Monday, February 18, 2008

Northern Rock nationalisation

Contrary to what the Tories may say, this is not a return to the past or a sudden thrust of socialism from the Government; it is in fact reflecting the reality of the situation faced by the government in making a decision that was necessary. Despite valiant efforts by the Government to find a buyer, nationalisation is like to best protect taxpayers' money. What happened in the case of Northern Rock was mismanagement by the company on a grand scale coupled with the financial crisis that had engulfed the US mortgage market.

This should hopefully be a temporary solution and provide the necessary stability for the Northern Rock to be a viable bank again. Yes, shareholders' will have lost out in terms of the share value but the alternatives could have been far worse and if the bank had collapsed it would've had widespread ramifications for the whole financial market and the UK banking sector. This option was effectively the only one that was viable.

In terms of Gideon Osborne and David Cameron, the option of administration would have been a disastrous option with little chance of recouping any of the taxpayers' money. They also seem to have developed very few alternatives in dealing with the Northern Rock, with the policy like their general economic policy changing on a daily basis. If the Government had gone down the like they were advocating, instability would have been the likely outcome along with thousands of job losses with widespread economic repercussions.


Anonymous Anonymous said...

I agree with you that it's not a socialist move by the government. But it's yet another symptom of how inept ex-socialists become when they try to manage market capitalism. Besides blaming Northern Rock's management, since we're not living in a laissez faire capitalist society but a regulated one, the government, the Bank of England and the FSA should all be sacked for being caught sleeping. Of course as a Labour Party hack you won't agree with this, or possibly won't publish my comments.

4:47 pm  
Anonymous Anonymous said...

"Contrary to what the Tories may say, this is not a return to the past or a sudden thrust of socialism from the Government"

If only! I've always fancied owning a bank though...

1:18 pm  

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