Sunday, 17 February 2008
Darling and Brown go mad; Northern Rock Nationalised
Firstly apologies for the lack of a business news round-up, but with today's events there seems little point in reviewing the fish and chip wrappers of tomorrow. Back to normal service next week.
Well it is all over the news and I am quite shocked that it has come to this. Sadly, I have to eat my hat (hat-tip istockphoto) as I was sure that Virgin would win the bid. Instead, the Government has decided it knows how to run a bank better than private sector bankers.
The decision really beggars belief and although I will post on this later this week, but here are 5 key points to remember:
1. All the Minister's talking on the news bulletins today talk about a temporary nationalisation. This is a cruel play on words, what they mean is it is not for all time. However, it is hard to see the taxpayers getting our money back within a 5 year horizon; so don't be fooled by the piece of spin.
2. The idea of NR being 'run at arms length' is ludicrous. Gordon Brown likes to have everything within swiping distance and seeing as this crazy idea was his, he will interfere as much as he can. I would not be surprised to see some of the parachuted in executives leave within a few months.
3. If Olivant and Virgin could not make the sums add up, then whay can the Government? To second guess private enterprise invites another whole PFI type disaster upon the taxpayers.
4. The Northern Rock brand was already ruined, now it is to be owned by socialists who have never had a private sector job anywhere near finance(Darling and Brown have these resumes). Branson said the brand was wrecked and it still is, how to keep this business a going concern will be the real priority.
5. The shareholders will sue the government and they might well win, in which case the debts will grow even further rather than shrink.