Why should the taxpayer be bailing-out Northern Rock?

[sasguru]

It sets a dangerous precedent - what if every bank had to be bailed out? The govt. doesn't have the cash to do that. You can be sure that further difficulties will be covered up to avoid a loss in confidence.

[beaker]

It sets a dangerous precedent - what if every bank had to be bailed out? The govt. doesn't have the cash to do that. You can be sure that further difficulties will be covered up to avoid a loss in confidence.

Hello Sas, you're up late

[TheFaQQer]

Note, the government has not said "we will bail out Northern Rock whatever happens", or that they will bail out anyone else.

What they have said is that during the current financial market uncertainty they are prepared to guarantee the deposits at Northern Rock.

[Moscow Mule]

It sets a dangerous precedent - what if every bank had to be bailed out? The govt. doesn't have the cash to do that.

Yes they do, they'd just print more. If every bank needed bailing out they'd have a lot more to worry about than a touch of inflation.

[Clippy]

It said on the BBC that the Government hadn't worked out exactly how they'd get hold of enough money to bail out Northern Rock if it was to collapse.

I believe they have submitted an application to the Lottery Fund.

[Lucy]

sas is back on his medication

It sets a dangerous precedent - what if every bank had to be bailed out? The govt. doesn't have the cash to do that. You can be sure that further difficulties will be covered up to avoid a loss in confidence.

and I'm feeling ill...i'm agreeing with you, you little frog.

And anyway the CEO of NR gets around a £1M a year to look after this place, so off with his head. TWOT!
(Where do these people come from?) Please don't tell us you didn't see the risk, or it was managable. How long before people who can't manage their money manage to stop paying their mortgages?

[OwlHoot]

It sets a dangerous precedent - what if every bank had to be bailed out? The govt. doesn't have the cash to do that. You can be sure that further difficulties will be covered up to avoid a loss in confidence.

Damn right, and it's not just the money directly. If the Government takes it upon itself to act as guarantor for banks their incentive to meddle in the banks' affairs and regulate them will greatly increase, and we all know how well the Government is at organising piss ups in breweries..

[GreenerGrass]

The government and BOE cannot let the UK banking system collapse, but also they cannot be seen to let banks get away with reckless business practises and expect to be "bailed out" if it all goes tits up.
There has to be some kind of punishment (i.e. sacking) of the entire NR board, Darling hinted that this should happen but that it is down to NR shareholders to force it to.

You could argue we needed something of this gravity to happen in the UK now, and for lending rules to get tightened up, rather than something even bigger and worse in the future.

[DBA_bloke]

Bollox. A failure of NR does not mean the economy has to go into a nosedive. NR ran out of cash and had to borrow from the BoE but there are plenty of banks who have enough liquidity and who will happily pay for NR's obligations if they can get a good deal.

Your comments answered:
"A failure of NR does not mean the economy has to go into a nosedive."
Given that every pundit and his dog was unsure WHAT would happen if NR went belly-up, and given that the financial markets are, above all, based on gossip, gut instinct and base selfishness, I couldn't disagree with you more. If NR had gone pop!, then I doubt very much that the UK's financial markets would have sanguinely carried on as normal. There'd have been a big panic, as per, with the whole pack of pundits and look-at-me LSE dropouts looking for another lender to cast doubt on.

A run on a major high street bank; tales of potential buy-outs; screams of panic on very front page; news positively drowning in "It's the end!!!!" bulletins, etc. Leave it out!

Your comment would have been correct if you'd said: "A failure of NR does not NECESSARILY mean the economy has to go into a nosedive."


"NR ran out of cash and had to borrow from the BoE but there are plenty of banks who have enough liquidity and who will happily pay for NR's obligations if they can get a good deal."
And a good deal would be what? 20p per share? Thanks professor! If NR had been bought-out, following the huge media frenzy there's been since last Friday, then, once again, I doubt very much that such a buy-out would have calmed the market. And, once again, it'd be a case of the Maddy-sated media looking to knock another lender. And so the whole mess would, possibly, get bigger.

Calls for the Markets to look after themselves is fine and dandy, usually; but Government has a duty to protect, and protecting the economy, especially as we've had nasty meltdowns twice in recent times, is simply sane.

It's a one-off correcting touch on the wheel. Not some sort of commie-CIA-Mafia-whatever plot to destroy Capitalism. The spirit of Maggie is still alive.


"Bollox"
Zzzzzzzzzz…..

[RightLaugh]

NR shares are on the slide again.