Northern Rock is nationalised

[CoteDAzur]

Government announces the nationalisation of Northern Rock this Sunday afternoon.

Shareholders are not happy campers. Neither are taxpayers, I imagine, who are footing the bill of Northern Rock management's incompetence.

what does this mean in simple terms.

what happens to the shareholders.

how will this bank be run

Shares are suspended from trading. Bloomberg says a panel will "determine how shareholders will be compensated" - i.e. they will not be buying back the shares at market price, but will be offering some token amount. So shareholders are stuffed.

Apparently, gov refused Virgin's offer, because they didn't guarantee repayment of taxpayers' money that gov has been pumping into Northern Rock to keep it afloat ever since it imploaded in September. (It says here they didn't promise to pay it back 'fast enough' but I doubt if Branson even offered to. It would be highly unusual.)

there is no real market price for northern rock shares because without the 25 billion pounds of taxpayers' money propping it up, the bank is bust and the shares worthless. caveat emptor.

am i right is saying then that if the gov't hadn't propped up NR the shareholders would have still been stuffed? If so, i can't see why they have the hump with the gov't.

I just hope that the gov't doesn't try to bend over backwards to try to please more shareholders like they did with the rail network.

I hear you re 'caveat emptor' but there was a market price and it remained high with the expectation that Virgin would buy Northern Rock.

It is a Very Bad Idea to nationalise companies who go bust for a variety of reasons. All very Econ 101. Can't imagine government advisors being unaware of them, but I guess they are just trying to save the day so that the repercussions of NR's collapse will not be on their heads..

"why they [shareholders] have the hump with the gov't."

Possibly because shareholders in September are the not necessarily the same shareholders of today.

They should have either nationalised NR in September or sold it off to highest bidder and considered the cost to taxpayer of the last six months' of financing as the acceptable cost of stability of the markets and saving face.

This dragging their feet while sinking taxpayers' money and then refusing private money reeks of amateurism, imho.

"Possibly because shareholders in September are the not necessarily the same shareholders of today."
as someone said, caveat emptor!

i see your point re the other stuff.

the largest single shareholder now is a hedge fund

and the nationalisation is temporary and has effectively been forced on them by current extraordinary financial market conditions. i agree it's not ideal but what else realistically could they have done? far worse to start foreclosing on people's houses.

unbelieavable, the Gov should never have pumped money in, they should have let it fold.

what are they going to do when even bigger banks are unable to operate? it's madness, they can't avert the terrible economic slump that is ahead of the UK.

I give Darling two months before he's replaced by Balls.

by other banks, I am thinking Alliance and Leicester and Bradford & Bingley in particular...

I'm quite shocked at this too.

feel we will look back on this point as the time the downturn really accelerated.

just think, Rolls-Royce was nationalised for SIXTEEN years!

GB is in deep water

Economically this country really is in it and I can't believe how GB has duped evveryone with his debt miracle and they are still believing it.I think the coming few years will make the last recession and house price crash look like xmas tbh.

yeah, very much what my dh believes, NH, the UK's level of debt is far higher than the States..

the nationak debt is a disgrace When labour caame to power the public coffers were low but in credit now the debt is off the scale,The budget will be interesting although I feel we may get off lightly in 2009 and he will hammer evryone with tax once the election is in the bag.

exactly, Labour inherited a good balance book from the Tories

I have a feeling they are going to let inflation go skyward in order to keep interest rates low.This seems ridiculous.Interest rates of 5% are v low and people are still not coping with debt.7-8% is a historical average but today that would push many people over the edge so its £3 for a loaf of bread coming soon!

yes, anything to save their own skins at the expense of the economy

I agree completely with you both, Dinny and NH. People's capacity for self deception about their finances and the state of the ecomomy never ceases to amaze me. It is like GB has performed a kind of mass hypnotism on the public. Weird.

This "extroardinary market condition" was forseeable. Many people have been predicting it and warning of Gordon Brown's mismanagement when the economy was high. And now, we are about to pay the price. Lots of people are not surprised. He has spent all the money. And what is the goverment cost of the bailout as it stands now £35 billion or something... That is soooooooo much money. I wonder how many hospitals one could staff for a year with £35 billion? I'm not sure if this figure is right but it is a huge amount of taxpayer money.

I read £50 billion Eleusis.

Bloody Hell, I stand corrected. It is £55 billion!!!!!!!!!

Just to get this in perspective, dos anyone know how much the NHS annual budget is?

There was a breakdown in the Telegraph a few days ago, mainly to point out the massive interest payments on the national debt. The annual payments are the same as the amount spent on the military each year. Can't remember how much it all was though.