But they are still potential at this stage right? Maybe I'm being too optimistic here...
How much would you pay to recover a £100bn loan?
The way I see it, Darling hopes to turn the bank around, pay back the loans and have it privatised. How easy will that be? I assume that the executive management will be totally replaced, but even if the bank suddenly becomes much more competent than it has been, I'm still wondering how plausible this is given the state of the housing market and the state of Northern Rock's reputation. Even if it works, this will take a while, but to attract any investor the government is going to have to offer them some sort of margin, and that margin is going to be a percentage of taxpayer money, surely.
But maybe I'm being too pessimistic -- the more I read, the more I think that nationalisation is at least an improvement on the situation immediately preceding nationalisation. At least this way we get returns as well as risk.
But this won't matter now with a government guarantee will it?
Hopefully not, no, but people aren't always that rational and I suspect that many will be unconcerned with the actual facts of the case and will think "queues of people desparately trying to withdraw their money" every time someone mentions Northern Rock instead of thinking, "secured by the government -- cushty". In terms of real risk to customers, there's obviously little to worry about. But in terms of brand identity, I think that this
must have been a real kicker.
Well, I understand that this all has to be hammered out, the other banks are going to cry foul if it has too much muscle and yet it has to be competitive as well.
Yeah, there are some clear upsides for the bank at the moment, and some tricky stuff to negotiate. I wish I knew more about this sort of stuff, but there's only so long I can sit and read
Calculated Risk before I start to get weird urges to push pencils into my eyes.
Also worth noting that
Paul Murphy thinks the government will give shareholders four times what Branson was offering.
And that this was done on the advice of Goldman Sachs, so it can't be all bad...