don’t fool yourself that other banks who are currently private won’t need the bank of england to rescue them in due course and we’ll have the same sorry situation all over again.

“You honestly believe this is little more than party politics? I thought you had a bit more political savvy than that.”

It is both. The Conservatives are using this to their advantage, but at the same time it is still a massive issue.

“It is all very easy to talk about the desirability of NR failing or not passing into public ownership when it is not my money/mortgage/loan/insurance I am talking about.”

True enough. But then that is life- sometimes we are unlucky/make bad choices, but then we can’t expect the government to bail us out everytime.

“That said, is it really the place of government to tell private banks what thier strategies should be or indeed force banks to prop up failed banks? One could make a pretty good argument either way.”

I agree. I did not mean that the government should have forced the banks to prop up Northern Rock, more that it was in the banks’ own interest to help one of their own, ensuring that the sector did not suffer from a crisis of confidence.

“Is this not a matter of private choice? If people want to invest/take out a mortgage on this risky business model is it the place of government to stop them? Your argument to me seems to be that homeowners rather than banks per se should be allowed to fail?”

Both should be allowed to fail. People forget that putting money in a bank is a risk, and the payoff is a sum of interest. Yes, for the most part it is a small risk, but one nonetheless. The government pretty much gurantees the average person’s deposit anyway.

“On the £760k, the issues would be the same for any failed finincial institution. The cash involved ordinarily doesn’t belong to the banks but to the depositors. When the institution fails, it is a truism that the managers will already have taken their bonuses. The investor suffers, there being insufficient funds to repay them after the bank has had its ’share.’ Whatever the amount the issues are the same. Greed is a wider question.”

They are all a bunch of sharks.

So spending tens of billions of our money to secure jobs in Labour’s heartlands shoudn’t be a stick to beat them with?

You honestly believe this is little more than party politics? I thought you had a bit more political savvy than that…

Thanks you for your reply to me. I am rather in two minds on this. It is all very easy to talk about the desirability of NR failing or not passing into public ownership when it is not my money/mortgage/loan/insurance I am talking about.

The problem with NR clearly hinges as much on regulatory concerns as much anything else. Any bank that lends 7 pounds for every 1 pound of clients’ deposits and offers 125% mortgages is playing with serious gearing leaving them seriously exposed to any adverse market conditions. In NR’s case this was a lack of liquidity. That said, is it really the place of government to tell private banks what thier strategies should be or indeed force banks to prop up failed banks? One could make a pretty good argument either way.

Is this not a matter of private choice? If people want to invest/take out a mortgage on this risky business model is it the place of government to stop them? Your argument to me seems to be that homeowners rather than banks per se should be allowed to fail?

I can’t help but feel that the NR should not be nationalised line overlooks rather that NR is, on one level at least, an excellent state asset. Probably the government could fund NR’s mortgage book at lower rates than could the private sector until the upturn comes along.

On the £760k, the issues would be the same for any failed finincial institution. The cash involved ordinarily doesn’t belong to the banks but to the depositors. When the institution fails, it is a truism that the managers will already have taken their bonuses. The investor suffers, there being insufficient funds to repay them after the bank has had its ‘share.’ Whatever the amount the issues are the same. Greed is a wider question.

Sonia – I think that you are right. Any government of whatever colour would be under the same pressures and the cry of, ‘something must be done,’ would go up. Damned either way.

“The system is the problem here, and I’m not seeing much recognition of that. i think you’re a sincere sort of person – what im saying is that if the 760 K is worrying you, then its likely the rest of it will as well.”

Thank you. The system worries me terribly as well- all these huge rewards for failure, to go with their huge rewards for success. Once you get to the top, you have it made.

“I am also curious why Rumbold has chosen – rather conventionally – the Northern Rock situation. Again i ask – is it because it has been nationalised? Is it because of the ‘failure’? Are people ok with the big nasty banks who haven’t failed and the disgusting amounts of money their top dogs make? do we think that the rest of us aren’t propping them up with the tax breaks these banks – who make money out of nothing, get? is that all ok?”

I am not happy when I see executives receiving huge sums of money, but the Northern Rock situation is exceptional. The bank was so badly run that it had to be nationalised, and then those who had run it were paid off with our money. As for private banks, they don’t deserve their bonuses wither, but I thought that a nationalised bank was supposed to adhere to some sort of principles. Why isn’t Applegarth in a debtors’ prison? That would soon focus the minds of the average banker.

Leon:

“A lot of Tories are because it’s a convenient stick to beat the Labour Government with.”

So spending tens of billions of our money to secure jobs in Labour’s heartlands shoudn’t be a stick to beat them with?

i am also curious why Rumbold has chosen – rather conventionally – the Northern Rock situation. Again i ask – is it because it has been nationalised? Is it because of the ‘failure’?

A lot of Tories are because it’s a convenient stick to beat the Labour Government with…

“But this £760 K really besides the point.”

Yes and no. The most important issue is of course the fragility of the banking system, but little things like this still should not go unnoticed. Applegarth is more responsible than anyone for the collapse of Northern Rock, and we are paying to fund his retirement.

MaidMarian:

Well, I would not have nationalised Northern Rock in the first place. I don’t resent paying ordinary Northern Rock workers money (any more than I do other employees whose jobs should be privatised/scrapped), but I object to funding the lifestyle of men who were responsible for the mess in the first place.

“There are relevant concerns about NR, in particular the sense that we are seeing private benefit alongside nationalised risk.”

That is the most worrying outcome of this whole thing. Northern Rock should have been propped up temporarily by the other banks and the Bank of England, as they have an interest in seeing that the banking system remained intact. If that was deemed impossible, Northern Rock should have been allowed to fail.

I apologise Rumbold as I recognise that I am rather putting words into your mouth and stretching the point. But I can understand why government has a role in securing the funds of a suitably registered bank’s depositors – a recognised role of Government since at least the 1930s.

There are relevant concerns about NR, in particular the sense that we are seeing private benefit alongside nationalised risk, but he article just feels like taking NR as an issue to the lowest common denominator.

Sorry.

the fundamental problem is the banking system itself and the increasing unsustainable debt. and this is becoming apparent with the financial collapse increasing around us. I suggest we sit up and take notice, in addition to worrying about the £760,000.

I’ve never been one to harp on about a want for an egalitarian society of any sorts but this just stinks.

Wall Street, the City and the wider global finance industry as a whole have made billions, if not trillions, of dollars in profits over the last quarter of a century and justified such vast margins by laying claim to being bastions of all that embodies “progress”: capitalist ideals, globalisation, the free movement of capital etc. etc. when charged with accusations of gross excess.

So it smacks of hypocrisy that such folk are seemingly better off as a result of their own decrepit foresight in predicting the crippling impact that the credit crunch (a direct result of rampant greed on the part of those in the industry seeking ever higher fees and increasingly generous renumeration packages) would wreak.

As far as I’m concerned, if you’ve not done your job properly then tough- you’re obviously not smart nor shrewd enough to be trusted in the control of such monumental amounts of capital.

But the wider point is the cost of public spending to bail out in the first place. The Economist (21st feb) had the headlines right on this one :

‘Profiting from the nationalised bank may prove harder than rescuing it’

They gambled on the fact that perhaps they can sell it off again at a competitive price – or run it competitively, the latter ain’t going to happen as risks of breaching competition rules are very high indeed, so where to go …

I object to it on the basis that it is our money (and it is, as the bank is government-owned). I am annoyed when private sector banks pay out huge bonuses for failure, but at least I have the option of banking with them or not. I can’t withold my tax payments.

that’s for sure Rumbold, i don’t think anyone will be disagreeing with that. but like i said, is your objection to this on the basis that it is the government’s money? and how do you actually know that the severance package is government money?