While we’re busy here arguing against a government-sponsored bail out for the over-inflated housing market and over-zealous mortgage lending meltdown the folks across the pond in Britain are awakening to that reality. The British government will be nationalizing Northern Rock bank. Northern Rock is the largest employer and one of the largest mortgage lenders in the country.
When subprime mortgage bonds starting going bad in the states Northern Rock (along with many other European banks) found themselves over-leveraged in US mortgage bonds. This sapped their cash causing a liquidity crisis - resulting in a run on the bank by British folk and a bail out by the British government.
Now after two failed proposals for private takeover the British government is putting up about $107 billion in loans and guarantees to bring the bank back. Talk about a government bail out. Take our “stimulus” package and whack it in half and give it to one entity. That’s what’s happening with Northern Rock.
If I was a British taxpayer I’d be pissed. I guess if I was a Northern Rock customer I’d be relieved my money was safe and secure. I probably would still want to change banks.
Can you imagine the US government nationalizing a lender? No, they don’t have to - they just grease the M&A wheels and let the big get bigger (see Countrywide and BofA).
From the NY Times article on the nationalization of Northern Rock:
The British government announced on Sunday that it would bring Northern Rock, the struggling mortgage lender, under its control. It was the first nationalization of a bank in more than a decade and a huge blow for the administration of Prime Minister Gordon Brown.
The government rejected two takeover proposals for the lender, which ran into trouble last year because of a money shortage that followed a subprime mortgage crisis in the United States. The government was forced to shore up the company with about £55 billion, or $107 billion, in loans and guarantees.
“The government has completed its review of the two detailed proposals received,” Alistair M. Darling, chancellor of the Exchequer, said at a news conference in London on Sunday. “But in current market conditions, we do not believe that they deliver sufficient value for money for the taxpayer. The government has therefore decided to bring forward legislation to take Northern Rock into a period of temporary public ownership.”
Entries (RSS)