If Alastair Darling was your father, how confident would you feel that you'd get your pocket-money each week? Exactly.
The fiasco of Northern Rock exposes not only the foolishness of allowing banks to operate in a manner that is to all intents and purposes unregulated, but also the poor grasp of financial reality at the Treasury.
It is a common scenario that people who have difficulty meeting their credit card payments acquire new cards with which to service their existing ones. Or they remortgage their home, and remortgage, and remortgage.... Well that's what the board of the Northern Rock have been doing on a vast scale, and like the above individuals they have got caught; there's no more credit available and they've got to start making payments from their existing funds. What existing funds? That's it, isn't it, there aren't any; truth be told Northern Rock has gone bust. Fancy words may suggest that it merely short-term cashflow difficulty but it ain't; they're as bust as a busted flush can be.
Now you'd think that a bank that not so long ago was a building society would be ok given a bit of time. All those people with mortgages keep paying them back and providing they don't lend out any more they'll soon have a nice healthy balance again and everything will be hunky-dory. If only... because Northern Rock have been very reckless in who they lend money to, and a lot of their customers are going to have as much difficulty meeting their commitments as the bank does. Not only that, but far more problematically Northern Rock have been flogging off their 'safe' mortgages in order to fund the unsafe ones. They've been using a 'charitable' offshore trust called 'Granite' to do this; it's a 'charitable trust' for tax reasons, none of which are charitable, but in reality it's just another company. It's Granite who own the safe mortgages, and who have borrowed against them to service Northern Rock's indebtedness.
Just another company? Well, sort of. As far as the law are concerned they might as well be, but in truth Northern Rock and Granite are one and the same company, trading under different names both for tax reasons, and more cynically to keep profit and risk apart, with the risk being taken by those who have been foolish enough to deposit money in this ill-managed institution. So what is the government going to do about Granite when it nationalises Northern Rock? Remarkable as it might seem, nothing at all. It would have made more sense to do things the other way round; nationalise Granite and let Northern Rock go to the wall. Then, when the Granite mortgages come good, use those funds to repay the taxpayer and others who have been swindled by the Northern Rock board. Surely not nationalise the part that has irrecoverable debts, and leave the profitable bits to the crooks who ran the whole damned enterprise to start with.
The Northern Rock crisis impacts on everyone; not just the employees, nor the taxpayer. The lending of excessive money secured against property is the biggest factor in driving the price of property up, and that drags the cost of living with it. If affordable housing was regarded as a desirable objective, we would have been better served if Northern Rock had gone end up; since it hasn't been allowed to, the government must bring Granite into public ownership as soon as possible, without any recompense whatever to the financial leeches who operated such a cynical rip-off.