Friday, March 20, 2009

Why governments should not run banks

The National Audit Office's report on the Treasury's handling of Northern Rock is a gloomy read. The Treasury was incapable of asking the right questions to both its advisers and Northern Rock managers. Even after Northern Rock was reliant on taxpayers' funds, it continued to hand out £800m mortgages which lent people 125% of the value of the property. The Treasury signed a contract with Goldman Sachs, one of its advisers, which included a £4m "success fee" without defining what would have constituted "success". The total bill to taxpayers for advisory fees and bidding costs associated with Northern Rock is £78m.

7 Comments:

Blogger kinglear said...

Treasury doesn't understand business? Of course they don't - they've never had to create a profit in their lives.And "success?" Covering your backside, speaking gobbledegook, and being seen to do something - anything. Its a bit like the old soldiers trick, if you walk about with a bit of paper, noone will ask what you're doing.

2:21 pm  
Blogger kinglear said...

But ps, that's why Goldman are the best. I note they have effective risk exposure to eg AIG of ZERO

4:26 pm  
Blogger Mopsa said...

...also, why bankers should not run banks, and why bankers should not run governments. And now, why MPs shouldn't run government.

4:37 pm  
Blogger Welshcakes Limoncello said...

It doesn't bear thinking about, WW.

10:43 pm  
Blogger kinglear said...

The Dunfermline BS is basically bust because it lent millions to commercial property developers - who are hoing bust like ninepins.
It should be noted Jonah visited them recently as they are amongst the largest employers in Fife...

8:55 am  
Blogger Winchester whisperer said...

KL - it is depressing that the Treasury apparently couldn't be bothered to read the RBS 2007 accounts which gave all the details of Fred's pension.

Mopsa - you're right - the country has gone to the dogs. It's too depressing to think that national debt as a percentage of GDP will be 70% in 2010. At least you're self-sufficient.

9:55 am  
Blogger Ellee Seymour said...

That's a truly shocking bill. I hope they are better with their domestic housekeeping!

7:19 pm  

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