Uncharted Territory

February 22, 2008

Bashing my head against a Northern Rock

Filed under: Economics, Media, Northern Rock, Rights issues — Tim Joslin @ 9:18 am

Here are two letters to the Guardian editor. What’s the difference, do you suppose?

(1) “I agree with Nils Pratley (Rock fudge is the most palatable confection, February 19). Northern Rock shareholders should be given the same level of compensation I received when I compulsorily lost my share of British Telecom, British Gas, British Coal, British Steel, British Rail and all the other corporations that used to be run in the public interest.”

(2) “As a shareholder in UK plc, I am somewhat alarmed to hear that we are going into the mortgage business just as the smart money is getting out. I’m particularly concerned to read that members of our Board, perhaps including the Finance Director, Mr Darling, apparently do not clearly understand the asset base, nor the modus operandi of the company we have acquired (Northern Rock nationalisation in turmoil over offshore trust, February 21), and that we are entirely reliant on external consultants. Furthermore, I understand we are being threatened with legal action by some very angry fellows who are expert in business matters and may have a strong case against us. I gather that an alternative to acquiring Northern Rock outright would have been to have agreed to a proposed solution to inject a minimum of £700m of private sector capital into the bank. Wouldn’t the alternative strategy have not only avoided the risk of damaging litigation, but also left UK plc at least £700m better off, in the event that the assets and liabilities we now own prove to have a large negative net value?”

Yes, the first one is trite and unoriginal and was published today. The second one was (even if I say so myself) original and not (yet) published. Maybe you’re allowed to agree with Nils Pratley, but not disagree with him. And I even gave them the possible title “Don’t worry, it’s Granite, innit”, but they went for “Rock’s Granite edifice under siege”. Boooring!

I can only imagine that the Guardian considers the point I am making to be nonsense. This is how the public is kept in a state of ignorance. Groups of people – as philosophers of science understand very well – give up “cherished ideas” only with the greatest reluctance. And in this case, the cherished idea is that shareholders belong to some genus of blood-sucking parasites. Unless the shareholders are their mates of course. On last night’s BBC Question Time the union leader Derek Simpson mentioned the idea that just employee shareholders ought to be compensated. Pure prejudice. Note the similarity with racism. The idea of the left, one might suppose, is to create a better, fairer world, with less inequality – this is what draws people to left-wing politics – but in reality the Left is a viper’s nest, crawling with those in power or who wish to be in power so that they can decide who’s deserving and who isn’t.

In fact, “the shareholder” is willing to take on the very risks that are making “the taxpayer” so indignant.

On Question Time last night even Vince Cable said that alternatives to nationalisation would have meant the “taxpayer retaining all the risks”. Wrong! If we didn’t want the taxpayer to retain all the risks, we could have allowed private investors to put in more risk capital, as pointed out in my exceptionally witty letter to the Guardian editor. Does Vince Cable not understand this? Or are he, Brown, Darling et al happy to continue to mislead the public?

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3 Comments »

  1. […] winding the bank up should it actually prove insolvent at some point in the future (in this event, as I’ve already pointed out, the taxpayer would be at least £700m better off than they are now). But I put “liquidity […]

    Pingback by A “wunch” of bankers « Uncharted Territory — February 23, 2008 @ 3:34 pm

  2. […] the Guardian rejected my exceedingly witty letter, I thought of writing a piece for their “Reply” column.  Trouble is, the issue will no […]

    Pingback by Blast-off from Planet Hector « Uncharted Territory — February 27, 2008 @ 3:06 pm

  3. […] by institutions and individuals who saw the companies as recovery prospects. As I noted before, (more than once, or even twice, it seems) at least some of these investors were prepared to put more capital in to […]

    Pingback by More on the immorality and hazard of policy based on moral hazard « Uncharted Territory — March 26, 2008 @ 3:39 pm


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