Rival banks protested that the nationalised company could enjoy a huge competitive advantage over them and steal business away. And MPs complained that the Rock was risking repossessions by attracting new customers with offers to lend them far more money than their homes are worth, by offering cheaper rates on loans of up to 125% of property values - where a quarter of the debt is unsecured. The political crisis deepened after the Government refused to deny claims that taxpayers face a £100m bill for the cost of advice from banks and lawyers during the failed efforts to secure a private sale. The Prime Minister has said nationalisation was a temporary measure, although new Northern Rock boss Ron Sandler has said it will be ’some years’ before the bank can repay its debts. Today’s emergency Bill will give the Government special powers for 12 months to nationalise any bank, not just Northern Rock where it is necessary to protect “the stability of the UK financial system”.
Posts Tagged ‘nationalisation’
Banks protest at Rock’s unfair advantage
Tuesday, February 19th, 2008Northern Rock nationalised
Sunday, February 17th, 2008The government decided to nationalise Northern Rock today, abandoning a five-month attempt to find a private sector buyer for the ailing bank. “In the current market conditions we do not believe the two proposals deliver sufficient value for money for the taxpayer,” Finance minister Alistair Darling told a news conference. “So the government has decided to bring forward legislation to bring Northern Rock into a temporary period of public ownership.” The government will put forward legislation on tomorrow to take the bank into public hands — the first major nationalisation in Britain since the 1970s — and trading in Northern Rock shares was suspended.
£25bn sweetener revealed for Northern Rock
Monday, January 21st, 2008Today’s detailed plans to rescue Northern Rock involves converting the £25bn of Bank of England loans into bonds that would be sold off to investors. The bonds would be available for up to five years after which any remaining debt would be written-off. Critics point out that the scale of the rescue package is highly risky. In the event of a catastrophic downturn in the housing market, with Northern Rock mortgage holders defaulting on their debts, the taxpayer would be left seriously out of pocket. With this new deal, potential purchasers of Northern Rock will no longer be responsible for paying back the loan and will have until February 4 to make a renewed bid to the government. In return for taxpayer support, the government will receive a percentage of the new owner’s profits. If the government was unable to secure a sale, then nationalisation would become necessary.
