Tuesday 19 February 2008

Rocking in the bedroom

14st 7lb; 4.0 units of alcohol; 1,445; Hebrides. I start the day in bed, which is where I invariably start the day now I come to think of it, listening to someone I know talking sensibly on the Today programme about Northern Rock. He is followed by an emotional Geordie, who embarrassingly bursts into tears over the terrible tragedy of it all. Well, I can think off the top of my head of at least a dozen tragedies that are more deserving of tears than Northern Rock; and an almost limitless number of better causes on which up to £100 billion of taxpayers’ money could be hazarded. Indeed, the only glimmer of light in the whole situation is that it hasn’t fallen into the hands of the egregious Richard Branson. But it seems a hellish price to pay even for that.

Such is the weight of the chips carried around on Geordie shoulders that one detects in the local media a distinct whiff of the belief that this near-collapse and nationalization is all part of some sort of evil Southern plot against the poor old North East. In fact, the simple truth seems to be that the management pursued a high growth, high risk business plan which proved – under admittedly exceptional circumstances – to be fatally flawed. Personally, I’d have allowed it to go bust but I concede that there may be something in argument that doing so would have set off a domino effect which would have brought down a series of other small banks. What I think is certainly true is that the institution and its depositors and staff would have got much shorter shrift if it had been called Southern Rock and based in a region with a high proportion of Conservative MPs.

As for the shareholders, if they receive one penny of compensation out of my taxes I shall be as angry as a Sunderland supporter realizing that he is now paying for the Northern Rock logo on Newcastle United’s shirts through his PAYE. The big hedge funds who took a punt deserve as much sympathy as the local greyhound trainer who is suing William Hill for letting him lose £2 million. The small holders who got free shares in the demutualization have lost something they did not pay for in the first place. And did not they all read the inevitable rubric: share prices can go down as well as up?

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