Northern Rock's small shareholders are no angels, of the North or otherwise. But they have been evilly misled.
The building society was a way in which people could take shares as well as borrow cash to facilitate meeting their housing needs; they are essentially local institutions. It was the Labour party that legislated to permit their demutualisation.
The small shareholders do not make a great distinction between shares and deposits in a local and very familiar organisation that has been there since they can remember. They understand it as still functioning as it always did, and the demutualisation put a bit of money their way for generations of financial trust and loyalty.
Over the years the small amounts they have made have not been cashed-in; often they are regarded as rainy day money, or for meeting special occasions, or for grandchildren's tertiary education. There have been real sacrifices made not to touch the money that is regarded, deposit or shares, as savings.
And now a Labour government has permitted such financial practices as have led their local financial institution into ruin, and nationalised their small resources without compensation. Enhancing a client voter base is one thing, but facilitating apparatchik enrichment by corruption and destroying independent wealth and saved resources is enslavement.
New Labour New Depths.
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The Tories would have let the shareholders drown citing market forces which must be allowed to take their course.
Labour have let the shareholders drown because of the politics on envy - they wouldn't dream of lifting a finger to protect those they perceive as rich, even though many Northern Crock shareholders were actually working class.
Either way, it's the usual story. When businesses fold the board get golden handshakes, the bond holders and debtors get to pick the bones, the workers get redundancy, and the shareholders get shafted.
If the concept illegal existed in any real form in the United Kingdom any more, then all of what is happening with Northern Rock would be illegal.
But it doesn't, and the only good that might come from Northern Rock is the demonstration of illegality, and social violence, on such a scale that what is the nature of the UK government might be widely understood.
Perhaps it was the market that was doing the evil misleading by letting the share price rise to over £12 per share - on the back of lots of buy recommendations from the same people who are now saying that the Northern Rock business model was fundamentally flawed and some of whom were making nice fees from securitisation structures etc.
The removal of financial and banking oversight from the Bank of England and its placing in the Financial Services Authority, under the deeply flawed and highly politicised arrangements brought in by Gordon Brown as Chancellor, is what is respsonsible for the 'business model' (in truth, political off books redirection of resources to a favoured Labour-voting clientele).
There is a reason for Mervyn King to be listed with the heroes. His refusal to be party to the Third Sector economic and financial practices of the Third Way Labour party brought Northern Rock to the surface and all that is carried with it. At least now we know what we're dealing with and poked a stick in Brown's wheel (or up his nose).
No - the regulators sin was the lesser one of ommission. The greater sin of commission was by those who pumped up the Northern Rock share price and provided it with teh wholesale funds and credit rating it needed to execute its business model.
There are also not many in the City who agree with your heroic analysis of Mervyn King - when the FSA eventually identified the problems with the Rock - the Bank did not react with the speed which is necessary in such situations (not a million miles away from BCCI and JMB when the Bank was their regulator). Perhaps rather than talking about moral hazard - I suspect everyone now wishes tha the Bank had given the necessary guarantees to allow the Lloyds deal to go through - certainly would have been a lot cheaper and a lot less disruptive to the financial markets (and that is King's job).
If GB was covering his backside King would have gone a long time ago - rather than having his term extended.
In the last para should be "wasn't" rather than "was"
The disregard - to put it at its kindest - in which Gordon Brown is held by European financial, and now political, circles has to be heard to be fully appreciated. On his standing in US circles I could not comment, but Europe's judgment doesn't bode well. It is to be hoped devoutly that they take him more seriously than the rest of us, if only for the sake of his amour propre.
The notion that he could have touched the Governor of the Bank of England without creating a run on the country, never mind the collapse of his bank-fronted, economic regional policies he is already suffering, will not stand examination.
Mervyn King enjoys everything that Gordon Brown is not, including legitimacy in office, and we were fortunate that his commitment to his country protected us all from Brown's socialist, authoritarian-inspired folly.
Whoever locked Gordon into his bunker and confounded his efforts to sack the Governor of the Bank of England in the middle of a Brown-instigated, triple run on a bank (for the public eye saw only the retail run), deserves a medal.
Your suggestion that it would have been cheaper to buy off Brown's regional transfers and half-baked ideologies than pull it all out into the open for public viewing, shows why there is no Anonymous listed among the heroes.
From what you comment here, you put ideological, New 'Labour' party, and narrow, short-term financial interest, before the permanent well being and opportunities, of all the people of England.
Allowing significant banks to collapse rarely does anyone any good whether they are New Labour/regional interests or otherwise. They tend to be rather contagious and infect other healthy parts of the economy - a managed decline is usually much more sensible. The policy you suggest was tried in the US in the Great Depression without much success- and your other hero (and mine and Mervyn King's, if you read his earlier writings) Keynes made several comments to this effect at the time.
Anon.:
Should Brown have sacked Mervyn King a long time ago? Belarus President Alexander Lukashenko in
1995-98 sacked three Central Bank Governors in three years (one of which he imprisoned for a few months) till he found one who would "independently" do what he was told.
We may be getting there but not so fast please. Apart from stricter legal constraints in the UK, London has a financial market inordinately larger and infinitely more vulnerable than Minsk.
Did the Bank not react with the necessary speed? You confuse the Bank's role as Lender of Last Resort - against good quality collateral at a penal interest
rate - with that of providing virtually unlimited guarantees and unsecured credits at a subsidised
rate or free of charge. This we leave to the Central Bank of Belarus.
Any other gradual unwinding of insolvent banks at public cost could only be justified in the public interest if it did not amount to a privileged transfer to a small group. I.e. this would have to be preceded by complete nationalisation, not a "temporary" one as in the UK government fantasy world, but total and irreversible, in order the reserve to the state the full value of public support.
'Belarus President Alexander Lukashenko in
1995-98 sacked three Central Bank Governors in three years (one of which he imprisoned for a few months) till he found one who would "independently" do what he was told.'
There we have it, C. Gordon Brown's rage at Mervyn King's refusal to do as he was told has undermined the UK's financial standing, expressed itself in most unwise, hurried, and damaging proposals for the reform of banking and financial controls not just for the UK but (Brown's lack of self-awareness knows no bounds, as does his hubris) for the EU, and is as yet unassuaged.
And the weird man from Scotland, so inappropriately our prime minister, bears a grudge as does no other.
This, and paricularly this, aspect of the Northern Rock avalanche of disgraceful behaviour, has not yet reached rest.
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