George Osborne plans £1bn privatisation of Northern Rock

Northern Rock savers waiting to take cash out in 2007

Planning something and effectively carrying out the plans are two different things. George Osborne is keen to get rid of Northern Rock, the gobbler of toxic debts. As it happens, the Rock is cleaved into two halves. The good bank and the bad bank. Osborne is looking to flog off the good bit, which does not have toxic debt fouling its coffers. Apparently Virgin Money and the Yorkshire Building Society are expected to be among the bidders, and the formal sale process could start by the next month. But taxpayers are likely to experience a loss because this is a bit of a "reduced item".

Robert Peston of BBC fame has been talking about all this, and one suspects he's getting a bit weary by it. Having broken the original story of the bank going bust, he probably no longer feels he can dine out on this tale of woe any longer. He did, though, give the interesting point that savers currently attracted to Northern Rock may be there because it is a safe house at taxpayers expense. Put it in the private sector and, well.... he didn't elaborate, but the possibility is some may leave for pastures new.

The Daily Telegraph reports that "Although the sale of the so-called "good bank" part of Northern Rock is likely to generate a loss, this will be offset in the longer term by the repayment of tens of billions of pounds of state aid loans held in the "bad bank", now known as Northern Rock Asset Management". I thought all the bad stuff was toxic debt brought over in some grand recycling scheme from American sub-prime lenders. If the money was completely fake in the first place, how come these "asset managers" can turn the financial toxins into good money?

Maybe George Osborne can illuminate us all on that one?

Posted in: banks,George Osborne,Northern Rock