Has the government acquired the worst bits of Northern Rock?
It is a question easier to answer than “nationalisation – which nation?” or “temporary public ownership – temporary for years?”
The answer is yes, the government has got the worst bits of the Rock.
And yes, it does get worse than the Granite bank-within-a-bank farce.
Ron Sandler, the Lloyd’s man appointed by the government to run the Rock under “temporary public ownership” and make it fit for flotation again (sale to the private sector, in other words) – this guy is a non-domicile.
So Sandler doesn’t pay tax on his earnings abroad due to non-dom status, and his UK earnings aren’t bad – he’s getting ninety thousand pounds a month (that’s around three thousand pounds a day!) for running the Rock for us. His deputy is on a similar ammount and is also a non-dom.
Meanwhile, there are no firm guarantees that NR staff will not face compulsory redundancies, and since the Granite issue has been unveiled, no way of knowing if the debt acquired will be paid off by the Rock…
Worship of profit
(Wednesday 20 February 2008)
THE longer that the Northern Rock saga drags on, the shakier the grip that the government appears to have on what’s happening.
Alistair Darling and the real Chancellor Gordon Brown both insist that the bank had to be nationalised to get it back into financial order and to safeguard taxpayers’ money that was injected into it.
But how can these goals be achieved if the cream of Northern Rock’s assets has been shuffled off by a subsidiary called Granite to a tax haven and is not part of the nationalisation package?
Given that the residue of the bank’s “assets” include unsecured mortgages and those offering advances on the basis of no deposit and 125 per cent of property valuation, how long do the daring duo imagine that it will take to turn such boobies into cash prizes?
Treasury Chief Secretary Yvette Cooper seemed oblivious in Parliament to the Granite sleight of hand.
Is she alone in her ignorance? Or, if Messrs Brown and Darling were aware of this manoeuvre, why were they not straight with Parliament and the public by telling them that we were all becoming joint owners of what may be little more than a
John McDonnell is correct to point out that the government is hoist by its own petard, in that it slashed regulation of the financial sector, believing that banking could safely be left to bankers.
The sad truth is that it cannot, which is precisely why there was previously a framework of regulation.
New Labour swallowed all the Thatcherite guff from the 1980s about business being held back by red tape and how setting it free would release entrepreneurial spirit and prosperity for all.
All it did was encourage speculation, gambling without a safety net, and the results are BCCI, Hambro and now Northern Rock.
Adam Appleyard was regarded as a financial whiz-kid when he masterminded the demutualisation of the Northern Rock Building Society, which, like most societies, had ticked over by offering mortgages at a higher interest rate than that paid to savers and not overstretching itself.
Bidding farewell to this boring respectability, he offered members something for nothing – free shares for agreeing to become a bank.
From then on, Northern Rock financed long-term risky mortgages by borrowing on the international markets, gambling that low interest rates, especially in the US, would continue to underpin the bank’s expansionist scenario.
The Financial Services Authority, whose job it is to monitor banking conduct, did nothing, but that is hardly surprising when the government itself had given the go-ahead to regulation-light banking adventurism.
When these funds began to dry up, the bank was in trouble and had to approach the Bank of England for help.
This ought to have been the time for government consideration of public ownership, but so petrified is the Labour government by the thought of nationalisation that it dithered for six months.
The public can see that nationalisation does not lie at the heart of this problem any more than it does on the railways, water, gas, electricity and all the other public services plundered and degraded by dogged worship of private profit.