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Northern Rock Bank Could Consume Entire NHS Budget of £100billion

Companies / UK Banking Dec 18, 2007 - 10:54 AM

The UK Government effectively announced the nationalisation of Northern Rock Bank as the Treasury extended its guarantees beyond the current estimate of monies loaned of £25 billion to cover all deposits and debts of the Bank, which amounts to more than £100 billion or the annual UK health service budget.

In the meantime competing bid offers on the table look increasingly unlikely to succeed due to the demands placed for extended loan grantees to the bidders from the British tax payers, thus making an outright nationalisation a better alternative then to provide say Richard Branson's Virgin group a free lunch of buying the bank now worth less than £400 million, with the risks continuing to be borne by the British tax payers.

On Nationalisation, the Bank of England Governor Mervyn King stated that if it were to happen it would be a temporary measure with media speculation that the bank would be divided up between the major high street banks.

The current situation is the worst of all for British tax payers and likely to worsen should the bank be taken over for literally peanuts, whilst the tax payer covers the banks creditors for upto £100 billion. Therefore a temporary Nationalisation by the government is the best option as this would allow the bank to be sold off in chunks with the outstanding tax payers monies expected to be fully repaid as Northern rocks assets are estimated to more than cover total liabilities. This would leave any left over balance to be distributed to existing shareholders.

By Nadeem Walayat
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Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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