Shareholders of the Rock are battling it out in the courts. They say their bank was taken from them by the government, without proper compensation for their interests. The government says their bank was in a very bad way, and has to be valued without the support the government was offering it. I leave that to the well paid and well qualified lawyers to fight out. Some will say a central Bank’s duty is to lend money to banks that need it – had they carried on doing that for Northern Rock, shareholders would have retained an asset with decent future value. Others will say the Rock was in deep trouble, and that it had run out of normal commercial options.
What should be clear by now is the government did the taxpayers and future mortgage holders no favours by its nationalisation. As I feared at the time, we have been left with the worst of all possible worlds. We own a heavily loss making bank, which is not allowed to write new business and to grow its activities to try to trade itself into profit again. Taxpayers can look forward to more shrinking of their assets, as staff are sacked and the loan book is run down.
Why on earth did the government do that? Why didn’t they assist a refinancing of the Rock that would have allowed it to carry on trading, and to make a further contribution to the market for new mortgages? Do they yet regret their haste in rushing for the Vince Cable “solution” of nationalisation which is turning out to be a kind of lingering death of the business?