...a blog by Richard Flowers

Tuesday, January 22, 2008

Day 2574: Dither and Delay


People seem to have forgotten – in the face of the Prime Monster's now-you-see-it-now-you-don't General Election – that Mr Balloon spent last year working up a reputation as a FLIP-FLOP-FOP, with such masterpieces as being against and then for Grandma schools and for and then against Hugging of Hoodies.

He's now come out AGAINST the government's policy of supporting the Northern Rock, even though he was previously FOR it.

In Prime Monster's Questionable Time, he accused Mr Frown of "DITHER AND DELAY!" not once, but three times.

The Conservatory Policy on Northern Rock will be announced, er, sometime later this week.

The Liberal Democrats, as you know, have been calling for the Rock to be taken into temporary public ownership since November. This is not a "good" solution, because governments are NEVER any good at running businesses: the 1970s saw THAT theory tested to destruction. However, it does secure public control over the company's assets against which so very much of our money has been loaned.

Admittedly, this would see the shareholders lose out, which is a SHAME. Except some of the larger shareholders are Hedge Funds who jumped in AFTER the bank's share price crashed, buying up stock dirt cheap in the hope of making a killing if the Bank of England came to the rescue. Which it did.

Anyway, isn't the POINT of investing in shares that you get a better return in exchange for taking a RISK? If the government is going to guarantee you NO risk, then isn't that getting money for NOTHING – and at the taxpayers' expense! No, if you wanted a SAFE return, then you should have put the money in a bank… which, ironically, the government would NOT have promised to bail out if it got into trouble. There is something wrong with this system.

Speaking to "The Week in Politics" Mr John Deadwood, chair of the Conservatory review group for benefiting stinking rich city types said that the Conservatories would reject all forms of nationalisation. His solution, he said, was for the Bank of England to show a bit more banking common sense before handing out great big loans like this.

Which isn't a terribly PRACTICAL solution as the Bank has ALREADY given them the money. Mr Deadwood may be caught in a TIME LOOP but for the rest of us that decision has been and gone.

So, that's the Conservatories without a policy. No change there. What about the Labour?

Well, Chancellor Sooty has announced what he has been told to do by Mr Frown (speaking to him from India on his Virgin Mobile roaming tariff).

He's going to have Northern Rock issue government backed-bonds. That means that the stock market will buy some and maybe eventually all of the debt, paying back the taxpayer. Unless the bankrupt bank defaults on the loan, in which case the taxpayer picks the tab right back up again. Fortunately it is very rare for a bank not to be able to pay its debts, and the only recent example is the… oh dear.

Add to that, Chancellor Sooty is going to take a "shareholding" in the Rock so that the public can "benefit" should the bank recover and he'll insist on having a say in who goes on the Board of Directors. So, basically all the WORST aspects of nationalisation – government ministers tinkering in the boardroom; the taxpayer taking the risk of losses – without the advantage of actually securing the loan against something.

Still, at least – like the Conservatories – the Labour can claim to be BUTCH against NATIONALISATION. Even when it might be in everybody's interest.

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