Sunday, February 17, 2008

What do we think of the Rock’s Nationalisation?

Breaking News: NR

Sky reports that the government has taken NR into public ownership.

Posted by alan @ 03:12 PM (3058 views)
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70 thoughts on “What do we think of the Rock’s Nationalisation?

  • little professor says:

    PWNED!

    How embarassing.

    Northern Rock is to be nationalised, the BBC’s business editor Robert Peston has learned.

    A consortium led by the Virgin group was leading bids to run the beleaguered bank, while a management buyout had also been considered.

    But ministers have decided that nationalisation – the first such move since the 1970s – was the only option.

    “They felt that the offers on the table did not offer enough to the taxpayer,” Mr Peston said.

    “It’s a momentous moment. Nationalisation has become a dirty word associated with industrial failures of the past,” he went on.

    “Financial services, by contrast, have been considered the great British success story – so for such a seemingly growing bank to end up being nationalised is a big moment for the City and a big moment for the government.”

    Northern Rock got itself into financial difficulties last year because its business model left it ill-prepared for the global credit crunch.

    It was forced to ask the Bank of England for emergency funding, triggering the first run on a British bank in more than a century.

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  • What a f**king surprise.. B&B on monday.. and A&L on tuesday.. really..

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  • Hah ha hah aha ha, mwah ha ha hah haahaahh aaa , Mwah.. haha (sorry confused76), but this is always inevitable.. For the other readers.. kevlar helmets at the ready, and seat belts on.. for CRASH landing. Remember to extinguish all cigarettes.

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  • Labour Boom & Bust.. never under a New Labour Government.. F**king Champagne Socialists.. bring back Prescott the fat F**K

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  • I think this is a good thing now they should wind the bank down and return the money to the taxpayer. However I hope they sack all the upper management for being incompetent and don’t reward the shareholders for backing this type of company!

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  • Ironic that this of all Governments should be forced to admit there infinite support of a Capitalist dream has turned into a nightmare. They have been prepared to shower billions on a greedy, fast buck making,and irresponsible business when there are so many rightful and more deserving needs. Shame on them!!!
    How embarrassing to have to make such a U-Turn. Still, No Dignity, No Shame. The lot of them should resign unreservedly. The people of Britain have no confidence in them. Ask Anyone you like.

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  • Christ.. watching Vince Cable on News24… makes you wonder how strong this “Iron Chancellor is”.. rusty barsteward.. hang him…

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  • I’ll be f**ked if i’m going to pay for the B&B as well as the A&L, i’m off..

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  • Backed into a corner with nowhere to go, the taxpayer is now a mortgage provider with a huge sub-prime portfolio; this could end up costing the taxpayer much, much more than it already has!

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  • Appalling. I’m kind of speechless.

    The move is to protect the taxpayers interests, but the only reason taxpayers have any interest in it is because the government committed our money!

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  • Hopefully the massive cost, political embarrassment and damage to the City’s reputation will encourage the government to rethink their laissez-faire attitude to financial regulation, though whether Darling et al will ever be able to stand up to the bullying and blackmail of the financial industry is questionable.

    P.S. I notice they left the announcement until after Andrew Marr, Politics Show etc were all well out of the way.

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  • Problems stacking up for Keegan. Hehe. No sympathy for the speculators.

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  • No real surprise, the Northern Rock brand was damaged beyond repair and the size of the required rescue package was such that even LTSB needed preferential terms from BOE to even consider making a bid.

    The interesting thing now is what the Gov are going to do with NR as a business going forward.

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  • I have said before that I am a FTB who can afford to wait several years until buying. For the past few months I have been sitting back and watching them bleed, interest rates, repossessions, credit limits, real inflation, etc. Today, they have cut a big artery.

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  • When I worked for a government owned company (they were the only shareholder) the only thing they managed to do was achieve nothing and make everything cost a fortune!

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  • So, if you’re a bank into reckless lending, the grateful British taxpayer will bail you out. I think the message is all wrong: Act prudently and lose margin. Act like NR and we’ll help you if your poor decisions go wrong. We all know why: This Government will do ANYTHING to avert a HPC. Including nationalising incompetence on our behalf.

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  • They failed to get the offers and so have taken the [worst] possible path.

    A joke.

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  • japanese uncle says:

    From the riskiest to the safest just along with NS&I.

    I am goling to move my savings to NR then.

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  • little professor says:

    Darling is v. happy now.

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  • How do you think the City will react tomorrow morning? Any calls on the FTSE close for Monday night.

    Sentiment has been negative for 4-5 months now, it will be positively subterranean now. Recession here we come. House for 50% less than they are now in three years, here we come!

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  • @japanese uncle

    “From the riskiest to the safest just along with NS&I.”

    I am having a bit of difficulty deciding whether or not you are serious (no criticism intended).

    I would also like to ask a question: what is the purpose of a nationalised bank?

    It’s perfectly clear what Northern Rock’s purpose was in the past: make money for the shareholders. Try changing that to “make money for the government”. If they make high charges to your bank account, can you complain to your MP? Will they be allowed to write new loans? I think stopping them from taking on any new loans or mortgage renewals might be a good idea.

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  • I wonder what the exisiting savers are going to do? I think although there is probably no need, I would not be surprised to see HUGE queues at Brown Rock as people say “hello Darling, I think I’ll take my money whilst I can”. Who will believe anything they say since they are now fully-declared VIs? Woudl you believe Darling Brown saying “trust me with your money”? Will the Government get into the situation where they stop their savers taking money out? We have only starting seeing the tip of the scandal. I reckon the market will take a hit, NR customers will flee and a real crisis ensue as Government sees people scrambling to get their money out.

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  • Brown Rock, luvvvit!

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  • I was dubious about NR in april last year and took £9K out of the bank, I’ve left £40 inthere just to see what would happen. I’m with you thiough Growler, I can’t quite get my head around the fact that our prime minister is now chief of a high street corporate bank.

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  • This move by the government either indicates that a house price crash is likely -thus public rather than private ownership is a good way to smooth such an event when it happens with 1:5 mortages with NR…

    Or it indicates that they think there is money to be made if/when the economy recovers.

    How transparent will the bank’s finances be under GB/AD’s control? Thoughts welcome.

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  • FROM NR MAIN WEBSITE

    BUSINESS AS USUAL

    Temporary Public Ownership: What It Means For You

    The Government has announced that in the best interests of customers and taxpayers, it is taking Northern Rock into temporary public ownership.
    Customers are not affected by this change.
    Your savings with Northern Rock continue to be safe and secure, protected by the Government guarantee arrangements.
    The terms and conditions of your mortgage, savings and other products remain unchanged.
    All branches, call centres and other operations remain open for business as usual.

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  • japanese uncle says:

    qg:

    It was a comment purely from savers point of view, and did not involve any broader judgment including whether it was justifiable from moral hazard
    point of view.

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  • @ JU

    Northern Rock currently offer a very competitive fixed rate bond @ 6.35% which headlines on their website – no penalties for withdrawls !

    The Gov decison means NR is effectively NS&I (option 2)

    What really interests me is that the proposal is “temporary” because my guess is that savers will be happy with the Gov G’tees but the minute NR is to be returned to the private sector I think another run would occur

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  • @japanese uncle

    “It was a comment purely from savers point of view”

    So you meant it; I think I’ll give this some consideration as well.

    If a large number of people reached the same conclusion that NR is a no risk bank, then it’s possible, theoretically at least, that they will take in a lot of new savings deposits which should improve the banks profitability by increasing liquidity hence justifying the government’s decision (No I don’t expect so either but it’s an interesting possibility.) This is so weird.

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  • @ geed: It’s crazy really. I have to say I think Nationalisation is the only hope of avoiding a gravy train for private equity and Virgin. Having said that, the lawyers and advisers will do nicely – but they might have advised them this was the best thing to do….

    I do laugh at RAB and others though, piling into shares in the hope of a windfall due to lack of confidence. A touch of schadenfreude, I agree. I think that the reality of a HPC will severely dent Darlings budget even more than the general downturn is causing. I don’t see how they are going to get out of it. I think it’s a HUGE conflict of interest and I can’t believe our leaders are so incompetent to get the nation in this mess. No, I’m not a Tory activist. I just astounds me the mess we are in following 12 years of “prosperity”.

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  • Such a cold afternoon this afternoon that I put my feet up by the fire and had a snooze. Whilst snoozing, I had the most fantastic dream. Labour had been physically ousted and Peter Andre and Katie Price were running the question. Bizarre? Yes very, but I do wonder if Andre and Price would have invested billions in NR. I doubt even they would have been so stupid.

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  • were the backhanders allegedly not big enough??

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  • Cynicalactuary says:

    Given where we are (last summer’s decisions cannot be undone), it is almost certainly the “least worse” option and has been so for some time. However the government should offer shareholders exactly nothing, because that is what the business is worth without public support.

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  • Fantastic news. Now let’s have a run on another and see how Labour deal with that! It’s so funny that after all these years of spin on the economy which so many swallowed, Labour now have a major beacon highlighting how carp they really are.

    And as for those hedge funds who bought in after the crisis started, hilarious! I can only pray they lose the lot, greedy ****s!

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  • Don’t like to say I told you all so but I did post on 2nd September and many times since that this was the game plan for NR and inevitable. No suprise to me whatsoever.

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  • While all the cronies of government had their faces in the trough and a ‘miracle’ economy was still growing no-one battered an eyelid about Northern Rock’s irresponsible lending. As soon as it goes belly up the cronies start whining and the taxpayer picks up the tab and supports them. It highlights what life is like in this country and while the rich were getting richer nobody gave it another thought. Sadly I don’t think it will ever change regardless of the party in power. Politics is so entrenched in money and power that there’s little that can be done even by people who really do seem to have a conscience. It’s utterly deplorable but unfortunately because it’s such a vast sum and ‘invisible’ money I don’t think the voter will think too much about it at the next election. What we all should’ve done is borrowed recklessly ten years ago and walked away with the profit!

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  • Wonderful news! Is this the start of sense at last? I fear not. The Thatcherite pay-for-everything culture still tenaciously grabs most people at the only way to go — and the poor still suffer.

    This is the right move; next should be the water industry, to show commitment from the Government to all the people.

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  • Here’s an interesting thought.

    The government now has the means to shape the housing market directly. What if they instantly cut the savers’ rates and become a soft touch for mortgagees? What if the government uses their new purchase to try to prolong the housing boom?

    You could have a directly government-induced housing boom quicker than you can say “Vested Interest”.

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  • If I was a Northern Rock customer, i would be first in the queue to get my money out.

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  • JU

    “From the riskiest to the safest just along with NS&I.

    I am going to move my savings to NR then.”

    As I am a prudent coward, all the cash from my STR is currently with NS&I, because I don’t trust any of the High St banks.

    I know from previous posts that I am not alone.

    Does this now mean I can move to NR and get 1.25% more interest from, in effect, the same provider?

    Guaranteed?

    Do you think they will lower the NR savings deals to come in line with NS&I?

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  • larry pickleman says:

    Makes me want to hold back paying last years tax bill!!

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  • The government guarantees £35K, hows about if they deliberately sink the ship to pocket the savings of all those daft enough to have more than £35K in the rock!

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  • japanese uncle says:

    wdbeast

    That is really the point. But again ‘temporary’ is the questionable point as someone said. For the time being, though moving money to NR does not seem to do any harm, as long as it is a instant access savings.

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  • @enuii – There is currently a distinction between Northern Rock and other UK Banks because NR has Government (Treasury) backing which guarantees ALL of the savers deposits. This contrasts with the other banks who are subject to the Financial Services Compensation Scheme ie Deposit taking firm: The limit is 100% of the first £35K per individual.

    From the NS&I Website The safest home for your money – “At NS&I we offer a range of savings and investments to suit different people’s needs. Because National Savings and Investments is backed by HM Treasury, you can rest assured that any money you invest with us is 100% secure”

    As I said in my earlier post NR is currently NS&I (option 2) – better hurry up guy’s and get that 6.35% guaranteed return before they lower the rate !! – instant access into the bargain.

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  • JU

    Just checked and I could move from an IR 5.33% (NS&I Income bond) to 6.49% (NR online easy access) – both government backed.

    I know it’s a good deal for me and all other savers, but it does stink, it really does!!

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  • Unbelievable, will the situation get even worse?

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  • Free Image Hosting

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  • I am trying very hard to post an image I’ve just finished and uploaded to free image hosting but its not working very well. Apologies for the blank posts …

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  • [url=http://www.freeimagehosting.net/][img=http://img2.freeimagehosting.net/uploads/ba21ed9467.jpg][/url]

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  • Dumb question, but what happens when/if Bradford&Bingley and A&L fail?

    Is our great leader going to nationalise them as well?

    At this rate the red flag will soon be flying over the remains of Threadneedle Street.

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  • voiceofreason says:

    Hello david_20040 , long time no hear !!

    denzil @23 – how bizarre was that ?

    paul – the govt has been a vested interest ever since they introduced the MP’s London Housing Allowance…

    I guess the govt can’t nationalize another bank because it doesn’t have enough money. Another $100bn on the books, and wouldn’t the British govt’s credit rating start to slip along with major fiscal consequences?

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  • NS&I savings have different tax treatment to general banks.

    Thus the difference in the rates.

    But, you know, lets continue to suggest that NR and NS&I are the same, it is fun even if it is wrong.

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  • Here are my ideas:

    Government now has huge vested interest in the performance of the property market so:

    1) Pressure put on MPC to drop interest rates like a stone over coming months and hold them there far too long.
    2) Re-inflate property bubble, based on even cheaper debt.
    3) Northern Crock Mortgage book looks extremely good.
    4) Northern Crock sold to private equity firm for massive profit to the government and subsequently Tax payer gets their money back. Seen to be a big success.

    Brown and Co. become opposition after next general election.

    5) HPC put on hold for another few years, probably after the Olympics
    6) HPC finally happens, Torylib government stuffed with huge GDP deficit and crashing house prices.

    Crash and Darling end up having a real go at the new Torylib government from the safety of the opposition bench.

    How does this sound?????

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  • Holy hell Bystander you are right, the government can now slash interest rates boost the housing market saying it is getting a better deal for taxpayers!!!!!!!!!!

    OH NO!!!!!!!!!!!!!!!!!!!

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  • planning4acrash says:

    I think they have some control, but not enough to hold back a crash until the Olympics. I hope not!

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  • @bystander

    I though that the value of NR was determined by the quality of its loan book. All that matters is that the mortgage payments for mortgages loaned by NR continue to be paid – avoiding all the political fallout from having a national bank seen to to be kicking people out of their homes. Whether that is achieved by slashing interest rates or some other mechanism is pretty much irrelevant as long as people can keep up with their mortgage payments. Is it possible that NR could offer preferential terms to existing borrowers to reduce the number of repossessions they must make? If memory serves, the government has asked lenders to offer assistance to distressed borrowers before going for repossession; well now they own a bank. What is to stop the government implementing its own policies for distressed homeowners?

    Interest rate cuts look like a crude tool to me when you consider the alternatives.

    The government only needs to do this until the next election – then sell off NR for whatever it can get. The scope for corruption when selling off NR looks considerable as well. I don’t think Branson has given money to any political parties but who knows what might happen in the future?

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  • “Interest rate cuts look like a crude tool to me when you consider the alternatives.” @quiet guy

    I agree with you QG, but the MPC have already said their focus is to encourage more exports, and to do this they need a weak sterling, the crock and its loan book has only given more fuel to that fire, but we will see in March.

    “The scope for corruption when selling off NR looks considerable as well. I don’t think Branson has given money to any political parties but who knows what might happen in the future?” @ quiet guy

    Again couldn’t agree more, but with Brown’s recent forays into China seas I would not be at all surprised if the Crock ends up with its head office in Beijing or Dehli.

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  • I do know that Dehli is not in China………………….. it’s in Bermondsey and does a mean aloo gobi

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  • Labour are now in completely unchartered waters and I presume they are going to have to tread carefully as their every move is going to be carefully watched from all quarters. Obviously they’re going to try and take as much advantage of the situation as possible but they cannot be seen to take steps which will be detrimental to their ‘commercial competitors’. Over the past few weeks there has been a lot of discussion as to whether interest rates should be cut and I think it’s generally accepted that a) there are too many inflationary pressures around for cutting and b) low rates got us into this mess in the first place.

    If you ask me Labour’s track record over 10 years is largely the reason we are in the situation we are in now anyway (NR being one (highest profile) aspect of that situation). Anyone who thinks a little cutting of interest rates is suddenly going to save the UK economy is deluded.

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  • Wealthy Vagrant says:

    The only certainty I can see in all this is for the pound to get hammered further.

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  • @bystander and david_2004,
    Slashing rates won’t save the housing market. Look at what happened in the US – falling rates don’t seem to be having much of an effect. If rates are cut the currency will fall, and that will scare investors away, both foreign and domestic.

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  • dohousescrashinthewoods says:

    Oh my.. “Temporary” yeah right – markets are not recovering. Next, Government shelling out printed money to compensate shareholders. “Real power” (big shareholders) suing the hind legs off the “little guy” (government). @Bystander, point 4, not a chance – Crash Gordon and Captain Darling are far more likely to throw good money after bad, before finally writing the whole thing off as a dead loss.

    This is a big deal and I don’t think anyone has any idea what it means yet. There are just too many points to consider, (many well put above) – what happens when the government start repossessing their own voters? Oh my..

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  • The Government are in a right mess. If another lender looks dodgy (thinking the BofE will be lender of last resort) then big problem. I just heard on the news that RAB will sue if the share value is less than GBP4.50 I think they said. Looks like a law suit is coming towards the Government. Serves them right for meddling in the first place and much as I have no time for RAB, it’s rather amusing.

    I remember Dennis Healey nationalising – and Mike Yarwoods impersinations even more so. Such irony that “new labour” are Nationalising again. It was a huge mess in the 70s, and will be a huge mess in 2008.

    I don’t agree with the previous post that they’ll reflate. This will be a non-event. It will kill Sterling and put UK business out of business since they have to pay for materials. We’d also have huge inflation which would cripple the Treasury even more. We’d have a lot of defections on the benches and an early election.

    I see them doggedly carrying on.. and I see the NR sale taking ages, and I see the European competition committee watching NR closely. Lets hope NR is a reminder to all Governments: leave poor companies sleep in the bed they’ve made.

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  • Does Blair have shares in Northern Rock?

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  • @will (57) “NS&I savings have different tax treatment to general banks.Thus the difference in the rates.But, you know, lets continue to suggest that NR and NS&I are the same, it is fun even if it is wrong”

    Certain NS& I products are deemed free of personal taxation (even to higher rate tax payers) other products are paid gross but interest must be included on tax returns whilst other products are paid net of the lower rate of tax (currently 20%) .

    The point with regard to the current status of NR is not one of the Tax situation on products or the interest rates available but one of the underlying guarantees on deposits – where else other than NS & I can depositors currently get a 100% treasury backed guarantee in excess of the FSCS limit of £35k – only Northern Rock. Hope this clairifies the undersatnding of previous posts..

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