Wednesday, 21 November 2007

I have been very impressed with Vince Cable over Northern Rock. Many commentators have acknowledge how well he has done. Steve Wright on Radio 5 this afternoon was generous in his praise. His article in the Guardian (link below ) was excellent. I particularly interested in the suggestion that the Rock should be re-mutualised . Anyway here is the story in full:

Northern Rock:
Gordon Brown should come clean
20 November 2007

Vince Cable MP has launched a petition calling on the Government to come clean about how much money has been lent to Northern Rock.Launching the petition, Vince Cable said:"I don't know whether this Chancellor has been singing in the bath but he has much in common with the Conservative ex-Chancellor, Norman Lamont, who also presided over a financial disaster on Black Monday."As we stand at present, every taxpayer in Britain has something approaching £900 of their money at stake in this small mortgage bank following the £24 billion loan (which excludes the less controversial £18 billion in deposit guarantees)."When Tony Blair was Prime Minister he was widely and rightly criticised for squandering £800 million on the Millennium Dome. This Prime Minister and this Chancellor have invested the equivalent of 30 Millennium Domes in this bank and we don't even have a few pop concerts to show for it."There are some key questions for the Government to answer: "Will the Government's loan will be paid back in full, with interest, in this Parliament?"Is it true that Mr. Adam Applegarth, who led the bank into its current disaster, can expect a £2 million pension pot and generous bonuses, all underwritten by the taxpayer? How did the Government get into a position of entrusting vast sums of taxpayers' money to a man who showed his own faith in the company by selling his own shares to invest in a country mansion and a Ferrari?"What is the true total figure? We know about £24 billion from media reports, but the Government has not come clean: it has refused to give a figure, refused to confirm the media reports and refused to say whether there are even more loans than those the media discovered."There are even more fundamental conflicts of interest. The Government entrusted its money and, now, the sale process to managers and directors (or those that are left) whose first responsibility is to the company not the taxpayer. Without the Government loan the shares would be worthless. Yet Government money has been used to prop up the company and encourage spivs and sharks to profit from the company's misfortune."Where do we go from here? It would be ideal if a private investor would now take over the bank as a going concern, keeping the jobs and the Northern Rock Foundation intact and servicing the government loan in full. But, this week's announcement of the bids made it clear that this is simply the stuff of fantasy."The truth is that there are only two practical solutions. One is administration: to close Northern Rock down. This would be devastating for the North East and, in present conditions, the Government would probably lose billions."The other is for the Government temporarily to take control: the least worst option. This would eliminate the conflict of interest in the company and give time to stabilise it. The Chancellor has already had a Clause 4 moment at Railtrack so he knows that this is not straightforward. But can he confirm that the Treasury is at least evaluating this option, which has of course been used elsewhere, with the National Mortgage Bank under the Tories and Continental Illinois in the US."The Chancellor has taken to calling my comments "unwise". I wonder what words posterity will use to describe a Chancellor and a Prime Minister who entrusted billions in taxpayers' money that was only partly secured and was managed by discredited executives, feathering their own nest."
Sign the petition
Read and comment on Vince Cable's article in The Guardian