By Sky News' business editor Michael Wilson

It looks like a slow lingering death for Northern Rock. Certainly the savers and the borrowers will enjoy ‘business as usual’, as the new, £90,000 a month executive chairman was keen to stress yesterday. Well, if you think that stagnation and disintegration is ‘business as usual’, then so be it.

The ‘new’ Northern Rock will not be a ‘business’ in any real sense of the term. It’s a £90bn addition to the national debt, and as a nationalised concern, won’t be allowed to actively seek new customers, because its new Government-backed status would give it unfair advantage over its commercial rivals.

So Northern Rock will remain just above the water, but with no possibility of growth - which is why we heard its new executive chairman Ron Sandler say yesterday that his new plans would ‘require returning the bank to a more sustainable size.’ Sources were saying that up to 3,000 jobs would go.

Those same sources were also pessimistic about how ‘temporary’ the nationalisation would be – with some saying that it would be some years before the bank would be sold. That’s one view - much more likely is that Northern Rock will be broken up and its mortgages sold to private equity.

Why was the Virgin bid not good enough? There were, apparently, worries that Branson’s bid valued the future of the bank, and thus its taxpayer support,too cheaply and if he’d managed to turn the bank round in six months and made a tidy profit, there would have been hell to pay. So what was Branson supposed to do – buy it and then deliberately stymie his own business to keep the people he bought it from happy?

We are now left with a lamentable mess, with no winners - many people will lose their jobs; shareholders will take the Government to court and lose; taxpayers are in hock and the near-term future for public finances must be even worse than it was before all this; business has turned its back on the mess, and the holy trinity of Bank of England, Treasury and the Financial Services Authority have all failed their first, real, test.

That’s some ‘business as usual’.

Comments

[Nyerho Odje, London Bridge 23 Feb 2008 17:13:58]

I just wonder what solution to Northern Rock would have been free from mass criticism by Cameron and other Brown bashers.Once again we know that the Conservatives do not have a consistent approach to a solution in this case.Yet they are trying to score points merely by picking holes in the Nationalisation option.I dont agree with them. The government was right to spend sometime looking at several options before taking a decision. This is a big issue which does does not deserve a 'rushed' decision.
One thing is clear.And that is even if Branson or someone else took it over he would still have laid off some staff and trimmed expenses in order to break even as early as possible. Moreover I believe that the government will give it the best shot since the elections are not far off.They would seek to please the tax payers more than a private entrepreneur would do.
As a taxpayer I commend the government in their attempt to ensure that the problem does not spread to other banks. Cameron and those of his ilk have no policies of their own.They will only be rememebered for their criticism of Labour's policies. N.ODJE

[Nyerho Odje, London Bridge 22 Feb 2008 20:39:30]

It is easy to crticise the Government. If the government had taken a different option Cameron and other Brown-critics would still have made the same noise(if not more). If Branson or took it over,he would also have thought of shedding staff.AND if he failed the Govt would be crucified for that decision.Therfore the Govt looked at the options and took the best decision. AT THIS CRUCIAL TIME IT IS ONLY THE GOVERNMENT THAT IS VERY WILLING TO SUSTAIN THE BANK AT ALL COSTS. Not just for the sake of mere benevolence,they also need the votes.Election is not far off.Consequently I am sure that they will give it the best shot. As a tax payer I am happy with the decision.The effects of Northern Rock should be managed as much as possible so as not to spread to other banks and the government needs to be commended(at least for now).
N.ODJE

[mike,spain 19 Feb 2008 15:38:33]

May I suggest a new name for Northern Rock as British Crock

It should have paid out all the depositors, sold the mortgage book then closed the business. Shareholders get whats left.

This government has now basically underwritten every highstreet bank to act totally irresponsible as the taxpayer will bail them out.

I bet the top staff still got their bonuses for these sub prime investments.

[Elizabeth Davies Cape Town 19 Feb 2008 08:23:23]

It's the Northern Rocky Horror Show.
The Bank Of Brown is now on a High Street near you, reality!
This business will now be "nipped and tucked" until the 90,000 a month man decides to move on.
This mess will continue for years to come, and could possibly still fail in the future, only one thing is certain....things will change.

[anne swansea 19 Feb 2008 06:39:28]

I cant understand what is happening to this country. We give ex amounts of pounds to migrants to go home to re-settle. My tax goes to pull a bank out of trouble never heard of it before. The NHS could do with all the extra cash to stop patients from in some cases dying for lack of medicinThe UK is going down hill fast.

[R.Bailey 19 Feb 2008 06:05:26]

The "depositor" asses risk based on the return. The "shareholder" asseses risk based on his forward view of the return.

What is so different with Northern Rock - it should have been allowed to liquidate if the market so wished - as it did.

[Jack 18 Feb 2008 19:37:31]

Sharereholders should only get what the company was worth at the close of business on 15/01/08 Shareholders were warned to sell and I did and lost money, why should you be rewarded for keeping your money in there?

[neraj singh, leicester 18 Feb 2008 18:23:37]

Its the poor frontline staff that will suffer. they will have been put under a lot of pressure when things were going well with ever increasing sales targets and 'performance management' and now they face the prospect of losing their jobs. The shareholders should be happy with what they get, they knew the risks. if you can't handle a company failure, don't buy shares. as with the nationalisation... two words... British Leyland...RIP Northern Rock.

[Robert, Scotland 18 Feb 2008 18:07:41]

Alistair Darling has come in for some stick over this Northern Rock debacle and I for one do not doubt he deserves some of the criticism but, there are other culprits who deserve it more than him;
We can start with the management crew of Northern Rock a more reckless bunch of cowboys would be hard to find. I know a lot of the culprits are still in place so when Ron Sandler starts to downsize I just hope to God he works from the top down.
The other is Gordon Brown the hubris of this man, at every budget he ever presented he always boasted of the independence he had given to the Bank of England. Some independence, when things started to go wrong at Northern Rock, Mervyn King was to discover he had less autonomy to act than any of his predecessors and when he went to the Chancellor he must have been horrified to discover he in turn had to go to the Prime Minister.
To the background of this charade of musical chairs the Public were queueing to withdraw their monies and the management of Northern Rock in conference debating the size of their christmas bonus.
So we are where we are and we all know it will be some way down the line before the Nation learns the true costs of this Government's mistakes, it will not come from them but the poor unfortunate administration who inherit the mess.

[Ivo (London) 18 Feb 2008 17:40:17]

Darling and Brown,
The foundations that were on rock are now on sand - Darling responsible.
From brown to black, Gordon reswponsible. Please accept moral responsibility for this crisis and resign.

[steve / Cumbria 18 Feb 2008 15:54:58]

(Anonymous small share holder) -
OLD LABOUR is officially back. Over spending, massive debt and Nationalisation, at least Ron Sandler and his friends get a golden nod (£90K a month I believe). This must be a bargain in the chancellor’s eyes! Looks a bit brow beaten at the moment though!

[Mike brown, Hampshire 18 Feb 2008 14:55:22]

How I bet Brown and Darling wished that they had ither let lloyds TSB buy it or let it go to the wall.

This whole debacle is a product of the dithering Brown not making his mind up on the election date, as he could not afford to lose north East seats.

Now all taxpayers atre paying for his in decision!!!