipbuilder said...
Did Rover get this sort of aid from the government? Or any other company with a similar number or greater number of employees than NR?
4. Bigyin said...
A quote from the article 'But as one City analyst says: 'No one will touch Northern Rock unless the Treasury continues to stand behind it; on its own, the Rock is not viable.'' Time to put some lead behind NRs ear.
Then we should see about putting the liars and thieves at the Palace of Westminster out of their cushy, fully pensioned jobs.
5. British Exile said...
Hells Bells - I've been living in Italy for the last 7 years and am just planning to move home.....Looking at these sort of news articles makes me think I won't find much difference in terms of embarassing govt actions that can shame a population
6. planning4acrash said...
Yes, why the hell didn't Rover get this, at least they actually did something of some value!
More to the point, why isn't this funding available to cutting edge start up businesses in new fields such as renewable energy and socially progressive ventures, etc. Why do these stupid bankers have a monopoly on my money damn it!
7. the northerner living in oz said...
As a U.K citizen I am concerned that
If northern rock get away with avoiding the risk penalty
Premium for the loan & get it extended beyond the February date
This will send a message to other lenders make high-risk loans
Do not worry the tax payer will bail us out if these loans turn bad
8. Ihopeitgoeswithabang said...
One rule for the us etc.
Just how do they expect to get away with claiming the funding is not what they have already said it is lol.
There is absolutely no grounds whatsoever for changing the status of the loan.
Everyone was told it was a short term fix. 6 months is enough. £30 billion is more than enough.
Restructuring Aid? Is that an admission that the bank has fallen to pieces?
Because when they started this loan thing they key argument was that it was a short term loan to a bank that was in good shape.
So now it is a 'forever loan' for a company that nobody wants unless it is underwritten by the government. Oh and they want there to be no penalties on the loan ! lol
9. the northerner living in oz said...
4. planning4acrash said...
Yes, why the hell didn't Rover get this, at least they actually did something of some value!
I agree
Unfortunately engineering requires intellect and great deal of effort to teams of engineers.
Technicians etc to make money.
I worked at a Engineering company there was only a few months left on the Factory lease
(to demolished to build houses)
so the company needed to find an alternative factory i heard nothing of any government help
in finding or building a new factory.
10. sovietuk said...
More should be made of this scandal
This link below gives the proposed Planned resource budgets 2007-08 (£ million) for the United Kingdom.
http://en.wikipedia.org/wiki/United_Kingdom_budget
Yes you will see that the money the taxpayer is going to lend to Northern Rock will probably be greater than the entire budget for UK Communities & Local Government or maybe even the same as the UK's defence spending. How reliable is NR's collateral??? Judging by their balance sheet it's made up most mostly of outstanding mortgages. How many of these will be paid????? How safe is the loan that you and I are making??? We are not talking about a few hundred million here, this is big money. The whole thing looks decidedly dodgy.
11. enuii said...
I also concur with the above, but it's the same old chestnut of money speaking loudest. It's like the person who commits GBH getting a more lenient sentence then the chap who copies software or DVD's etc.
My best guess is that the Northern Rocks is the keystone and if it was to appear to fail other bigger fish would be dragged down with it.
The trouble with the UK is rampant short-termism and the need for a quick profit and the trouble is that for the majority of us the ability of companies (our employers) in the UK to turn out quick profits will shortly become very difficult.
12. techieman said...
Erm im as bit confused. IF NRock was allowed to go under that means administrators are called in. They then would either sell on the mortgage book or the unpalatable alternative would have to be to call in the mortgages. Presumably at the time they did a bit of canvassing and found that nobody particularly wanted the moirtgage book - presumably the big players had some problems of their own. So really what was the alternative? You cant go calling in milions of mortgages can you? This is not really up my street so i have as they say "no pride of position". However lets not get all silly and think that employees have ANYTHING to do with this, realistically do they ever?
13. planning4acrash said...
The BOE is giving a penal rate because bonds linked to the debt issue were low grade junk that required a high yield to be funded by the city. If the penal rate is taken away, it will be a direct subsidy and likely to fall foul of European law.
14. the northerner living in oz said...
13. planning4acrash said...
The BOE is giving a penal rate because bonds linked to the debt issue were low grade junk that required a high yield to be funded by the city. If the penal rate is taken away, it will be a direct subsidy and likely to fall foul of European law.
It is my understanding that the penalty premium is 2 Billion
*** What is the conservative opposition doing about this?
15. planning4acrash said...
At least that is my guess. I assume that the tax payer will only suffer if Northern Rock defaults and has to be bailed out by the tax payer.
16. uncle tom said...
To my mind, our new Chancellor has fallen at the first fence - he was much too slow to respond when the crisis first became apparent, and now seems clueless as to what to do next.
The right thing to do now is for the BOE to formally ask for it's money back - then immediately offer to buy the business (nationalise it) for £1. The shareholders will lose everything - that's the name of the game - better them than the taxpayer.
All assets should then be liquidated, all new business ceased, all savings accounts refunded, and elements of the mortgage book that are considered to have value should be auctioned to other mortgage providers.
The remnants should then be administered by a skeleton crew, with the remit to move to an end game as soon as possible, minimising the loss to the taxpayer.
It's not rocket science - but Darling seems a complete prat at this point..
17. Stevie Dee said...
Well, nevermind, I will be out of the UK next year, I believe I have found the right place to go to. Thank my luck stars, I got involved in websites. And a special thank you to this website too. Now I can earn and relax abroad, the interesting thing is that where I'm going, a property is a home, not a pension plan.
As for my clients, they will do fine. As for any graduates, my suggestion, leave the country and don't pay for your student loans. If the Government can bail out an irresponsible Bank, why should the younger generations (-40's) pay for this mess, we are an asset which has been simply abused and taken for granted. So to my parents generation (55+), stuff them, they've created this mess, let them eat bricks.
Apologies for sounding heartless, but in my parents day, they could walk into a new job at leisure when they were younger, there was even public housing for new families. What have the "baby boomer" generation given in return, a society which is simply passed its "sell by date".
18. the northerner living in oz said...
16. uncle tom said...
I agree with uncle tom but surely it should be one penny not a pound.
19. stillthinking said...
If there is no solution to the NR crisis, the printed money will stay in the economy and cause inflation. However, it also appears that money is disappearing from the banking system at a great hidden rate. I have no clue where this leads.
New Labour are obviously not competent to fix the problem, but what will they do? Surely they must foreclose, nationalise and sell the assets slowly. What else can they do? No bidder is going to accept their conditions of sale, apart from the finances of it, any bidder must know that they are in a forced sale. They can, and probably will extend the loan for the short term, and hope the voting public get bored.
But.
I think they will offload as a going concern. The big problem seems to me that if there is a recession, a lot of the NR book won't hold the value they have guaranteed. One way or another, the guarantee will continue I am sure. I think a sale or arrangement will come soon because the amount borrowed will keep going up and Labour must be getting desperate to sell. It did occur to me that as lowering the base rate won't actually alter any bank rate paid in the real world, the only purpose would be to lower the costs for NR. Its true, the delay doesn't do NR any good either as they are paying over the odds.
The government seems to have bust itself financially though. The chronic loss of tax revenue hasn't filtered through yet. The winners would seem to be the people who got their money out of NR and had the cash replaced with taxpayers money. Maybe the global economy is deflationary but Labour will inflate, I am positive of it. How can they shrink the public sector quickly enough? They cannot, so they will borrow. I think Labour will inflate for the pure reason that apart from any economic reason, boost to the economy la la, they don't have enough money for their ongoing commitments such as the heavily expanded public sector. NR is just another expense they are carrying. There is no more tax to raise. Literally none. The only way forward will be government borrowing. So I think, although I change my mind because I don't know, that we will get stagflation now. Anyway, thats what I think today.
20. Stevie Dee said...
Like the Callaghan government you mean..
21. inbreda said...
14. the northerner living in oz said...
*** What is the conservative opposition doing about this?
We have an opposition???
News to me. I thought they were all in the same club.