Darling between Rock and hard place

In a most unsatisfactory end to another Government shambles, it has been announced that stricken mortgage bank, Northern Rock, will be nationalised until market conditions improve, and the value of the bank increases, whereupon Darling dreams that bidders will flock back to repay the British taxpayer a handsome dividend.

In the meantime, I expect this to be the worst decision for bank employees, shareholders, customers, and the banking industry in general, not to mention taxpayers in the long run.

It is widely acknowledged that a new brand is required for Northern Rock if it is to survive, never mind thrive.  Is the government going to rebrand it “Brown and Darling”  – a secure home for your money?

The Government is badly placed and very inexperienced at running a bank.  I expect that value in Northern Rock will actually be eroded and the taxpayer will lose out again.  In the meantime, no doubt Northern Rock’s competitors will be considering their legal positions regarding the special Government assurances and protections that Northern Rock savers enjoy.

What a mess.

However, you have to be somewhat sympathetic to Darling’s dilemma.  The mistakes were made very early in the affair with the Bank of England, the FSA and not least Northern Rock management all carrying some responsibility.  It is easy to blame the Government when there have been many parents of this problem child.

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