When the government first took over Northern Rock, they and their supporters tried to kid us that it was a short-term "liquidity problem", not a problem with the underlying credit quality of the Crock's mortgage book.
You always needed to be Simple Simon to believe that (eg see our very first Crock post here), and this morning the truth is exposed for all to see. Crashing to a £585 million loss in the first six months of this year, its supposedly top quality mortgage book is falling apart:
"The number of mortgage borrowers that are more than three months in arrears has doubled in the space of six months to 1.18 per cent of the overall home loans book. Rock warned that it was particularly vulnerable to the housing market deterioration because of its past practice of offering big loans relative to the value of homes."
So that's £600m of our money straight down the Swanee. And in addition to that, the government has agreed to convert £3bn of the Bank of England loan into equity (ie no obligation to repay - ever). And in addition to that, the Crock's pension fund is in big deficit (last estimate £100m), with the trustees demanding an immediate cash injection from the company (ie us) or they will report us to the pensions regulator.
Just to reiterate the key point - however the deckchairs are rearranged between HMG loans and equity, the government's blanket deposit guarantee means that taxpayers remain on the hook for pretty well the entirety of Crock's remaining £97bn of debt (see new NR financial statement here).
PS Chancellor Darling was interviewed on BBC R4 Today this morning. Disappointingly he wasn't asked why his original Crock assurances turned out to be so misleading, and how much we can now expect to lose.