I’ve written about Northern Rock quite a few times since they were brought down by Saint Robert of Peston in 2007 and looking back at what I wrote and what others said is quite interesting.
When Saint Robert of Peston whipped up a frenzy of consumer panic with his misleading reports on Northern Rock’s request for an emergency credit line from the Bank of England (misrepresenting it as a loan rather than the offer of a loan if they needed it) he caused a run on the bank which deprived it of its working capital. The inevitable happened of course and the Northern Rock ran out of cash and was nationalised.
Northern Rock has now been sold to Virgin Money at a minimum loss of £400m but possibly as much as £653m on the amount the UK Treasury spent nationalising the bank. Those of you who have taken an interest in the Northern Rock affair and with good memories for these things might be getting a touch of déja vu at the mention of Virgin Money and Northern Rock in the same sentence because Richard Branson tried to take over Northern Rock before it was nationalised and on much better terms for UK plc than what has just been agreed less than a fortnight after Saint Robert of Peston embarked on his career-making hatchet job on the bank.
The original Virgin Money offer was to buy Northern Rock’s entire operation, pay back £11bn of the £25bn Bank of England emergency loan that Northern Rock was forced to take immediately with the balance to be paid within 3 years. The UK Treasury hadn’t spent any money nationalising the bank so the taxpayer’s exposure to Northern Rock would have been repaid within 3 years, Northern Rock’s operations would have remained intact, Northern Rock’s investors would have had a chance of getting a return on some of their investments and the ripples that Northern Rock’s collapse and nationalisation sent through the banking sector could have been avoided. The UK Treasury instead chose to nationalist the bank, costing the taxpayer billions and contributing to the virtual collapse of the UK banking sector.
Whilst I hold Saint Robert of Peston significantly responsible for the collapse of Northern Rock, some of the blame has to fall on the EU because Saint Robert wouldn’t have found out about the credit line if it wasn’t for the EU Monetary Abuse Directive (MAD) that required the Bank of England to publicise the fact that it had been offered. The previous governor of the Bank of England, Eddie George, said at the time that if he was still governor when the EU MAD was brought in he would have resigned over it.
Ed the Millibeast has had a pop at George Osbourne about him selling the Northern Rock off at such a loss for no apparent reason but it turns out that he had no choice because the last Chancellor, Alistair McDarling, had to agree to sell off Northern Rock within 3 years to get permission from the EU to nationalise the bank. And which government department did Ed the Millibeast work in at the time of the Northern Rock nationalisation? Erm, that would be the Treasury – he was a minister in the Treasury when his boss agreed to the 3 year restriction on the nationalisation!
Richard Branson’s purchase of Northern Rock is only for the “good bank” – the “bad bank” was merged with Bradford & Bingley which was also nationalised. The “bad bank” is still slowly paying back the billions of pounds it owes the taxpayer. What happened to the Bank of England loan is anyone’s guess. Northern Rock has cost the taxpayer a lot of money – a lot more than necessary so far and the Virgin Money takeover will cost hundreds of millions more. The mismanagement of the economy and the banking crisis is nothing short of criminal.
The whole Northern Rock saga started with gross incompetence and unnecessary wasting of taxpayers money and it’s perhaps a fitting end for the Northern Rock brand that it will finish with a loss-making sale to the bank that tried to buy it before it cost the taxpayer billions of pounds and precipitated the near collapse of the banking sector and at a snip of the price offered in 2007.
Come the revolution there will be a special part of the wall marked out for Saint Robert of Peston, Alistair Darling and all the other criminally incompetent and irresponsible idiots that have cost us so dearly.