£150m Northern Rock Gift

October 09, 2007 2:50 PM


When the Northern Rock crisis broke, we blogged that taxpayers should on no account be made to bail out NR shareholders. And the Bank and Treasury denied they would do any such thing.

But today they've executed a complete U-turn, and handed Northern Rock shareholders an exquisitely wrapped giftbox.


The authorities have done this by extended their deposit guarantee to cover all new NR deposits, as well as those existing when the bank hit the wall.

So now you really can move all your money to NR, benefit from their market leading interest rates (eg 6.31% on an instant access Base Rate tracker account), and rest secure in he knowledge that you're fully guaranteed by HMG. It's the best of all possible worlds... as long as you're not a UK taxpayer.

But the real winners are NR shareholders. Because now their bank can get its hands on all those fresh new retail deposits, it will no longer be so dependent on penal borrowing from the Bank of England. Profitability is automatically boosted- especially when NR trims its deposit rates, as it undoubtedly will.

No wonder NR shares have shot up today. On our reckoning, NR's market capitalisation has already increased by about £150m.

This is a disgraceful climbdown by the Treasury, and a gross misuse of public funds. Northern Rock shareholders have been gifted £150m. All at the expense of taxpayers.

When the Northern Rock crisis broke, we blogged that taxpayers should on no account be made to bail out NR shareholders. And the Bank and Treasury denied they would do any such thing.

But today they've executed a complete U-turn, and handed Northern Rock shareholders an exquisitely wrapped giftbox.


The authorities have done this by extended their deposit guarantee to cover all new NR deposits, as well as those existing when the bank hit the wall.

So now you really can move all your money to NR, benefit from their market leading interest rates (eg 6.31% on an instant access Base Rate tracker account), and rest secure in he knowledge that you're fully guaranteed by HMG. It's the best of all possible worlds... as long as you're not a UK taxpayer.

But the real winners are NR shareholders. Because now their bank can get its hands on all those fresh new retail deposits, it will no longer be so dependent on penal borrowing from the Bank of England. Profitability is automatically boosted- especially when NR trims its deposit rates, as it undoubtedly will.

No wonder NR shares have shot up today. On our reckoning, NR's market capitalisation has already increased by about £150m.

This is a disgraceful climbdown by the Treasury, and a gross misuse of public funds. Northern Rock shareholders have been gifted £150m. All at the expense of taxpayers.

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