Tue Jan 15th, 2008 at 07:10:22 AM EST
This headline was staring at me from the top margin of my google mail inbox today...
CNN.com: UK government may nationalize bank
The board of embattled Northern Rock PLC faced shareholders Tuesday amid growing speculation that Britain's biggest casualty of the global credit crisis will be nationalized.
Hundreds of investors attended a meeting to vote on proposals by two key shareholders that would restrict the power of the board to reach a private sale -- proposals that analysts say could simply speed up the move toward nationalization.
That fear was reflected in a share sell-off in trading ahead of the meeting, pushing Northern Rock's already battered stock 11 percent lower.
I am getting rather angry at this. Of course they will nationalise Northern Rock, eventually, but it should have been done immediately. The government and the press are so full of neoliberal propaganda that it is news that the government will finally capitulate to facts and do its job.
A few years ago there was a case in Spain that might have led to a similar bank failure, but it was handled differently. If you don't know about the Banesto case, follow me below the fold.
In the late 1980's there was this young up-and-coming lawyer turned banker called Mario Conde who took this small, unassuming bank called Banesto and turned it into a giant with his aggressive management. A bit like Northern Rock's Applegarth.
Anyway, the equivalent of April Fools' Day is on 28th December in Spain, which also tends to be a quiet day on the stock markets, for understandable reasons. On 28th december one year, out of nowhere, the Bank of Spain dismissed the board of directors of Banesto and took over the bank, at the same time guaranteeing all the deposits. There wasn't a run on the bank, but its shares stopped trading on the Madrid stock exchange. A BBV executive was brought in to manage it on an interim basis. Within a month the shares were trading again, albeit at a discount. Within two months the bank was auctioned: BBV lost the auction to Santander, which I take as evidence of fair dealing. The bank still exists today. The end.
There you have it, a regulator doing its job. It's terrible, what these damn Socialist central bankers will do.
Now for the back story, which has some parallels with NR. It turns out Banesto had solvency problems, but this was not widely known. They presented a rescue plan to the central bank involving JP Morgan injecting capital. The central bank rejected the plan for unrealistic and immediately took over, as described above. In NR's case there was a rescue plan involving a capital injection but the Bank of England rejected it and then sat on its ass until there was a run on NR. And four months and who knows how many million pounds of loans later, they (and the press they take their marching orders from) are still wondering whether nationalisation would be a good idea.
So, yes, I'm pissed off at these 4 months of hand-wringing over whether to nationalise or not. Incompetent fuckwit ideologues!