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I'm feeling a bit lighter in the wallet today - if you believe the latest reports on the Northern Rock saga, the Government have lent in the region of £24 billion to the beleaguered bank.
Small potatoes eh? These figures must flow around the money markets every day. Give the boys a cash injection and everything will sort itself out. Bank back in the black, no more feeding cups of tea to customers like an upmarket soup kitchen, and the housing pyramid scheme gets back on the up.
It’s not until you look deeper into the gravity of the situation that you start to worry. The loan to Northern Rock is provided by the Treasury, which is taxpayer’s money. That’s you and me (assuming you’re also being shafted by the IR on a regular basis).
Now, I’m all for lending my mates a few quid here and there. I’ve even been bailed out by the folks when I ran out of cash for beans. But get this – that £24 billion equates to each of us lending Northern Rock £900. Yes, £900 smackers. Each.
That plasma telly, Charlton season ticket, the trip to the Maldives… ok, more likely the monthly beer fund… is currently tied up in NR’s coffers. Strangely enough, I’m not angry. Mildly peeved, but I’ve had worse days. Surely we should be livid, losing £900 each? Marching on Parliament and all that?
Yet I feel strangely apathetic and happy to sit by and watch my hard-earned cash be poured away by a series of poor decisions beyond my control. Squandered, never to be seen again. Perhaps, I wonder, if it’s the feeling of familiarity causing this feeble defeatism.
After all, it wouldn’t be the first person I’ve called Darling that’s cost me £900…
2 comments:
Wasn't the government heavily criticized for not helping Northern Rock out earlier and guaranteeing peoples savings?
At that stage the governments line was as it was a private company bailing them out with loans would give the green light to other banks to give loans irresponsibly.
Cue massive uproar from the media about peoples life savings going up in smoke.
Now that the government HAS guaranteed peoples savings, they are getting it in the neck for wasting taxpayers money.
To be fair, what were they supposed to do?
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Also, the £900 figure is somewhat disingenuous. Dividing how much money Northern Rock has been lent by the amount of taxpayers in the UK (if indeed that is how the figure came to be) is nothing but sensationalism.
For one thing, the loan is not from the treasury, its from the bank of england. Also, its a loan, and as such should be repaid with interest.
Again, what should the government have done? Let the bank go to the wall? Possibly so, but surely its an impossible situation for the government either way.
Ha ha - this was supposed to be a light-hearted take on things, but while there's room for a debate... ;)
You're spot on that the Government was in a no-win situation. My worry is that they've pleased everybody yet satisfied no-one that this can't happen again.
Savers keep their cash - check.
Bank keep trading - check.
But, the bigger issue remains that a business model with a fatal flaw in it's funding capability is being allowed to continue. In last night's news reports, Banks are still sceptical about lending money to each other. There is no 'Plan B'. And yes, this is a loan that should be repaid - but as pitiful takeover bids continue to 'play chicken' with the Chancellor, the likelihood of this decreases.
So what plans have the Government put in place to stop this happening again? Shouldn't the Government and the FSA be screaming from the rooftops that change is being put in place to ensure the interests of savers, mortgage holders, shareholders, employees, and now the taxpayer, are being protected against a similar lack of directional foresight?
The action needs to start now to restore the credibility of the Banking system - admittedly a point missing from my original post.
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Oh, and ta for the comment - didn't think the 'serious' cap would have to come out by day 2! ;)
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