The ERM fiasco destroyed the chances of the Conservatives for a generation. The Northern Rock may do the same for NuLab, only at about ten times the cost to the taxpayer.
Years back I used to work at the Abbey National Building Society, and it was a nice straightforward business. Then it had to go and float itself as a bank, cock things up, and now it is just a locally branded subsidary of Santander.
The men who ran, or thought they ran, Northern Rock, might have been up to running a small north eastern buidling society, but they clearly did not have a clue about the realities of the world of high finance they got themselves into.
Luckily for them, the north east is a labour heartland, and the Northern Rock has always seemed rather close to the Labour establishment up there. I wonder if NuLab would have been so quick to shore up the Cheltenham & Gloucester?
Much as I would love to see the careers of Brown, Darling and all the other sock puppets destroyed, I wonder if we can afford it? Who would have thought a minor league mortgage bank could cause so much financial chaos?
It's clear what will happen.
NR will not cost us £30 billion.
It will cost several billion though.
The potential suitors are
(a) hard-nosed businessmen
(b) much cleverer than Darling
(c) aware that the government needs to offload Northern Rock quickly
They hold all the cards. They can dictate to the government. The government HAS to get a seller. So the seller will insist on numerous concessions - interest write-offs, long-term loan facilities, etc.
All of which, the lost interest, the money the government will need to borrow to fund the NR loan facility, will end up costing us taxpayers several billions.
You can rest assured: we are not getting out of this free. No buyer is stupid enough to take on the horribly poisoned brand, in difficult conditions, without screwing the taxpayer out of lots of money in the process.
Unless the State Aids provisions kick in, in Feb 08, then I suspect that the losses (real and substantial though they will be) can be blurred due to the long timescales involved. A "promise to recover all the taxpayers money" becomes "readjustment of loan period" becomes "realistic adjustment to market conditions" and thus the loss slips off the public radar, unlike the ERM debacle this problem for the gov, is probably (sadly) finessable. The fun and games begin if the EU pops up in Feb and cries foul. I for one can picture Peter Mandelson sitting in Brussels with a vulpine grin, thinking "revenge, revenge"!
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