I include this story with some reluctance – it’s sort of got to be the one today really as I feel it is the beginning of the end for Darling as Chancellor, and even for Brown as PM. He is ex Chancellor of course –and the way they have both handled this looks hamfisted in comparison to the leadership style of the ruthless but effective Blair. I chose the story from the Guardian, Fiona Walsh and Jill Treanor had got to some of the meaty bits but had held back from saying what I’m saying out of a sense of misplaced loyalty I suppose- though it won’t be long.
Shares in stricken mortgage lender Northern Rock were suspended from stock market dealings this morning following the government’s controversial decision on Sunday to nationalise the bank.
Its shares closed on Friday at 90p, valuing the Newcastle-based company at around £380m. A year ago it was worth more than £5bn.
The government’s move – the first nationalisation of a British company since the 1970s – has been greeted with fury by Northern Rock shareholders.
Although chancellor Alistair Darling said yesterday the government would appoint an independent valuer to decide the level of compensation, shareholders are expected to receive little, if anything, for their shares.
They are now considering a legal challenge against the government. Jon Wood, head of the Monaco-based hedge fund, SRM, said it was it was “a very sad day for the stock market, banking industry and the reputation of the UK as a financial centre”.
SRM is Northern Rock’s largest shareholder, with a stake of over 10%. Shares in another hedge fund, RAB, which has just over 8% in the bank, plunged in early trading this morning, tumbling 9% to 63p.
Prime minister Gordon Brown is scheduled to hold a briefing on Northern Rock at 11 o’clock this morning. This afternoon Darling will put forward the emergency legislation in parliament, with a Commons statement due at around 3.30pm.
The chancellor, who has his own mortgage with Northern Rock, said this morning that the government is still open to offers for the bank. “If people have proposals, of course we will listen to them,” he told the BBC, although he cautioned that the current state of the financial markets meant it was “not an ideal time” for a deal.
He again stressed that the nationalisation was a temporary move – “the government can’t run a bank; governments don’t do that” – but said that the timing of a return to private ownership would depend on market conditions.
Unions are expected to meet today with Northern Rock’s new executive chairman, Ron Sandler, to discuss potential job losses among the 6,000 or so staff. He will also give a press conference at 1pm today.
Sandler, who is being paid £90,000 a month to head the nationalised bank, was first approached by the government last November, as part of its contingency planning for nationalisation.
He has a good track record as a “company doctor” and won respect in the City for his role in revitalising the troubled Lloyd’s of London insurance market in the 1990s.