Monday, 3 November 2008

More taxpayers money needed for NRK and the B&B

It seems like years ago when government ministers told us that the Northern Rock was a solvent institution and that our financial system was fundamentally sound.

Now, a source "close to the government" is telling the Daily Telegraph that more money is needed for our two state owned banks - NRK and the B&B. The story suggests that the government might need to inject a further "£2 billion pounds to £3 billion." This comes on top of the £3 billion the government has already injected into NRK as additional capital.

It is now painfully obvious that NRK was effectively bankrupt back in the summer of 2007. It had a rotten portfolio of mortgages that are now quickly deteriorating into a pile of bad loans.

Today's story in the Telegraph is a classic "bad news management" trick. The story starts out as a rumour, and then when all our rage has been dissipated on the rumour, the government quietly releases a confirmation.

Before this crisis is over, the government will make liberal use of this tactic. There is a lot more bad news to come for UK taxpayers.


vado said...

And the total cost to the taxpayer will be?

Any guesses anyone?

Mark Wadsworth said...

Ye Olde Gummint is not, if I understand correctly, putting more money in, what it's doing is converting some of our taxpayer loan into shares.

Which is all well and good, but isn't this a debt-for-equity-swap? And if it's good enough for the taxpayer, why doesn't the gummint demand that other bondholders do the same? That would fix the banking 'crisis' at a stroke.