Northern Rock and the EU.

[Edna]

EU approves Northern Rock split 
 
 
The European Union (EU) has approved plans for nationalised bank Northern Rock to be split in two - paving the way for a partial sale.

One business, described as the "good" bank, would hold savers' money, carry out new lending and hold some existing mortgages.

A second "bad" bank would be set up to hold the rest of the mortgages and repay outstanding government loans.

Northern Rock said the EU's approval was "an important and positive step".

It added that it was "business as usual" for customers.

However, critics fear that the taxpayer may still be left with losses, racked up from the assets that remain with the bad bank.
 

BBC.

[Papaumau]

I have two thoughts about this Edna....

1). If the government sell off the "good" bank to the likes of Branson or Tesco - as has been mooted - this would mean that a large chunk of the money that taxpayers already chucked at that sinking bank would come back again into the treasury.

2 ). It WOULD be an unsatifying situation if we - the taxpayers - were just left holding the "bad bank" that is carrying the toxic debt.

Maybe eventually, even THIS bank could be made to be profitable again and then it too would become attractive to the private sector once again !

[John]

The Taxpayer will lose out along with the shareholders, many of whom
probably only hold these now worthless shares as a windfall or
as an addition to them over the years.

[Papaumau]

The writing off of toxic debts has now become a worldwide phenomenon !

There was only two choices when Northern Rock threatened to fail:

1). Support it - or nationalise it - and secure the assets of the ordinary borrowers and savers.

OR....

2). Let it go under and then not only the shareholders would lose out but the ordinary bank customers would lose out too.

Eventually, and once the unrecoverable toxic debts had been written off both parts of this "bank" might once again become profitable. At this point the government could resell it to the private sector and get back much of the investment that they made in it to keep it afloat.

The second option - above - ( the one that the Tories wanted ), was no option at all as if that option had been taken EVERYTHING would have gone down the tubes and nothing would have been recoverable later on and after the recession eventually turned around.

[Ivanhoe]

Papaumau, Correct me if im wrong, but arent the banks in EU countries nationalised ?

[John]

Ordinary Bank Customers would only lose out up to
the amount that is guaranteed by Financial Laws.

It would be unwise to keep more monies in any
one Bank above the guarantees, should that Bank
fail.

Banks should not be propped up with public money
over and above that. It puts that money at risk
and increases the tax burden.

This is exactly what it has done.

Many businesses go to the wall or are sold
at a very low price to foreign buyers regularly.

There is no government assistance there - just
Tax demands at head of the creditors queue...