Well, the inevitable finally happened and Northen Rock was "nationalised". The right decision too late?, The wrong decision too late?
Who knows, but at least Beardy Branson didn't get his hands on it after his cosy trip with Brown.
Long term this might be a good deal for the taxpayer, OK the Bank of England has to gurantee the deposits and lend money to cover the mortgages, but as it can effectively create money out of thin air at almost zero cost, as long as the business is run at arms length, the government makes a spread between the cost of the money to the BoE or zero % and the rate lent to NR at around 5.75-6% or around £1.7 billion per year. The danger is if this money is left in the sytem as it unwinds it will fuel inflation.
With hindsight the current squeals about govt mismanagement don't really add up. If they had nationalised on day 1 (probably the right option) they would have been accused of resurrecting clause 4, if they had sold to Lloyds, it would have been big business favouritism and EU troubles and merely guaranteeing deposits and lending short term funds would have implied the same to all banks. I'm not convinced the other lot would have done any better.
What was/is at fault is the regulatory regime that allowed the problem in the first place, the Bank of England can set higher capital adequacy requirements if it deems a banks business to be risky (in effect limiting the number of loans it can make without similar deposits). Separation of oversight between teh Treasury, BoE and the FSA led predictably to nobody doing anything as each body could legitamately claim that it was "somebody elses problem".
If banks are considered too big to fail, at public expense, then they should be subject to tighter regulation and higher capital adequacy should be required.
It also comes down to rampant money and credit creation by govt over the last 10-15 years, not just in the UK. As money gets cheaper and more abundant, more risks are taken and where the govt leads the private sector will follow as inflation and money supply rises they must search in riskier places for higher yield to compensate for the real decline in the value of their assets.
The real damage to the govt is going to be when they start laying people off from NR. It has to be done, but it doesn't look good for Labour to do it.
As an aside, the press conference with Darling Brown yeatrday spoke volumes. Every time Darling was asked a question he asked Brown if he could answer. I think we can all guess who wears the trousers in that relationship!