Monday, February 18, 2008

He really is awful isn't he?

What year is it again? Is it 2008 or 1978? I'm confused. Am I dead? In a coma? Have I travelled through time? No wait, this is neither Life on Mars or Ashes to Ashes. I'm not in the past at all, it is 2008 and the Government really has just nationalised a bank. Strikes next I guess to go with the rising and record unemployment rates. Wait, sorry, I don't mean unemployment, I mean worklessness, but I digress.

After six months of Darling and Brown dithering over Northern Rock they've finally done what is instinctive for someone on the Left to do and formally appropriate private property for the state. In this case it means we now have hundreds of thousands of homes being effectively owned by the state. Mortgage holders have become quasi-tenants, literally overnight, and should they default the Government gets to repossess the housing stock and presumably turn it into council property.

It's certainly a novel way to solve the housing crisis and need for affordable homes. Just screw up the economy, nationalise a bank and then watch the market crash and you have lots of property to dole out to people. Whilst you do it pretend that you know what you're doing because you're a politician. Price control will be next and the timewarp will be truly complete. The most amusing mess in all of this is the comment on it in some of the papers. Steve Richards in the Independent reckons that the real losers are the Tories because they are being opportunistic by saying the Government has dithered and also opposing nationalisation. That is of course bollocks.

For a start the Government has dithered. Darling and Brown, so fearful of the mere phrase 'nationalisation' have allowed themselves to be driven by events by not being convicted enough to take a decision. Brown is not the politician of conviction and long termist that he would like people to think he is. He's short term Machiavellian tactician and a rubbish one to boot, especially when the spotlight is on him and he is not operating from the shadows as he had done until last June. That is the truly significant political ramification of yesterday's news. His reputation for economic competence having rode the wave in the good times is crashing down around him in the wake.

The Tory opposition to nationalisation is not in the least bit inconsistent with pointing out Brown and Darling's shortcomings in terms of their inability to take decisions. The question of course on the lips of the anti-tory, or more correctly, anti-right though is thus 'alright clever clogs, what would you have done?'. Personally I don't know the answer to what Cameron and Osbourne might have done but were it me I would have done nothing and said I was doing nothing. I would have sat back and let Northern Rock go under.

Now some might say that would be irresponsible, what about all the mortgage holders? If the Rock went under what about them? Well the bricks and mortar would still have been there with a market value. As we have been constantly reminded, this was a liquidity problem not a solvency problem. Northern Rock, like any bank, deserves no special treatment, especially not for votes. The primary reason the Rock found itself suffering is because it tried to play a dodgy game of risky lending, pushing its customer base too fast and too high.

I was chatting with an Estate Agent the other day or is with the bank. He was noting that even through all it's troubles it is still doling out cash to almost anyone who comes to it and asks nicely. He has sold property to people that he is sure cannot survive the repayments yet they still get approved. The bank's website continues to push unssecured loans to people even though it has not, as we learned, got the traditional levels of deposit backing that the other banks have. That is where the real crux of the problem lies, and as I've said before when I first heard of the bank's problems I laughed simply because the first time I cam across them was when I was a leaseholder and the freeholder got repossessed.

The bottom line for me is that the bank should have been left to sink or swim. A rescue package from the taxpayer should never have been considered and the nationalisation of a mismanaged 'bank' into the hands of politicians flies in the face of any economc progress the country has made since 1979. Brown liked to play on his 'interest rates out of politician's hand' line, now he's just turned the state into the biggest landlord with a significant interest in those rates he has made quasi-autonomous. Add to that Darling saying it is 'business as usual' at the bank and you have a recipe for further disaster. John Hutton was spot on when he was alleged to have said Brown would be a 'fucking awful Prime Minister'.

20 comments:

Gordon is a Liar said...

Brown effectively lied to Parliament when he said mortgage holders were at risk. They (the mortgage book) were never at risk and were effectively a most sort after prize from the private sector.

Shame on Call Me Dave for not bringing Gordon to account for this LIE.

kinglear said...

The real problem of course is that neither Doom the Gloom or Darling Darling know the first thing about markets or economics, despite their protestations to the contrary. At the first hint of a problem, Mervyn should have MADE them take any private offer that was even being whispered - but they knew so little they didn't even realise there was a problem, despite being told so.

Howard said...

I agree and it is the best analysis that I have read so far. I read Richards this morning and what he is saying is complete bollocks.

Cameron's strategy should be to tease out the labour opponents to maximise Brown's embarrassment. Dale is saying that Cameron should call a vote coincidence . This will just unite labour and could backfire.

My guess now that Blair loyalists may now break ranks and shareholders will go to court. This could get very nasty very quickly.

Man in a Shed said...

The question should be "What would Margaret have done ?"

The answer is probably to have let the bank go bust.

After all BCCI and Barings were allowed to go bust.

Why was Northern Rock different ? Pok barrel polictics and the willingness of the Labour government to spend other peoples money on their own political careers.

The burden of the public sector is now at the same as under Jim Callaghan, Debt is out of control and Ed Balls the next chancellor has arranged for us to beg Muslim clerics to lend us sharia money to bail Gordon Brown out.

Gordon Brown's self obsessed career has to have been the most expensive in history. The selling of gold at a low, PFI, giving away the UK' budget rebate from the EU to promote Tony Blair's career, vast pay increases for less work in the NHS, Northern Rock.

There is a risk that Gordon Brown is going to make Jim Callahan and Wilson look good.

Back to the 70's - weep for those people who will be crushed by Labour shameless and selfish mismanagement of our economy.

PS Both myself and John Redwood have been working this theme in early Jan.

lettersfromatory said...

I'd be jumping for joy at the news of nationalisation if it wasn't going to destroy this country's financies for years to come.

Johnny Miller said...

You right wing buggers are so vicious to poor old Gordon. He had to do it didn't he? Even if it meant rushing in and nationalising it so quickly. Well, it must have all been a bit quick mustn't it? cos I just heard Mr Darling tell nasty John Humphries that "now Ron is going to look at the books"!

See, they overflow with the milk of human kindness, sparing no thought for money at all, and all you lot can do is carp.

Anyway, my ice cream business never does well in January, so I'm off to get a quick unsecured loan for 125% of what the van is worth. Toodle pip!

Henry Crun said...

Dizzy,

How much of this has to do with the EU's anti-comptetion legislation? IIRC, late last year the MSM were reporting that if no buyers were found the bank would have to be nationalised before the end of February to avoid charges from the EU as the the govt's propping up of NR could be viewed as an unfair advantage.

Henry Crun said...

"The bottom line for me is that the bank should have been left to sink or swim"

If Bodger and Badger hadn't interfered, the bank was ready to be "rescued" by Lloyds TSB. They should have left well alone and let the Banking industry sort the mess out for themselves.

The BoE did the right thing in acting as "lender of last resort", however the whole debacle was triggered by whoever authorised the press release describing the BoE's action as emergency funding.

A similar thing happened in South Africa in the 1970's. Trust Bank found itself in difficulty and before the Reserve Bank intervened the banks clubbed together with a rescue package and Trust Bank was eventually bought by Volkskas which later became ABSA.

Henry Crun said...

Let's hope now that the Nr is now a government "asset", Dave can finlly get some figures from Bodger and Badger.

Let's just see how much the loan book is really worth. With falling house prices and repossessions rising it is likely that any repossessed property going to auction the govet would only recoup about half of the properties' value.

Ed said...

Quite right Dizzy. All the pain of the late 70s and early 80s was for nothing for we are back in 1975 again. There is one silver lining, for while the economy looked good Labour could get away with all their police state nonsense but now the economy looks bad people will want them out a.s.a.p.

John Redwood has a list of things he has said since the beginning so if people want to know what the Tories would have done...

tyger said...

Dizzy,

Are you still drunk from the weekend?

You're right it is a liquidity problem. Now, are you aware how screwed up things get once one bank defaults on a daily inter-bank transfers?

Had the treasury not acted, things would have got very nasty. This has little to do with one bank, and everything to do with a very unstable and complicated system.

Now, Brown *is* the most overrated chancellor is history, and proving to be a woeful PM, but he has to act - or the whole episode would have snowballed.

CityUnslicker said...

sink or swim at the time may have dragged down B&B and A&L too.

However, LLoyds TSB made an offer that should have been accepted and after the die down a quieter piece of liquidation before Xmas would have done the trick.
Finally, Virgin's bid was good anyway and should have been accepted.

They have chosen the worst option.

curly15 said...

It would have been cheaper to provide economic regeneration to the North East region after Northern Crock's death, rather than throwing it a £100bn tax payer's lifeline.

Alan Douglas said...

Dizzy, is my fuzzy brain deceiving me, or was nationalization supposed to be about taking control of the "commanding heights" of the economy ?

I suppose to the creepy-crawlies of Liebour Northern Rock qualifies ?

Alan Douglas

Trixy said...

I do hope you're not suggesting that the Tories are in any way economically competent.

All one needs to do is look at this Non dom nonsense to see that they don't have a clue either.

anthonynorth said...

I always thought Brown was stuck between a Rock and a hard place.

Henry Crun said...

I have just watched Badger's disgraceful political point scoring exercise in the House.

Rather than answer honest questions, he and the rest of his mendacious cronies berate the Conservatives at every opportunity for not putting forward any viable solutions to the NR crisis.

It is not the Opposition's job to sort out government crises, that is the job of the government. The Opposition is there to hold the government to account not provide them with policy ideas.

Given this current lot's record in counting electoral donations and expenses we should be very worried indeed that they now have charge of a bank.

Elusive Pimpernel said...

" I would have sat back and let Northern Rock go under."

Yes, yes and yes. Its a business like any other. It sinks or swims on its performance and decisions - it made bad ones.

greenspam said...

sure you are an intelligent man and understand what a "counterfactual" is. Cousin of 20:20 hindsight. I think had this business, NR, had been allowed to go under there would have been a run on other banks. The media would not have been unable to help themselves. F**k the british economy v. sell some more newspapers. No choice really.

Sepoy Agent said...

I have been waiting all these months wondering why nobody was saying the things you have said today, Dizzy. Well done.
It is the political consequences of nationalisation that are most troubling. The points you make about the mortgage book, the state becoming a landlord to all these new tenants, and the housing stock reverting to the state in the event of repossession is frightening in the extreme.
I agree with all you say.