Monday, February 18, 2008
So I own a bank, well..
My taxes get to pay for the losses and guarantee the operation of the bank, but I don't get a dividend if it makes a profit (there is no hope in hell that Labour would cut the top tax rate). Worse of all, if it keeps losing money, I keep having to pay for it, but I can't sell my "shares" in it.
I don't even use it.
Should Northern Rock been allowed to fail? Well, sad to say for all of those with accounts in the bank - yes. Your investment in Northern Rock is not a risk I should have to bear. I don't expect you to bear my risk in spreading my money among four different banks, people with shares don't expect everyone else to cover the loss of any capital value.
Yes the government guarantee of deposits was the start, the start of the state bearing the losses, the state being the bank of last resort. Now the nationalisation is more like being put in administration, which is pretty much what would have happened anyway - although it may have been a little more brutal for depositors.
It might not all be bad, according to the Daily Telegraph the UK government may yet make money out of it but...
"Now that the company is part of the public sector this profit, which will come from selling off its mortgage book, could help improve the public finances, reducing the need for future tax increases. However, in order for the bank to turn in a profit, it will have to be managed well. This means jobs will have to be cut, and the homes of those Rock customers who can't keep up their repayments will have to be repossessed. To the horror of Whitehall, it is now faced with the prospect of doing all this dirty work itself. Taxpayers must hope it has the stomach to do so."
Indeed, I can only hope that it does. A nationalised bank that acts commercially, hmmm. According to Shadow Chancellor George Osborne addressing the Chancellor of the Exchequer:
"You are introducing unprecedented, sweeping, draconian powers that will let you nationalise any other bank or deposit-taking institution in Britain by ministerial fiat. That is something not even Michael Foot dreamt of and it will create further uncertainly in financial markets and do further damage to Britain's reputation"
That in itself is disturbing, and perhaps the only thing saving the reputation is the impression that Gordon Brown himself is really behind this, and he is no Michael Foot. I can only hope the damned thing can be privatised and the relevant legislation repealed.