A tug of war has begun at the top of the government over the future of Northern Rock as senior figures argue that the Treasury's planned sell-off should be stopped so that the ailing bank can instead be turned into a building society owned by its customers.The move would mean forgoing a potential £11bn windfall for taxpayers but some cabinet ministers and No 10 officials believe this option is preferable to selling the bank to a rival or refloating on the stock market since it would leave the bank less prone to instability and financial risk.However, there are concerns within the Treasury, which needs to reduce public debt and claw back some of the £25bn of taxpayer money which was used to bail out the bank in 2008.The final decision will be taken by ministers but they want to win the support of UKFI, the company set up to run the nationalised banks after last year's crash. Senior government sources believe there is a convincing case that taxpayers would benefit in the long term if a remutualised Northern Rock were able to help less well-off customers get low-interest loans.The plans are meeting resistance from those who want the bank sold off by a Labour government to prove the rescue of Northern Rock was the right thing to do.However the policy is appealing to Labour strategists beginning to coalesce around the rolling out of mutuals, and cooperatives across other areas of the public services as a policy platform for Labour's future; and politically appealing, as they think it will test David Cameron's reforming credentials for banking .
A tug of war has begun at the top of the government over the future of Northern Rock as senior figures argue that the Treasury's planned sell-off should be stopped so that the ailing bank can instead be turned into a building society owned by its customers.
The move would mean forgoing a potential £11bn windfall for taxpayers but some cabinet ministers and No 10 officials believe this option is preferable to selling the bank to a rival or refloating on the stock market since it would leave the bank less prone to instability and financial risk.
However, there are concerns within the Treasury, which needs to reduce public debt and claw back some of the £25bn of taxpayer money which was used to bail out the bank in 2008.
The final decision will be taken by ministers but they want to win the support of UKFI, the company set up to run the nationalised banks after last year's crash. Senior government sources believe there is a convincing case that taxpayers would benefit in the long term if a remutualised Northern Rock were able to help less well-off customers get low-interest loans.
The plans are meeting resistance from those who want the bank sold off by a Labour government to prove the rescue of Northern Rock was the right thing to do.
However the policy is appealing to Labour strategists beginning to coalesce around the rolling out of mutuals, and cooperatives across other areas of the public services as a policy platform for Labour's future; and politically appealing, as they think it will test David Cameron's reforming credentials for banking .
Well, I still think that there is another way of doing it - a Northern Rock Partnership
It's Not Northern Rocket Science as I said here as the Northern Wreck hit the rocks, and it would be a lot more straightforward to set up such a partnership now. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
There's £8bn more loans from the government to Northern Rock to let them lend it to all of you. On top of that there's another £4bn of liquidity arrangements. This takes the loan that had gone down to £15bn back up to £27bn, which will take "around a decade to pay off", says the Rock's chief executive. My initial read on this is that the government is providing the funding for the Rock that it would otherwise raise from the dreaded wholesale markets that brought its downfall. In fact Mr Hoffman told me that "in due course" the Rock would be returning to those same securitisation markets, "but in a simpler form". So not quite Adam Applegarth Redux. More concerned City voices will suggest that this massive loan is to deal with some horrible mortgage delinquencies amongst Northern Rock's high loan-to-value borrowers. We will find out the figures next week.
There's £8bn more loans from the government to Northern Rock to let them lend it to all of you. On top of that there's another £4bn of liquidity arrangements.
This takes the loan that had gone down to £15bn back up to £27bn, which will take "around a decade to pay off", says the Rock's chief executive.
My initial read on this is that the government is providing the funding for the Rock that it would otherwise raise from the dreaded wholesale markets that brought its downfall.
In fact Mr Hoffman told me that "in due course" the Rock would be returning to those same securitisation markets, "but in a simpler form". So not quite Adam Applegarth Redux.
More concerned City voices will suggest that this massive loan is to deal with some horrible mortgage delinquencies amongst Northern Rock's high loan-to-value borrowers. We will find out the figures next week.
