It is a pleasure to visit our US partner company at a time of unparalleled expansion and success. Our joint formula of “putting the losses back into business” is working well. On both sides of the Atlantic governments are able to report big leaps forward in trading losses from a growing range of talented loss making businesses in which governments have shares. Our joint formula of “never knowingly undersubsidised” is proving especially popular in our financial subsidiaries.
I would like to bring both our US and UK audience up to date with our recent good results. I belong to the school of thought that you never knowingly understate a good loss, and should use every opportunity to remind the audience of success. Following the announcement of £24 billion of losses at RBS we were able to make an additional £26 billion of capital available to them. This means they have needed £46 billion ($65bn)of new capital from us in just three months.
We have now officially reported the £1.4 billion loss for our Northern Rock subsidiary last year. This may seem quite small, but they did achieve it on a reducing book of assets that is now under £40 billion of directly controlled mortgages, so the loss rate is good. The second half loss was, I am pleased to say, well up on the first half. We were able to put another £3 billion into this satisfactorily loss making venture.
I appreciate the UK PLC portfolio does not include such stars as Freddie and Fannie. They truly have become global favourites, a licence to lose money. Nor have we yet found such a gem in our insurance sector as AIG, which has pioneered a wonderful loss making niche in the world financial system. I hope nonetheless our American friends will recognise the huge improvements in our capacity to lose money and waste capital, shaking off the puritan days of Margaret Thatcher when profits stalked the nationalised sector and privatisation was all the rage to limit risks and costs to taxpayers.
Our model depends on ever greater borrowing. Both US Inc and UK PLC are aiming for new and exacting records this year and next. We have both expanded our normal borrowing requirements to new peaks, and can add many billions to those figures through our commitment to loss making businesses. I think adding the capability to print the money needed should markets become reluctant to lend is the icing on a very exciting cake.