Monday, January 21, 2008

Northern Robbery

The latest news on the Northern Rock farce has left me astonished and angry.

The idea that Mr Branson, or anyone else for that matter, can acquire a 100 billion pound loan book and a substantial high street bank to boot for 650 million of their own money while the taxpayer is risking 60 billion (ten times as much) is about as one sided as it is possible to get.

I am a fan of private enterprise and as a Conservative nothing pleases me more than to see a successful entrepreneur scaling the heights of financial success - but not at the taxpayers expense.

If the Chancellor and his puppet-master are allowed to do this deal it will amount to financial mismanagement on a stellar scale which dwarfs the 'ERM black wednesday' affair when the Bank of England lost a purely notional £3.4bn trying to buy sterling on the foreign exchange markets and tops the disastrous losses made when Gordon Brown ignored treasury advice and dumped our gold reserves at the very bottom of the market.

On current proposals the Government will have outstanding guarantees on this bank for at least five years of at least £60,000,000,000. A guarantee is as much a promise to pay as a bank note; so count those noughts- each and every taxpayer could be stumping up to £4,000 apiece if Northern Rock goes bust.

Even if it doesn't we have a bale out here on a scale that is ten times the size of the state aid given to British Leyland in it's sorry years under Government control from 1974-1988; at l;east BL was the country's last major car manufacturer - Northern Rock is is a relatively minor bank in a fiercely competitive, indeed some would say oversupplied, market that was and is long overdue for a shake out.

How is it fair that other banks are now, in effect, trying to compete with a firm that cannot be allowed to go bust? How will it work if, in an attempt to stay solvent NR start stealing business from other banks and building societies using taxpayers money backed by gilt edged security?

What happens if the credit crunch goes on for a bit, there is a serious property crash and another bank -or two banks even, get into similar trouble. Will they be baled out, too?

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