The Tories like to argue that they are strongly against nationalisation as a principle, and I would agree with them on this, but there are times when nationalisations are necessary and can work for the company, the customers and taxpayers.
Ignoring the Tories own nationalisation of Rolls Royce Aero Engines (now privatised, profitable and still British), one of the Tories heroes was responsible for one of the biggest nationalisatiions ever when in 1984 Ronald Reagan authorised the nationalisation of the Continental and Illinois Bank.
The Continental and Illinois had taken on too many bad debts, suddenly had a liquidity problem and $10bn was quickly withdrawn by account holders. This meant, in a strange parallel with the Northern Rock, that the Federal Reserve had to step in and act as guarantor to the C&I, for the very same reason that Northern Rock had to be saved, put simply it was too large an organsiation to let fail and the implications would have been massive for the US economy.
The US government at the time sought a private sector takeover and looked in to this for two months, again, another strange parallel with the Northern Rock, before it was finally nationalised.
The US government finally sold off all its interests in Continental and Illinois in 1994, although it had effectively sold out the majority before then, and what might be of interest to people is that the US government made back all its money and made a small profit too.
So there is some hope that this can be done with Northern Rock too and it shows that even Conservative free marketeers know that sometimes you have to do things that go against the grain for the better good.
6 comments:
Of course the Tories directly privatized at least two British "banks" during their 79-97 government - Johnson Matthey Bank in 1984 and the National Mortgage Bank in 1994. Not on the same scale perhaps, but actually that probably makes it worse since there was less of an imperative to maintain the rest of the banking system in those cases.
Indeed. This shows the hypocrisy of Gideon Osborne in opposing things through dogma which he knows he would alomost certainly ahve to do himself if he were in number 11 Downing Street.
Yes, I'm getting tired of some of the right-wing blogs using this to score points. I think if Dave from PR ever got in they'd do what Tories always do, get overconfident, revert to their most primitive instincts, go too far, and get slapped down by the electorate!
I think the point is Nich, no one could argue with any certainty this Tory front bench would have backed the decisions made 20 years ago in very different circumstances.
Had the government been Conservative I do not think Northern Rock would have been underwritten by the taxpayer. Why should we pay to prop up a bank that was driven to its problem by corporate decisions made by its executives?
NR relies on its loans and mortgages to make money. Yet it is increasingly saddled with bad debt as the economy constricts. If NR does not make money the onus is now on the taxpayer to keep it alive. The loans should have been spun off and NR allowed to close.
Other banks have not suffered to the same extent as the Rock because their decision making was not so flawed. Yet they now compete against a state owned business with built in advantages, risk seeing their own business suffer as a result and worry the government will rig the market to protect an 'investment' it should not have made.
Of course we should'nt nationalise Northern Rock
we should nationalise all the banks
Isnt it strange we are tod that pensions have collapsed, final salary pensions closed, wages must be kept down. Yet City bonuses for business men (sic)have jumped by 32% this year alone,
Just who is suffering in this City crisis
What we now need in Government is a group of old Etonians with their feet on the ground and a grip of work today
When is that end to punch and judy politics arriving...the tories a bleating about everything the government does, the problem is that when something really does need highlighting it's like the boy who cried wolf. I split a cup of tea the other day and the next day Cameron demanded Jacqui Smith resign 'cause of it.
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