We should not have bailed out NR

The government\'s handling of NR has not impressed anyone and perhaps it would have been better for the lender to have been left to the free market, says Sue Read

Recently I met up with our BDM and a friend from Northern Rock, a woman I’ve known for years but haven’t seen for a while.

It was good to catch up and, of course, we spent some time discussing the NR situation. They were talking up the Virgin proposition and were excited by the prospect of working for such an innovative organisation. But a few days later the announcement of NR’s nationalisation was made.

The roller coaster rolls on and I’m sure the public’s lasting impression of the government’s handling of the affair will be negative.

I feel sympathy for NR’s staff as they have had a terrible few months and the ride hasn’t stopped yet, but I feel no sympathy for the lender’s shareholders.

All but the most naive investors know that the value of shares can fall as well as rise, and if they are offered compensation it will confirm that the world has gone mad.

After all, I doubt any of them would have offered to share their profits with taxpayers if the lender had not got into trouble.

But that’s not the end of the story. The best part of NR’s mortgage book is owned by a company called Granite. I don’t fully understand the relationship between the two companies, but it would appear that the assets – including the mortgage book – of Granite will not form part of NR if it ever returns to private ownership. This is more grist to the mill for the government’s critics.

Controversial as this may be and as awful as the consequences might have been, I wonder if the government should have left things alone and allowed NR to go under.

It’s probably a simplistic view but if anyone running their own business gets into difficulties, chancellor Alistair Darling and the Treasury do not rush in to help.

And if I am overdrawn, the chancellor is similarly absent. So why should the rest of us bail out NR?

And compare NR with Alliance & Leicester. In spite of murmurings last year and until its results were published recently, it managed to keep its head below the parapet of press attention. It didn’t need Darling’s help either. Yet its lending model is similar to NR’s.

In the same way as I’ve frantically tidied my house in the past in preparation for potential purchasers viewing it, I expect there is a lot of behind-the-scenes activity going on in anticipation of potential buyers having a look around A&L.