The British government has finally done what it should have done months ago -- they nationalised Northern Rock.
Yeah it sucks for the shareholders, but had the government not propped up the bank with £55B in loans and guarantees, the bank would have gone under months ago. Their business plan of relying on cheap loans from other financial institutions left then overly exposed when the global credit crunch hit! These loans simply became too expensive. Thus the shareholders have no one to blame but the reckless executives and the Financial Services Authority who failed to provide appropriate oversight.
So long term, while the bank needs to return to the private sector, nationalisation is currently the most appropriate action to protect the taxpayers investment.
Chancellor to nationalise Northern Rock
Dominic Walsh, From Times Online, February 17, 2008
The Chancellor Alistair Darling announced today that Northern Rock is to be nationalised after deciding it was the best way to safeguard the £55 billion of taxpayers' money pledged in loans and guarantees.
Mr Darling decided that neither of the two remaining private sector bids to buy the troubled bank delivered “sufficient value for money to the taxpayer”.
Shares of Northern Rock will be suspended on the London Stock Exchange tomorrow morning and legislation will be passed to allow the Govenment to take it into temporary public ownership.
Mr Darling said that the level of compensation to Northern Rock shareholders, which analysts expect to be minimal, would be determined by an “independent valuer” who had yet to be appointed.
The news was announced at a hastily convened press conference at the Treasury this afternoon.
