NationStates Jolt Archive

http://news.bbc.co.uk/1/hi/business/7151840.stm

Looks like if a backer can't be found for failing bank Northern Rock, the government may step in and declare the bank nationalised, what with it oweing over £57 billion to British taxpayers already.

now, i don't fully get how this works (the economics i studied was more theoretical), but it quite excites me. i've long wished for the government to seize the assets of the banks operating in this country, largely because i think banks are, frankly, evil. but that's just me being crazy.

any thoughts?

1/ No. Why the hell should the taxpayers be expected to bail out a business whose management got it into that sort of mess?

2/ There were supposed to be safeguards in the system so that the authorities could intervene before things got so desperate. The government failed to use them properly. I wouldn't trust the government to run anything...
We are, after all, talking about a government led by the man who -- as Chancellor -- sold off half of the country's gold reserves when the value of gold was at its lowest level for ages (and actually announced the sale far enough in advance for the market to take the projected increase in supply into account and lower the price still further) and whose taxation policies wrecked what had been an excellent system of privately-funded pensions.
(And I, unlike some people here, am old enough to remember how badly-run most of the previous batch of nationalised businesses were before Mrs Thatcher privatised them: Admittedly there were what I consider to have beeen mistakes made in some of the privatisation processes, but that hardly means that the state-run enterprises were perfect...)

3/ Do you think that this government would be anywhere near as concerned about Northern Rock if it was Southern Rock -- and based in a staunchly Conservative area, rather than in a region that traditionally supports them -- instead?

1/ No. Why the hell should the taxpayers be expected to bail out a business whose management got it into that sort of mess?

2/ There were supposed to be safeguards in the system so that the authorities could intervene before things got so desperate. The government failed to use them properly. I wouldn't trust the government to run anything...
We are, after all, talking about a government led by the man who -- as Chancellor -- sold off half of the country's gold reserves when the value of gold was at its lowest level for ages (and actually announced the sale far enough in advance for the market to take the projected increase in supply into account and lower the price still further) and whose taxation policies wrecked what had been an excellent system of privately-funded pensions.
(And I, unlike some people here, am old enough to remember how badly-run most of the previous batch of nationalised businesses were before Mrs Thatcher privatised them: Admittedly there were what I consider to have beeen mistakes made in some of the privatisation processes, but that hardly means that the state-run enterprises were perfect...)

3/ Do you think that this government would be anywhere near as concerned about Northern Rock if it was Southern Rock -- and based in a staunchly Conservative area, rather than in a region that traditionally supports them -- instead?

source regarding the sale of gold thing?

I know pretty much zilch about economics, so I can't really say wether I think it's a good decision to go for nationalisation. But I'm certainly not against it in principle. I think privatisation screwed up a lot of things, but wether or not nationalising Northern Rock would make things better I don't know.

source regarding the sale of gold thing?
At the time, newspaper articles. I'll try to find one for you tomorrow, when I can spend longer online.

At the time, newspaper articles. I'll try to find one for you tomorrow, when I can spend longer online.

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2004/11/28/ngold28.xml&sSheet=/portal/2004/11/28/ixportal.html

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2004/11/28/ngold28.xml&sSheet=/portal/2004/11/28/ixportal.html

http://img.photobucket.com/albums/v427/vonbek/thumbup.gif

Cheers

1/ No. Why the hell should the taxpayers be expected to bail out a business whose management got it into that sort of mess?
To ensure that the problem doesn't escalate, especially in the context of a rapidly cooling housing market.

2/ There were supposed to be safeguards in the system so that the authorities could intervene before things got so desperate. The government failed to use them properly. I wouldn't trust the government to run anything...
Safeguards don't always work. We don't have this kind of problem frequently, so it stands to reason that we don't have a blueprint to prevent it.

We are, after all, talking about a government led by the man who -- as Chancellor -- sold off half of the country's gold reserves when the value of gold was at its lowest level for ages (and actually announced the sale far enough in advance for the market to take the projected increase in supply into account and lower the price still further) and whose taxation policies wrecked what had been an excellent system of privately-funded pensions.
(And I, unlike some people here, am old enough to remember how badly-run most of the previous batch of nationalised businesses were before Mrs Thatcher privatised them: Admittedly there were what I consider to have beeen mistakes made in some of the privatisation processes, but that hardly means that the state-run enterprises were perfect...)
That's mostly an off-tangent rant, but I will say that any plan to nationalise Northern Rock would be temporary, not permanent, and would be privatised once it had been restructured and had sorted out its finances.

3/ Do you think that this government would be anywhere near as concerned about Northern Rock if it was Southern Rock -- and based in a staunchly Conservative area, rather than in a region that traditionally supports them -- instead?
Yes, if not more so. The North is a very safe labour area, while the South East tends to have more marginal constituencies which could determine the outcome of the next election, all thanks to our absurd electoral system.

1/ No. Why the hell should the taxpayers be expected to bail out a business whose management got it into that sort of mess?
1) Because we didn't want the whole banking sector to collapse

2) Because the problem wasn't caused by the bank so much as the media who did a fucking incredible job of nearly bankrupting it

3) So that a fair amount of our taxpayers didn't become so poor as to become ex-taxpayers.
2/ There were supposed to be safeguards in the system so that the authorities could intervene before things got so desperate. The government failed to use them properly. I wouldn't trust the government to run anything...
Since the whole credit crunch thing came pretty quickly, and Northern Rock was then extremely fucked very quickly indeed due to its customers taking all of their money out due to the scaremongering press, what would a government agency have been able to do?
We are, after all, talking about a government led by the man who -- as Chancellor -- sold off half of the country's gold reserves when the value of gold was at its lowest level for ages (and actually announced the sale far enough in advance for the market to take the projected increase in supply into account and lower the price still further) and whose taxation policies wrecked what had been an excellent system of privately-funded pensions.
Irrelevant. The government's a complete fuckup, that's true, but I don't see how his selling off of our gold reserves is remotely to do with Northern Rock.
(And I, unlike some people here, am old enough to remember how badly-run most of the previous batch of nationalised businesses were before Mrs Thatcher privatised them: Admittedly there were what I consider to have beeen mistakes made in some of the privatisation processes, but that hardly means that the state-run enterprises were perfect...)
Yes, post privatisation we've had a wonderful time with the trains, Royal Mail and gas, right?
3/ Do you think that this government would be anywhere near as concerned about Northern Rock if it was Southern Rock -- and based in a staunchly Conservative area, rather than in a region that traditionally supports them -- instead?
It'd have tried even harder.

See the flooding in Hull and the other staunchly Labour areas versus the response to the swing voters in Gloucestershire. Hull - a few quid here and there. Gloucestershire - huge effort made on almost every front.

I BEFRIEND CHESTNUTS;13305615']I know pretty much zilch about economics, so I can't really say wether I think it's a good decision to go for nationalisation.
Here's a crash course:

It's never a good decision to nationalise anything.

Here's a crash course:

It's never a good decision to nationalise anything.Maybe you missed the problems with the credit market in recent months? What do you think a fairly major bank going into receivership might have on this situation?

Maybe you missed the problems with the credit market in recent months? What do you think a fairly major bank going into receivership might have on this situation?
Caveat Emptor

Here's a crash course:

It's never a good decision to nationalise anything.
That's utterly bollocks.

The Railways were run cheaper and better under the government than they are now. See also Royal Mail, which Crozier has managed to fuck up spectacularly during his time in office.

Caveat Emptor
Luckily for us in the UK, that doesn't apply here. Indeed, 'Caveat venditor' would be far more accurate.

well it is a good time I'd say to be putting the banks on a closer government watch

though I think Northern Rock is finished

If no buyer can be found, then the Bank of England should step in as the banks main creditor to begin winding up its assets to pay back the loan - effectively nationalisation. Of course, this could have all been avoided if the Bank of England had injected emergency funds into the banking system when the Federal Reserve and European Central Bank were doing the same thing. Or it could have been avoided if Northern Rock hadn't pursued a business model which favoured unsustainable growth and over-reliance on short term liquidity.

That's utterly bollocks.

The Railways were run cheaper and better under the government than they are now. See also Royal Mail, which Crozier has managed to fuck up spectacularly during his time in office.
They lost money before.

Or, they were under-priced for the market and thus crowding out competition unfairly.

Or, they now face an unreasonable regulatory burden.

There are any number of reasons why the private railways might be cheaper or offer better service under the crown, but that isn't evidence that they should be under the crown.

Actually the nationalized banks in NZ have done pretty well, I believe a big election thing some years ago was Labor promising a 'people's bank' for lower running costs and fees, and they won the election. Government bank imho are good because they can be used directly to fund community development and build, they can offer micro loans to small businesses and can allow the government to plan a sustained growth as opposed to the unpredictable arena of private investment.

Here's a great article providing all the background information you could want:
http://www.economist.com/displaystory.cfm?story_id=9988865
Lessons of the fall

How a financial darling fell from grace, and why regulators didn't catch it

A MONTH after Northern Rock made shocking headlines around the world, the full story of Britain's first bank run in 140 years has yet to be told. People were little the wiser this week, after Adam Applegarth, the mortgage bank's chief executive, and Matt Ridley, its chairman, tried to convince a sceptical parliamentary committee investigating the fiasco that they had been struck down by a bolt from the blue. The business model of Britain's fastest-growing mortgage bank—which funded its loan book mainly from the wholesale markets, rather than from retail deposits—had been prudence itself, they explained, derailed only by sloppy lending in America that caused those markets to seize up in August.

But their Northern Rock is now a busted flush. None of the three groups who talk of buying it at a knock-down price—a consortium led by Sir Richard Branson's Virgin Group and two private-equity outfits, Cerberus and J.C. Flowers—wants to keep its name. The bank, kept afloat at present by £13 billion ($26 billion) of public money, does not rule out going back to the Bank of England for more. And just as Northern Rock's bosses deny imprudence, so the central bank's governor, the head of the Financial Services Authority and the chancellor of the exchequer stoutly maintain that they were not responsible for the mess either.

Yet the story needs to be pieced together, for the debacle has had three important and unpleasant consequences. A financial institution that underpinned for years the economy and self-image of one of England's poorest regions, the north-east, has been destroyed. The reputation of a broadly good central-bank governor has been tarnished. And an admired regulatory system that helped to make London the world's biggest international financial centre has fallen into disrepute. What went wrong? What signals were missed? And what lessons should bankers and regulators both learn?

[...]

As for nationalising it...well, it's not really a savings bank. I wouldn't think this (creation and sale of mortgage-backed securities) is the sort of business the government wants to be (or could be) in.

If they can't work out a rescue package, they might not have a choice, but I can imagine the various government departments aren't too keen on it. It's a lot of work and basically nothing to be gained from it.

What this is not is something that merits a debate on the pros and cons of nationalisation as economic policy.

There are any number of reasons why the private railways might be cheaper or offer better service under the crown, but that isn't evidence that they should be under the crown.

Dogma?

They lost money before.
And continue to do so. The government's spent more on bailing out the train companies' various post-privatisation fuck-ups than they did on running the bloody things at the time.
Or, they were under-priced for the market and thus crowding out competition unfairly.
Fucking didumses.
Or, they now face an unreasonable regulatory burden.
Not really, no.
There are any number of reasons why the private railways might be cheaper or offer better service under the crown, but that isn't evidence that they should be under the crown.
So despite the fact that it was a better service run for less money, it shouldn't be nationalised?

That's not being particularly pragmatic about the situation, now, is it?

Not really, no.
Well, do franchises and price controls on some fares count?

Not that it makes much difference. The unregulated fares are under more inflation than the regulated ones, and most franchises seem to be replaced for going bust or simply failing anyway.

I can't believe anyone would choose to live in a country that so unilaterally acts so heavy-handedly in it's foreign relations to the point of damaging global opinions toward them.

*looks around* Shit! >.<

So despite the fact that it was a better service run for less money, it shouldn't be nationalised?
Was it actually run for less money?

You need to count all of the bureaucratic costs, as well. Every meeting that was held to govern the nationalised trains is a cost.

Did the government ever open its books on the trains? If not, how do you know they ran for less money?

That's utterly bollocks.

The Railways were run cheaper and better under the government than they are now. See also Royal Mail, which Crozier has managed to fuck up spectacularly during his time in office.

Agreed. Bring back CRE! Hail the Establishment!

I'm against nationalising anything like banks, but as for the railways... as someone who relies on them for day-to-day travel until I can find a job closer to home and get back into my lovely, polluting, comfortable, warm, fast, NOT DIRTY, NOT CROWDED, NOT STANDING IN THE FREEZING RAIN FOR TWENTY MINUTES WAITING FOR THE THING car, I have to say that at the moment they couldn't get much worse. Nationalise 'em again, see what happens.

I'm against nationalising anything like banks, but as for the railways... as someone who relies on them for day-to-day travel until I can find a job closer to home and get back into my lovely, polluting, comfortable, warm, fast, NOT DIRTY, NOT CROWDED, NOT STANDING IN THE FREEZING RAIN FOR TWENTY MINUTES WAITING FOR THE THING car, I have to say that at the moment they couldn't get much worse. Nationalise 'em again, see what happens.

If your car was fast, wouldn't you use it for your day to day travel?

If your car was fast, wouldn't you use it for your day to day travel?

My office was moved a few months ago and I'm now travelling cross-country every day, and there's nowhere to park when I get there. It's just not practical, and to be honest I can't afford to drive OR take the train. Hence why I'm desperately looking for a job closer to home. Trains are... unpleasant. Especially if you work late and take a later train, when you get to see just how huggable the hoodies really are.

Actually the nationalized banks in NZ have done pretty well, I believe a big election thing some years ago was Labor promising a 'people's bank' for lower running costs and fees, and they won the election. Government bank imho are good because they can be used directly to fund community development and build, they can offer micro loans to small businesses and can allow the government to plan a sustained growth as opposed to the unpredictable arena of private investment.

Nationalised banks? The last time a bank was nationalised in New Zealand was in 1989, and that was the BNZ. It was subsequently sold to NAB.

Kiwibank, the bank you were referring to, was a new SOE founded by the government and which operates as a subsidiary of New Zealand Post. Furthermore, it was not a Labour Party policy; it was the brainchild of Jim Anderton, the then leader of the Alliance Party - it became policy due to the coalition agreement between the Alliance and Labour (notice the u). Kiwibank has had its benefit in that it has allowed for improved services by the other banks in New Zealand and has brought prices down.

About nationalising Northern Rock, I personally think it is necessary to prevent further problems down the track. Let us say that Northern Rock collapsed and thousands lost their money; it would likely cause a panic and people would start withdrawing their money from other banks, and you would easily end up with a crisis. It has happened in New Zealand in the last year with finance companies; Bridgecorp collapsed back in April, and since then, there have been ten other finance company collapses, mostly brought on by investors wanting to pull their money out (of course, the money had been lent out).

In saying that; I would want to see Northern Rock allowed to get back on its feet, and then sold for a profit to the taxpayer.

About nationalising Northern Rock, I personally think it is necessary to prevent further problems down the track. Let us say that Northern Rock collapsed and thousands lost their money; it would likely cause a panic and people would start withdrawing their money from other banks, and you would easily end up with a crisis.
The government already guaranteed all savings with Northern Rock with taxpayer money.

As for getting it back on its feet - I'm not sure that's possible. Northern Rock wasn't a normal bank, it didn't take deposits as a big part of its business. It was in home loans, and it got the money for those loans by selling the mortgages it had secured as securities and by borrowing against those securities.

It was a risky business, and you can see why the sub-prime crisis brought it down. I don't think the government can get into that line of the industry - indeed anyone in it will have a hard time for a while yet.

So the only thing a nationalised Northern Rock could do is try to become a deposit bank, which is sorta hard if you have a tarnished name, established private competitors and basically no skill base to draw upon. Do you really think that's where taxpayer funds should go?

The only way a nationalisation should be handled is to break the thing apart and sell bits and pieces, just as a way to manage the thing's bankruptcy without too much confusion about people's deposits.