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Ministers prepare plan to nationalise Northern Rock | Business | The Guardian

The government was last night preparing a contingency plan for a possible new year nationalisation of Northern Rock as it held last-ditch talks with the potential buyers of the stricken bank.

Ministers have reluctantly concluded that temporary state ownership may prove the only way to prevent a final collapse of the Newcastle-based lender.

In a bid to keep the private sector option alive, they agreed last night to give the bid from former Abbey National boss Luqman Arnold equal status to preferred bidder Virgin, amid fears that Richard Branson has been struggling to finalise a deal.

But while the prime minister and the chancellor remain committed to a private-sector solution to the crisis that has contributed to Labour's political problems over the autumn, they believe that a short period of nationalisation may prove the only option. With Northern Rock still losing retail depositors and relying on a line of credit from the Bank of England to keep it operating, ministers accept that the current life-support operation cannot continue indefinitely.

The government believes that the prospects for a quick sale that would safeguard the £25bn of taxpayer support for Northern Rock is being hampered by the turmoil in the world's financial markets, which led to the run on the bank in September.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Fri Dec 14th, 2007 at 12:24:01 AM EST
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It's funny how all the wise commentators who were convinced that NR was a viable business back in September that would soon get out of its "short-term" problems, are now saying that nationalsation was inevitable and should have happened as soon as it was obvious the problems were deep-seated.

Ah, the beneifits of the traditional media never having to account for yesterday.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Fri Dec 14th, 2007 at 06:25:37 AM EST
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Branson hasn't been 'struggling to finalise a deal.' Branson and the other eager suitor have been struggling to find someone stupid enough to lend him the £11bn the BoE wants paid back immediately.

If it were that easy to borrow £11bn - except from the BoE - NR would never have gone down in the first place.

So this will be another example of Colman's law - bail out->nationalise->privatise at a giveaway price->trebles all round!

Darling will probably lose his job over this. Eventually.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Dec 14th, 2007 at 07:44:35 AM EST
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...Chavez and Morales are on the phone laughing their butts off, joking about the Bank of the South making a bid post-nationalization.

Our knowledge has surpassed our wisdom. -Charu Saxena.
by metavision on Fri Dec 14th, 2007 at 03:52:58 PM EST
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