Northern Rock - Legal Challenge

I do not agree with the investors getting nothing - and indeed have never said that was what I advocated - has anyone suggested that? Gaz has intentionally implied this by using the term "confiscation".

They should be given the share value at the close of business prior to the announcement that the nationalisation would go ahead.

I stand by the fact that SRM Global and RAB Capital intended to profit from the situation - I will be happy if they actually lose money.

The term parasites springs to mind with regard to their actions.

Reply to
judith
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Oh dear, Ronald. You nearly always write such sense, but this is an exception.

First, look at the timing of NR's share price movements in relation to the assorted good and bad publicity regarding white knights (beardy or otherwise). Anyone who wanted out could have done so up to last Friday. But they chose to stay at the table. For four months...!!

Second, the only reason "the market" gave NR a non-zero value was HMG's backing. Without that, the share price would have gone the way of Marconi and many others. Indeed, it seems clear that the only basis on which Beardy et al were interested was that HMG carried the bulk of the risk. The folk now crying out for "compensation" would have cried even louder if HMG had let NR go hang.

Third, NR shares are approx 75% small holdings - given for free to members - and 25% large players, who have a nicely balanced spread of investments, thank you very much. The big boys can look after themselves, while the little players have merely lost the chance of a killing, with no down-side and no cost.

Fourth, the tax-payer. Why should we pay even more than we are already paying for NR's crap management? The small investors are largely NR "members" - now enjoying far better protection (potentially at my expense) than I get on my Toytown Bank plc savings.

If NR could have survived without state support, it would have elected to do so. It couldn't and didn't. Value of shares nil - compensation nil. Value of share certificates for showing the grandchildren - whatever, but they get to keep those.

Reply to
Martin

You've expressed that so much better than I could have - cheers.

Reply to
judith

I don't have a problem with the idea that the govt should pay a fair price for the business. I just believe that in this case, a fair price is pretty close to £0.00.

Reply to
Jonathan Bryce

Seconded, or maybe thirded. And NR also need to STOP entering into new mortgages using my/our money, especially the '125% of value' sort. If I wanted to punt, I'd visit the bookmaker myself, not let Mr. Darling do it for me.

Actually we probably ought put the NR SVR up to .25% or 0.5% above the market average, and hope most punters will vote with their feet, thereby repaying some of £110B we are in hock for right now, and also avoiding law suits from all the other lenders. At the same time savings rates need to come down below the market average, for similar reasons. And the £100k guarantee needs to either go away, or apply to all institutions.

Only a committee could construct a c*ck-up this comprehensive .. did NR recruit its ex-board from the remnants of Equitable Life, maybe?

Reply to
GSV Three Minds in a Can

As long as a government has power to intervene in some cases we'll never have decisions that are "fair" to everybody. We also don't want a government who is powerless to intervene in any situation. Unfortunately, we are not going to get decision makers of quality while the parties have such power rather than individual MPs. The way to rise to decision making level in politics with the present system is to be an arse licking yes man. I wonder who is the person that most people would associate that description with at the present time?

Reply to
PeterSaxton

I don't see how. If the Bank of England had refused to bail it out, the bank was dead in the water, and others might have followed.

Until the taxpayer has had every penny back, I do not see on what basis shareholders are entitled to a single penny. Their asset ceased to have any value. The Bank of England bailed it out from political and economic necessity, not as a commercial deal. While I have some sympathy with your arguments about confiscation of assets, the assets ceased to have any value in the autumn. Since then, the taxpayer has taken all of the risk, and is entitled to all of the reward.

I agree with that assessment. I just wish they had had the honesty to do the job openly and made the arguments for it. They would be a lot more respected now if they had.

Reply to
Richard Miller

In message , Ronald Raygun writes

I don't see the issue as whether the share owners should be compensated, but whether the level of compensation should be a non-zero sum given the state of the business at the time of nationalisation. I'm a taxpayer. I want my emergency loan back now. The bank can't afford it. The bank is therefore insolvent and on a liquidation the shareholders would receive nothing. I cannot understand the arguments in favour of them receiving a non-zero sum at taxpayers' expense in addition to all the taxpayers' money that has already been poured in.

Reply to
Richard Miller

I hope the local council never wants to compulsery purchase your home, but i am sure you will be happy with a 'f*ck off'.

Gaz

Reply to
Gaz

It is one of those things that marks a free society from an oppressive one. In a free society they State cannot arbitrarily confiscate property without compensation.

Gaz

Reply to
Gaz

It might not be that simple, if it can be shown that Government actions pre nationalisation caused the price to depress. A government can not and should not be able to engineer the collapse of companies and then confiscate the property (i am not claiming that is what happened here, like with railtrack, but your blunt assesment of how people should be compensated could encourage it).

Good. I have no problem with that either, they acted like spivs day trading hoping to make a quick buck. But, in such a situation they are just entitled to a package of compensation as is the little old lady with her two thousand shares.

Gaz

Reply to
Gaz

In this case it might be.

Gaz

Reply to
Gaz

I think that we agree - at last ;-)

Reply to
judith

Richard Miller posted

Whether the loan is repayable now depends on what terms it was made on.

That doesn't follow at all. The bank may be insolvent in that it cannot meet its immediate obligations, but still have vast net assets that could be distributed to shareholders after liquidation. One would need to look at the balance sheet.

Reply to
Les Invalides

It definitely isn't that simple. The share price includes future cash flows from the NR loan book. The liquidation price is the value of the assets themselves if sold today. And the problem at the moment for NR shareholders is that the people with the cash to buy the NR's assets at the price the shareholders think they are worth aren't prepared to spend that money for the risk/return that the NR's assets will give them.

Nobody can tell who is right here. If the NR had sufficient liquidity we'd get to watch the whole thing play out and see whether the shareholders were right. But the NR has run out of money to keep going and the shareholders have got to supply that money unless they want the assets sold at what the people with cash are prepared to pay.

Agreed. But I don't think the shareholders have much of a leg to stand on here because the government support has been so huge and there appears to be absolutely nobody who is prepared to take on that liability from the government at all. (I say appears because I don't know whether the government would, say, have countenanced Lloyds saying "we'll take on the NR and repay all the government loans if we can buy the NR for 1GBP" but assuming that such offers would have been accepted, and were known to have been acceptable, then it appears that the liquidation value of the company is less than zero and the shareholders deserve nothing)

Although I think the government messed up in not providing support earlier for the NR, and had they done that the whole mess might have turned out better both for the taxpayer and the shareholders, the government(taxpayer) was under no obligation to provide any support at all at any point and the shareholders cannot claim that they've lost out because the government was reluctant to provide any support.

Tim.

Reply to
google

Wrong. The shareholders have never been *asked* what they think their shares are worth. The reason no-one is acquiring NR is not that there's no-one willing to pay, or that the shareholders have rejected their offer; it's because the *government* has rejected the bids.

The government provided support to NR not to protect NR's shareholders, but to protect the wider banking sector (and probably to some extent NR's employees). That is, the government intervened in its *own* interests. It would be unfair now to place the full cost of those actions on NR's shareholders, who, as it has turned out, have not benefited from them at all.

Reply to
Les Invalides

Northern Vote?

Reply to
®i©ardo

They did when the government privatised many publicly owned industries. As a taxpayer and hence a "shareholder" I got no compensation.

M.

Reply to
Mark

But nobody made any offer that removed the taxpayers liability.

You cannot sell your house without paying off your mortgage unless your mortgage lender agrees and the mortgage lender will only agree if they think it's the best possible deal they will get. The shareholders cannot sell the company without paying off the taxpayers loans unless the government, representing the taxpayer, thinks it's the best possible deal they will get.

Of course, the government intervened in its own interests. But without invervening the shareholders would have got absolutely nothing when the company would have gone into receivership and probably bought, much like Barings, for 1GBP. With the intervention the NR shares have continued trading long enough that every shareholder who held shares on 13th September could have sold them. Infact four hundred and sixty million shares were traded between 2th Nov[1] and 15th Feb. Between

1st Oct and 15th Feb it's about 1.1 billion shares or about 2.5 times the issued shares and between 13th Sept and 15th Feb it's 2.5 billion shares. [1]
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so the shareholders knew things were in a mess by 2nd Nov and to pay off the government and get control back was going to cost them 50GBP per share.

Tim.

Reply to
google

"Richard Miller" wrote

Suppose you laid a bet on at the bookies, a long-shot at 100-to-1. You paid a tenner; you'll likely get nothing back, but there's a small chance of winning a grand. Someone then nicks your betting slip just afterwards, well before the race is run/game is played.

How much compensation should you get? Nothing, because the likely value of the bet is Nil?

Reply to
Tim

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