Today’s links are not worth the paper they’re written on.
On the rocks
As the sub-prime crisis begins to dominate US domestic politics, British homeowners and 1st-time-buyers are also increasingly nervous about the property market over here. It doesn’t help when one of our own major lenders is up the creek. Yesterday, the Chancellor of the Exchequer Alistair Darling, told parliament that government guarantees securing savings with Northern Rock would remain in place, and that state-funded loans would be repaid.
The default position for Labour’s left in these situations is to call for nationalisation. Paul Smith didn’t waste any time, indeed, the Yeovil-based blogger wants Northern Rock to be nationalised, “ideally with the major shareholders getting no compensation.” Whaaaah? It’s not the shareholder’s fault, Paul. Next up is Susan (grimmerupnorth), who also calls for the bank to move into public hands, but thinks it won’t happen because: “Brown’s stubborn attitude and ideological opposition to anything remotely “socialist” will resist this one all the way.”
Mike Smithson (politicalbetting.com) asks how the crisis will affect Labour in the polls? And The Pub Philosopher is angry at NR’s former CEO, Adam Applegarth, who is accused of “robber-baron capitalism.”
Quite what Vince Cable was thinking, however, when he compared Alistair Darling to Norman Lamont during the Black Wednesday debacle, is anyone’s guess. Cue a justified cacophony of outrage and guffaws from his fellow parliamentarians.
Buyers beware
Buying a house in the UK is clearly a stressful and disheartening affair at the best of times, as blogging councillor Richard Baum explains. However Baum thinks he may have a solution that could help some financially-challenged home buyers: -
What about involving the housebuilders or the government themselves in non-rental shared ownership? Allowing first time buyers onto the ladder at virtually cost price, and then imposing a sell-on clause whereby the profit missed out on first time round (plus a bit more) is paid back when the house is sold?
So rather than a house costing £100k to build being sold for £150k, it’s sold for £110k, and when it’s sold on ten years later at full market value of, say £165k, the housebuilder gets all of the £40k it missed out on, plus 75% of the £15k profit? The young person has ten years of equity in his house, and the rest of the profit to re-invest.”
Clearly the international “credit-crunch” will mean that alternative financial models will have to be developed (beyond simply longer and longer mortgage terms). Britain’s home builders have enjoyed rapid growth as the property market flourished, now if they want to avoid losses as the market retracts, they may have to be creative and offer buyers new deals to entice them to sign.
Elsewhere…
Neil Harding - Enoch was wrong!
Andy Howell’s Political Futures - Training for Adults
Mary Reid - Clever Cleggs
Obsolete - Send in the lawyers
Also, Clairwil has the latest weekly Britblog round up.
Aaron,
“
Paul Smith didn’t waste any time, indeed, the Yeovil-based blogger wants Northern Rock to be nationalised, “ideally with the major shareholders getting no compensation.” Whaaaah? It’s not the shareholder’s fault, Paul.
”
It may not be their fault but it is, both legally and morally, their risk. They should receive the proper value, at sale, of the company. This may, of course - and likely is - either zero or much less than their investment. Not that I am advocating nationalisation - HMG are likely to be as crap at running Northern Rock / Blackbird as they are running DEFRA, the CSA, most of the NHS etc. The Bank of England, as the major creditor, should just apply for them to be wound up.
Absolutely it’s their risk, but I think the tone (Paul states “ideally” - almost with relish) is not exactly constructive. If they end up with nothing then fine - they took a risk that failed, but I don’t think that would be an “ideal” situation.
Investors have an important role in the development of businesses and allow British ones to expand.
Um Aaron, you do realise that by the end of this saga, whether we follow the Darling model, the Cable model or the Osbourne scheme, the taxpayer is going to have ended up giving Northern Rock (and thus giving the shareholders) approximately 2-3 times the market cap of the company?
Why do this and not do it as an exchange for ownership?
It seems the consensus is that Northern Rock must be “saved” to preserve confidence in the system and to protect the savers who are vulnerable due to the unethical structuring of loans by the board. (Go read the FT article on this issue.)
Given that, why should the taxpayer pump in 2-3 times the value of the company and then arrange for it to be sold at a cut price to some other bank (and get it in the neck from shareholder pressure groups through the medium of the opposition parties in parliament.)
If we’re putting up the money, we deserve to get ownership. If the shareholders don’t think that is fair exchange, we shouldn’t put up any money. The knee jerk “ooh investors will be scared” is just a code for allowing moral hazard to run wild in the City.
Incidentally, nationalisation doesn’t have to involve no compensation for shareholders and it’s pretty annoying that you leap to that conclusion.
Arguments for nationalising Northern Rock really are from another planet..
So the private sector screws up and creates an almighty mess. OK, so the Government doesn’t bail out shareholders, but it still takes on the almighty mess. And as other posters have observed, the likelihood of Government turning a privately-owned mess into a publicly-owned success story is just a wee bit unlikely.
This was a privately-owned business where private individuals took a risk with their money. Limited compensation to preserve confidence, may be. But wholesale rescue? Exactly whose interest is that in?
Metatone,
Incidentally, nationalisation doesn’t have to involve no compensation for shareholders and it’s pretty annoying that you leap to that conclusion. ~ Metatone
Incidentally, I think you’ll find that it wasn’t me that leaped to that conclusion: -
Paul Smith didn’t waste any time, indeed, the Yeovil-based blogger wants Northern Rock to be nationalised, “ideally with the major shareholders getting no compensation.”
But yeah, it’s pretty annoying.
Aaron: Incidentally, you painted Paul’s views as representative of the whole Labour party and implicitly the whole left. Which is pretty damn annoying.
Nah, Metatone, I just framed the web as I found it.
- direct link -
Surreptitious Evil