Northern Rock Nationalisation Under Fire
Rival banks are beginning to protest about the plans for Northern Rock, complaining that the nationalised bank could benefit from competitive advantages over them, taking business away.
MPs were also concerned that Rock was trying to attract new customers with offers above their homes’ worth, thereby running the risk of repossessions in the future.
This crisis doesn’t appear to be over for the Government as it would not deny claims that taxpayers face a £100mb bill for advice to be paid for from banks and lawyers during the quest for a buyer. Chief Secretary to the Treasury Yvette Cooper said: “I can't tell you what the figure is. But what I can tell you is that when a bank gets itself into trouble, inevitably there are fees and costs involved.”
As Chancellor Alistair Darling went into action in the Commons to push through emergency legislation to take Northern Rock into public ownership, he inevitably faced criticism from Conservative leader David Cameron who called for Mr Darling to be sacked. He said: “I think we have to ask ourselves, does this Chancellor have any credibility. Do people trust what he says?”
It was also, according to the Conservatives, amazing that Rock was still allowed to offer 125% mortgages, with a quarter of the debt unsecured. Rock’s interest rate on unsecured loans is 12.9%, whereas it is 13.1% at Halifax and 15.4% at NatWest.
Adrian Coles, of the Building Societies Association, felt that the assistance being given to Northern Rock by the taxpayer would 'lead to pressure being put on organisations that have not failed and do not need taxpayer support'.
CBI director general Richard Lambert, said: “It is critically important that state ownership of the bank should not be allowed to distort the savings market, through access to government funds on favourable terms.”
Prime Minister Gordon Brown re-iterated that nationalisation was a temporary measure. However, new Northern Rock boss Ron Sandler has stated that it will be 'some years' before the bank can repay its loan debts.