Here is one of the best articles written so far on the Northern Rock Fiasco. Anatole Kaletsky argues forcefully that the bank of england and the treasury should put NR out of its misery and move quickly to liquidate the bank. Furthermore, there should be no subsidies or interest rate write-offs for any prospective investors.
Katetsky's strategy for NR in full:
"The Chancellor should make a public announcement that there can be no question of extending any state funding beyond February, whether Northern Rock is under new ownership or remains in its present form. If, by that time, the company has not managed to secure private funding, the Bank of England will call in its loans and put the company into administration. To prepare for this contingency the Government will immediately present a short emergency Bill to Parliament, allowing the Treasury to honour its guarantees to depositors and creditors by offering £1 for all Northern Rock's assets and liabilities in the event of the company going into administration. Since the company would face a demand from the Bank of England for immediate repayment of more than £20 billion, there would be no question of either the administrator or the shareholders refusing this £1 offer.
Once this Bill was passed, the Government would be in a position to repay Northern Rock depositors within 24 hours of it being placed in administration. Meanwhile, Northern Rock's mortgages and other assets would be handed over to a newly created public sector company similar to Railtrack, which would sell them off, either directly to the credit markets or to other mortgage lenders, over a period of time.
If the Bank of England, the Financial Services Authority and the Treasury were right in their assessment two months ago that there was nothing fundamentally wrong with Northern Rock's book of assets, then the Government would be able to sell them off over a period at a good price. In that case the Treasury would recoup all the money paid out on deposit guarantees and might even make a modest profit."
Yes, this is how it should happen. Ejnd it now. Liquidate NR and move on. No bail-outs.