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.

2 comments:

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.