Taxpayer to pay for Scottish political argument

Today’s news that Nationwide will take over the deposits, staff, offices and good mortgages of the Dunfermline Building Society presumably requires substantial taxpayer payment or guarantee, just as the Bradford and Bingley one did. Once again I can find no mention of the sum of money to be handed to Nationwide as dowry to pay for the deposits minus what mortgages they are taking. The Bank of England website skates over that uncomfortable truth,and the Treasury website ignores the whole topic. Alex Salmond thinks there is a £1 billion Treasury payment to go with the assets and liabilities passing to Nationwide.

What we do know is the taxpayer is taking on the social housing loans, to be held in a “bridge bank” owned by the Bank of England on our behalf. And what we also know is the Labour supporters are on the airwaves already, telling us the Scottish government was not big enough and rich enough to “save” Dunfermline, which required the government of the UK to come in with the resource to sort it out.

We can expect a continuing spat between Mr Salmond, arguing it would have been cheaper to have subsidised the original entity, and the government, telling us the losses were potentially too large. They claim it will be cheaper to put the bad bits into Adminsitration and let Nationwide have the good bits with a dowry.

Once again the taxpayer – and the good institutions that stand behind the Compensation scheme – will pick up the bill, however big it may prove. Supporters and members of mutuals, ever willing to take the better interest rates or bonuses in the good days, will not of course be willing to put up the capital to pay the losses at their Society, now the management they chose has made such a mess. That is one of the weaknesses of the mutual model. Shareholders in banks have often been prepared to put in more share capital to pay their losses.

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  1. Brian Tomkinson
    Posted March 30, 2009 at 1:29 pm | Permalink

    Alex Salmon says £1billion. Robert Peston has a figure of £1.5billion from the Treasury. Do I hear any advance on £1.5billion??!!
    Maybe you can find out from Darling this afternoon.

    • Brian Tomkinson
      Posted March 30, 2009 at 1:32 pm | Permalink

      Sorry, of course I meant Billions!

      • Brian Tomkinson
        Posted March 30, 2009 at 3:32 pm | Permalink

        Darling’s figure- £1.6billion!

  2. Demetrius
    Posted March 30, 2009 at 1:48 pm | Permalink

    There may be something going on here that nobody wants to talk about, and the key to this is the vague references to “commercial property” issues. This is also tied in with RBS. It is possible that there is a very large private property group in real trouble as a consequence of highly leveraged ventures into the commercial property sector in recent years. The political trouble lies in the other sectors of the business, because the company is playing hard ball with the clients who provide the income streams. If this company hits the rocks all hell will break loose as the consequences unravel.

  3. mikestallard
    Posted March 30, 2009 at 6:16 pm | Permalink

    I know nothing about all this.
    But I do want to point out that £1,000,000,000 would just do nicely to build the College at March which we in Fenland were promised.
    I await the pension and golden handshakes all round for the unfortunate bankers.

  4. Jonathan Bryce
    Posted March 30, 2009 at 6:40 pm | Permalink

    One of their biggest bad loan losses is much closer to home, in Reading East.

    Looks like a potential loss off £107m.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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