Newcastle Journal's Poll Results
The Newcastle Journal recently ran a poll on what caused the problems at Northern Rock and who people think were to blame. Some of our supporters did manage to vote although our reminder to do so was too late for many. More than 70% rated the Government's handling of the situation as either poor or very poor, and almost 60% of people believe nationalizing the company to be the wrong decision. Some still blamed poor judgment by the former management as a contributory cause but on a positive note, 60% believe the brand is strong enough to survive although most thought that it would be a much smaller operation in few years time.
Banking Reform Consultation
The Because of the perceived problems in handling of the Northern Rock crisis, the Government is proposing some reforms to the banking regulation regime. It has launched a consultation on its proposals and UKSA has submitted a response which can be seen here.
Others have expressed concerns about the wide ranging powers that might be introduced to interfere with the rights of shareholders and take control of assets of banks in apparent difficulties, even in secret possibly without the knowledge of shareholders. One of the frustrating aspects of the Northern Rock affair, at least as far as the Government was concerned, was its inability to take control and override the wishes of shareholders. Our response is an attempt to widen out the debate.
Radio & TV Interviews
Our North-Eastern representative Dennis Grainger gave a good interview for the BBC which can be heard by going to this web site page.
You can also hear the excuses by Robert Peston for leaking the story of the rescue funding that precipitated the panic and run by depositors. He also makes some other comments but we do not agree with his analysis of Northern Rock at all. As the interviewer suggested, which Peston does not seem to agree with, other banks have taken advantage of the Bank of England's special liquidity scheme to help them through the credit crisis, but that was not available to Northern Rock. The beneficiaries have been kept secret however whilst Northern Rock's plight was promoted in a blaze of publicity.
Mr Peston suggests Northern Rock was a special case but the same liquidity problems hit Bradford & Bingley, and more recently, HBOS. In addition both Barclays and Royal Bank of Scotland have undertaken major rights issues to strengthen their balance sheets, while Alliance and Leicester has fallen to an opportunistic bid from Santander.
Note that the Government has encouraged and supported (via the extension of the Special Lending Scheme to the end January 2009 and dropping of competition issues) the rescue of HBOS whereas a year ago it did nothing to assist the proposed Lloyds-TSB takeover of Northern Rock - this demonstrates the Government's 'U' turn and discriminatory policy execution and supports our view that the Valuation terms are unethical given the £500 Billion of "state support" now being given without much publicity to other banks.
Valuation Process
Accountancy Age has reported some comments by Treasury staff about the valuation process. Apparently the agreed fee of £4.5 million for the valuation by BDO Stoy Hayward could be increased by "top-fee" fees - for example if there are legal disputes or for the handling of appeals. It was also made clear that Northern Rock will be charged with the cost of the process.
Liberal Democrat Comments
Nick Clegg (LibDem leader) referred to Northern Rock obliquely in his speech to the Liberal Democrat party conference. He said "When reckless bankers come with gold-plated begging bowls to ask for shareholders to be bailed out our answer should be a resounding no". Unfortunately these comments are misconceived. In the case of Northern Rock the shareholders were not looking for a free lunch - they were actually willing to support a major rights issue as part of the recovery plan, and any loans provided by the Government were done so on commercial terms - indeed on penal terms. Any Liberal Democrat supporters may care to write to Mr Clegg to correct him on this point.
Roger Lawson
Chairman, Northern Rock Shareholders Action Group
Friday 26 September 2008
Thursday 25 September 2008
Crediting from the Crunch
His wife, the vivacious Nichola Pease, was recently ranked the UK's 20th richest woman in the Sunday Times Rich List - leading to the couple being dubbed the Posh and Becks of the City.
A year before the first cracks appeared in the global financial system, he spotted the gathering storm that was the 'sub prime' credit crisis in the United States.
Since then, his company Odey Asset Management which he has ran since 1991 has been gambling on bank shares falling - and fall they have.
Mr Odey's helped his firm record an annual profit of £64.6million, out of which he has paid himself £28million.
This will help the household income greatly it seems considering that his wife recently lost one of her jobs as a non-executive director of non-other than Northern Rock.
Not that they were poor beforehand it is thought that the couple, operating out of a Georgian office in Mayfair, have built a fortune of more than £300million.
Her family are banking royalty and have been financial big hitters since the 19th century, when they had a hand in building the Stockton to Darlington railway.
It was her role as a non-executive director at Northern Rock that brought the headlines.
Mr Odey's firm was never associated with Northern Rock because of the obvious conflict of interest. But his profiteering from other failing banks is painfully ironic to the shareholders of Northern Rock.
His winning tactic was called 'short selling', which effectively meant betting against 900,000 shareholders. As the Northern Rock saga rumbled on, questions were asked about why his wife did not do more. She stated that the events were 'unprecedented' and could not be foreseen. Then, along with all the other non-executive directors, she resigned.
UPDATE: The Sunday Sun reported this story with comments from Robin Ashby, spokesman for the Northern Rock Small Shareholders’ Group, who said: “I have long been concerned about the performance of the non-executive directors of Northern Rock, prior to the crash, in their role of holding the executive to account on behalf of the shareholders.
A year before the first cracks appeared in the global financial system, he spotted the gathering storm that was the 'sub prime' credit crisis in the United States.
Since then, his company Odey Asset Management which he has ran since 1991 has been gambling on bank shares falling - and fall they have.
Mr Odey's helped his firm record an annual profit of £64.6million, out of which he has paid himself £28million.
This will help the household income greatly it seems considering that his wife recently lost one of her jobs as a non-executive director of non-other than Northern Rock.
Not that they were poor beforehand it is thought that the couple, operating out of a Georgian office in Mayfair, have built a fortune of more than £300million.
Her family are banking royalty and have been financial big hitters since the 19th century, when they had a hand in building the Stockton to Darlington railway.
It was her role as a non-executive director at Northern Rock that brought the headlines.
Mr Odey's firm was never associated with Northern Rock because of the obvious conflict of interest. But his profiteering from other failing banks is painfully ironic to the shareholders of Northern Rock.
His winning tactic was called 'short selling', which effectively meant betting against 900,000 shareholders. As the Northern Rock saga rumbled on, questions were asked about why his wife did not do more. She stated that the events were 'unprecedented' and could not be foreseen. Then, along with all the other non-executive directors, she resigned.
UPDATE: The Sunday Sun reported this story with comments from Robin Ashby, spokesman for the Northern Rock Small Shareholders’ Group, who said: “I have long been concerned about the performance of the non-executive directors of Northern Rock, prior to the crash, in their role of holding the executive to account on behalf of the shareholders.
“What did they do to earn the fat fees they received? Did they do much except warm chairs? They were supposed to be industry experts. Clearly, Ms Pease has money-making skills.
“It’s a pity they were not more evident in preventing the catastrophic losses suffered by shareholders and employees.”
Thursday 18 September 2008
Open letter to the Prime Minister and Chancellor of Exchequer
18 September 2008
Dear Gordon & Alistair
RE: NORTHERN ROCK COMPENSATION, THE GLOBAL LIQUIDITY CRISIS, AND TRIPARTITE FAILURES
As you know, I have written to you several times on these subjects during the past year. My last letter was dated 8 May 2008. Having largely recovered from a major heart operation now, and prompted by economic & financial developments, I am writing to you again in the earnest hope that with the benefit of a year’s “learning curve” you are prepared to move policy away from Denial, Obduracy, and blatant Discrimination towards Northern Rock.
I have to say that I am impressed with the fresh impetus and proactive initiatives that you have sponsored this year. The piecemeal easing by the Bank of
If you seriously consider the huge errors of judgement and assessment regarding the global Financial Tsunami made by the Tripartite right up to April 2008, the major “U” Turns by the Bank of England, admissions of failure by the FSA and other Tripartite members, it is both discriminatory and unethical to insist on the ridiculous Valuation Terms stipulated for Northern Rock compensation. Expert estimates of general support (December plus SLS) provided to the
Mervyn King said to the Treasury Select Committee last year that the level of support requested by Northern Rock would have injected very large sums into the
Blatant discrimination? YES! Northern Rock needed the same support as other UK mortgage banks; it was the first to suffer from the inter bank freeze due to its 72% reliance on wholesale markets. The other
Do not waste more money on litigation and rigged valuations. In a £1.4 Trillion economy, the £1.5 Billion or so for Northern Rock compensation is very small beer, and is dwarfed by the of £200 to £450 Billion that you will/are providing to other UK banks. It requires honesty and courage from you to accept what went wrong a year ago: that is the British way.
If you can get Mervyn to reduce interest rates to 3% by Xmas then there will be a strong recovery in 2009. The
I trust that you found my suggestions for the Autumn Statement helpful: it appears that these have been leaked to the Lib Dems!
Yours faithfuly
Pradeep Chand
Harrow
Middlesex
Friday 12 September 2008
Northern Rock Shareholders Action Group - Update No. 43
Please Vote in the Journal's Poll Today!
The Newcastle Journal is conducting a poll on what caused the problems at Northern Rock and who people think were to blame. Please click on the link from this web page: www.nebusiness.co.uk to vote. My answers were as follows: Question 1: The Government, Question 2: Yes, Question 3: No, Question 4: Very poor, Question 5, No, Question 6: Yes, Question 7: no comment: Question 8: Yes, Question 9: still in operation on a smaller scale. The poll will close today apparently so please vote as soon as possible (the results will be available on Monday).
Valuer Appointed
The Treasury has announced the appointment of Andrew Caldwell, a partner in BDO Stoy Hayward, as the valuer for your shares in Northern Rock. However, if you are expecting "fair compensation" as promised by the Chancellor when announcing the nationalisation of the company, think again. The terms of reference of the valuation which are set in the Nationalisation Act and associated Compensation Order will almost certainly mean little or no value is attributed to your shares.
The only way you are going to get fair compensation is if the legal action that is being pursued by private shareholders, and by the two largest institutional shareholders, is successful.
No doubt the valuer will need to go through the normal processes though which could take some months, and he will collect a fee of £4.5 million for his work. Members of your committee did a number of TV interviews on the subject of the appointment of the valuer and the status of Northern Rock one year after the "run on the bank". We were also quoted at length in several national and local newspapers.
Status of Legal Action
For those who have only recently joined this campaign (and we have had a lot of new supporters of late), the position is that the three groups mentioned above have all filed for a judicial review of the terms of the nationalization which should get into court on January 13th next year. We are asking for the Act and the Compensation Order to be set aside on the basis that it breaches the European Convention on Human Rights. In essence our claim is that the compensation terms have been set totally artificially by the Government to ensure that no or very little compensation is paid.
Alistair Darling's Background
One of the most outrageous aspects of the Northern Rock affair has been the consistent failure to recognize shareholders as having an interest in the company and to accept that they were "stakeholders" alongside depositors, lenders to the company (such as the Government) and employees. Statements issued by the Treasury made it clear that shareholders interests were to be ignored, and comments in Parliament by MPs portrayed shareholders as simple speculators who deserved to lose everything.
An interesting slant on why Mr Darling might not be sympathetic to shareholders rights was given recently in Private Eye. It commented on an interview he gave to the Guardian on his early life and suggested that it was somewhat distorted. Old Edinburgh comrades were reported as remembering Darling as a keen supporter of the International Marxist Group, British section of the Trotskyist Fourth International. It also claims he was a typical local-government leftie on Lothian regional council, and even denounced George Galloway as a "reformist" after the latter pointed out that Darling's opposition to the rate-capping laws would be disastrous and might land him in jail.
Fannie & Freddie
It is worth noting that the US rescues of Fannie Mae and Freddie Mac that were announced recently were conducted in a far more shareholder-friendly manner than the Northern Rock nationalisation.
One of our committee members identified the following differences between these two takeovers:
US treatment of Fannie/Freddie versus UK treatment of Northern Rock
1. US - Conservatorship (i.e., shareholders retain rights to residual profits as per normal, however, management control temporarily passed to the government authorities) UK - Nationalisation with strenuous attempts made to pay shareholders close to nothing in compensation with complete deprivation of shareholders' basic rights to corporate profits made in the interim.
2. US - Dividends forcibly suspended in order to conserve capital as part of conservatorship plan. UK - Confiscation of shares after dividends were voluntarily suspended.
3. US - Intended 10% p.a., wind-down in Mortgage backed security book through natural attrition with the aim of emerging as a more robust business in several years' time. UK - Intended complete payback of government lending within three years to the exclusion of all else. Competitors permitted to "cherry-pick" best quality assets at low prices in order to achieve this goal more quickly at the expense of long-term stability.
4. US - Co-operation and co-ordination between Federal Treasury and FHFA. UK - Very little co-ordination between the Tripartite authorities.
5. US - Government support payments recognised as "senior preferred stock" with warrants issued to provide taxpayer protection. Government authorities recognise that this entails that the returns to the taxpayer will be strongly linked to the health of the business. UK - Government payments recognised as debt facilities. Government authorities fail to recognise this fact and are presently attempting to gain both equity-holders' upside gains and debt-holders downside protection simultaneously.
6. US - Outgoing management recognised as being in no way responsible for the credit conditions that have precipitated these problems. UK - Outgoing management used as scapegoats.
It's A Wonderful Life
It's a Wonderful Life - that may not be the view of many Northern Rock shareholders recently, but it is the title of a well known film (Star: James Stewart, Director Frank Capra). It's worth mentioning because at a seminar this week on Northern Rock, hosted by Andrew Neil, the panel were asked "would they have saved Bailey's Savings & Loan" and most of them seemed stumped by the question.
The film is the story of a bank that experiences a run of depositors after some dodgy accounting. The bank is about to crash into insolvency, Stewart is in despair and gives up hope. But an angel shows him what life would be like in the town without the mortgage and other lending by the bank - homeless and jobless people in essence. So he is encouraged to save it with a happy ending resulting. Certainly a film worth seeing by every banking regulator and those who think that solvent banks should be left to go bust due to temporary cash flow difficulties. It's readily available on DVD.
Other Points to Note
Several shareholders have contacted me concerning telephone calls from an organization named AMG. They seem to be contacting shareholders simply because your name is on the share register of the company (anyone can obtain a copy of this, as we did, and please note that we have not passed your personal details onto anyone). We are not aware of any official role granted to this company and calling anyone out of the blue for the purposes of promoting financial services to someone is not permitted in the UK. Such calls by anyone should be treated with deep suspicion.
Several people have pointed out that there are possible solutions to the problem reported in our last newsletter of an inheritance tax liability on Northern Rock shares arising on the former death of a shareholder. You should consult a lawyer or tax accountant for further advice if you have experienced this problem.
Roger Lawson
Chairman, Northern Rock Shareholders Action Group
The Newcastle Journal is conducting a poll on what caused the problems at Northern Rock and who people think were to blame. Please click on the link from this web page: www.nebusiness.co.uk to vote. My answers were as follows: Question 1: The Government, Question 2: Yes, Question 3: No, Question 4: Very poor, Question 5, No, Question 6: Yes, Question 7: no comment: Question 8: Yes, Question 9: still in operation on a smaller scale. The poll will close today apparently so please vote as soon as possible (the results will be available on Monday).
Valuer Appointed
The Treasury has announced the appointment of Andrew Caldwell, a partner in BDO Stoy Hayward, as the valuer for your shares in Northern Rock. However, if you are expecting "fair compensation" as promised by the Chancellor when announcing the nationalisation of the company, think again. The terms of reference of the valuation which are set in the Nationalisation Act and associated Compensation Order will almost certainly mean little or no value is attributed to your shares.
The only way you are going to get fair compensation is if the legal action that is being pursued by private shareholders, and by the two largest institutional shareholders, is successful.
No doubt the valuer will need to go through the normal processes though which could take some months, and he will collect a fee of £4.5 million for his work. Members of your committee did a number of TV interviews on the subject of the appointment of the valuer and the status of Northern Rock one year after the "run on the bank". We were also quoted at length in several national and local newspapers.
Status of Legal Action
For those who have only recently joined this campaign (and we have had a lot of new supporters of late), the position is that the three groups mentioned above have all filed for a judicial review of the terms of the nationalization which should get into court on January 13th next year. We are asking for the Act and the Compensation Order to be set aside on the basis that it breaches the European Convention on Human Rights. In essence our claim is that the compensation terms have been set totally artificially by the Government to ensure that no or very little compensation is paid.
Alistair Darling's Background
One of the most outrageous aspects of the Northern Rock affair has been the consistent failure to recognize shareholders as having an interest in the company and to accept that they were "stakeholders" alongside depositors, lenders to the company (such as the Government) and employees. Statements issued by the Treasury made it clear that shareholders interests were to be ignored, and comments in Parliament by MPs portrayed shareholders as simple speculators who deserved to lose everything.
An interesting slant on why Mr Darling might not be sympathetic to shareholders rights was given recently in Private Eye. It commented on an interview he gave to the Guardian on his early life and suggested that it was somewhat distorted. Old Edinburgh comrades were reported as remembering Darling as a keen supporter of the International Marxist Group, British section of the Trotskyist Fourth International. It also claims he was a typical local-government leftie on Lothian regional council, and even denounced George Galloway as a "reformist" after the latter pointed out that Darling's opposition to the rate-capping laws would be disastrous and might land him in jail.
Fannie & Freddie
It is worth noting that the US rescues of Fannie Mae and Freddie Mac that were announced recently were conducted in a far more shareholder-friendly manner than the Northern Rock nationalisation.
One of our committee members identified the following differences between these two takeovers:
US treatment of Fannie/Freddie versus UK treatment of Northern Rock
1. US - Conservatorship (i.e., shareholders retain rights to residual profits as per normal, however, management control temporarily passed to the government authorities) UK - Nationalisation with strenuous attempts made to pay shareholders close to nothing in compensation with complete deprivation of shareholders' basic rights to corporate profits made in the interim.
2. US - Dividends forcibly suspended in order to conserve capital as part of conservatorship plan. UK - Confiscation of shares after dividends were voluntarily suspended.
3. US - Intended 10% p.a., wind-down in Mortgage backed security book through natural attrition with the aim of emerging as a more robust business in several years' time. UK - Intended complete payback of government lending within three years to the exclusion of all else. Competitors permitted to "cherry-pick" best quality assets at low prices in order to achieve this goal more quickly at the expense of long-term stability.
4. US - Co-operation and co-ordination between Federal Treasury and FHFA. UK - Very little co-ordination between the Tripartite authorities.
5. US - Government support payments recognised as "senior preferred stock" with warrants issued to provide taxpayer protection. Government authorities recognise that this entails that the returns to the taxpayer will be strongly linked to the health of the business. UK - Government payments recognised as debt facilities. Government authorities fail to recognise this fact and are presently attempting to gain both equity-holders' upside gains and debt-holders downside protection simultaneously.
6. US - Outgoing management recognised as being in no way responsible for the credit conditions that have precipitated these problems. UK - Outgoing management used as scapegoats.
It's A Wonderful Life
It's a Wonderful Life - that may not be the view of many Northern Rock shareholders recently, but it is the title of a well known film (Star: James Stewart, Director Frank Capra). It's worth mentioning because at a seminar this week on Northern Rock, hosted by Andrew Neil, the panel were asked "would they have saved Bailey's Savings & Loan" and most of them seemed stumped by the question.
The film is the story of a bank that experiences a run of depositors after some dodgy accounting. The bank is about to crash into insolvency, Stewart is in despair and gives up hope. But an angel shows him what life would be like in the town without the mortgage and other lending by the bank - homeless and jobless people in essence. So he is encouraged to save it with a happy ending resulting. Certainly a film worth seeing by every banking regulator and those who think that solvent banks should be left to go bust due to temporary cash flow difficulties. It's readily available on DVD.
Other Points to Note
Several shareholders have contacted me concerning telephone calls from an organization named AMG. They seem to be contacting shareholders simply because your name is on the share register of the company (anyone can obtain a copy of this, as we did, and please note that we have not passed your personal details onto anyone). We are not aware of any official role granted to this company and calling anyone out of the blue for the purposes of promoting financial services to someone is not permitted in the UK. Such calls by anyone should be treated with deep suspicion.
Several people have pointed out that there are possible solutions to the problem reported in our last newsletter of an inheritance tax liability on Northern Rock shares arising on the former death of a shareholder. You should consult a lawyer or tax accountant for further advice if you have experienced this problem.
Roger Lawson
Chairman, Northern Rock Shareholders Action Group
Thursday 11 September 2008
JournalLive Poll
The Journal here in Newcastle is running a survey concerning Northern Rock, asking for readers' opinions on what went wrong, who is to blame, and the plight of staff and shareholders.
You can take part by going to:
http://www.nebusiness.co.uk/
The poll only takes a moment to fill out (though you can flesh out your answers if you wish) and it's totally anonymous - it doesn't require that you submit any personal details. The results, we are told, will be published in Monday's Journal.
You can take part by going to:
http://www.nebusiness.co.uk/
The poll only takes a moment to fill out (though you can flesh out your answers if you wish) and it's totally anonymous - it doesn't require that you submit any personal details. The results, we are told, will be published in Monday's Journal.
Tuesday 9 September 2008
Government to pay £4.5 million to Rock valuer
The Government appointed an independent valuer for Northern Rock and agreed to foot the bill for £4.5million.
Chosen from a list of ten applicants, Andrew Caldwell, Valuations Partner at BDO Stoy Hayward, will determine how much, if anything, is paid to the bank's 180,000 shareholders.
He will also decide whether he works full or part time on the job – as no concrete timetable for valuation has even been agreed. And he will be paid regardless of how long the job takes him.
This comes after the news that the Government racked up a £17 million bill for consultants in the year 2007-2008.
The bill will be paid by the taxpayer but will be reclaimed from Northern Rock once it has been resold or refloated.
Although the Treasury said that Mr Caldwell had extensive experience of valuing companies, his appointment has been described as "rigged" by shareholders. Roger Lawson, of the UK Shareholders' Association (UKSA), said: "By rigging the valuation in this way, the Government will ensure that the value put on the shares by the valuer will be negligible."
Some estimates have placed a price as high as 400p a share for the Rock holders whilst many are suggesting that the Government will offer close to nothing. On this math, Mr Caldwell will be earning more than the estimated total share price he is in fact valuating.
Telling times….
Northern Rock Numbers
£1.1m Pay and pensions top-up for Adam Applegarth, the former chief
£167.6m Northern Rock’s pre-tax losses for the year to December 31, 2007
£100bn Maximum estimated liability for taxpayers
£4.5m One-off fee to Andrew Caldwell, Rock’s independent valuer
Monday 8 September 2008
UK govt appoints Northern Rock compensation valuer
LONDON, Sept 8 (Reuters) -
Britain's finance ministry said today that it had appointed BDO Stoy Hayward valuations partner
Andrew Caldwell to assess how much compensation should be paid to shareholders affected by the nationalisation of Northern Rock
The government took control of the struggling mortgage lender in February.
"A list of people who held shares immediately prior to the transfer is being maintained," the Treasury said in a statement.
"Former shareholders can update their contact details by following the instructions on Northern Rock's web site. In due course, Andrew Caldwell will inform former shareholders and others of the basis on which he is going to operate and how he intends to proceed."
Robin Ashby will be interviewed by BBC TV tonight on the subject. He will point out the scewed basis for valuation, the Judicial Review process and will call for the Governemnt to reveal how much they are paying the valuer and what indemnity has been offered against potential shareholder legal action against Mr Caldwell.
Britain's finance ministry said today that it had appointed BDO Stoy Hayward valuations partner
Andrew Caldwell to assess how much compensation should be paid to shareholders affected by the nationalisation of Northern Rock
The government took control of the struggling mortgage lender in February.
"A list of people who held shares immediately prior to the transfer is being maintained," the Treasury said in a statement.
"Former shareholders can update their contact details by following the instructions on Northern Rock's web site. In due course, Andrew Caldwell will inform former shareholders and others of the basis on which he is going to operate and how he intends to proceed."
Robin Ashby will be interviewed by BBC TV tonight on the subject. He will point out the scewed basis for valuation, the Judicial Review process and will call for the Governemnt to reveal how much they are paying the valuer and what indemnity has been offered against potential shareholder legal action against Mr Caldwell.
US Conservatorship vs UK Nationalisation; Fannie and Freddie - by Shum Ghumman
A commonly believed fallacy that the press seems to have propagated is that the UK government had no choice but to nationalise Northern Rock, however, it was worth noting that the US takeover of Fannie Mae and Freddie Mac that was announced over the weekend was conducted in a far more shareholder-friendly manner than the Northern Rock nationalisation that provided plenty of security for the US taxpayer.
The US economy is only five times the size of the UK economy yet Fannie and Freddie have $5,400,000,000,000 in mortgage backed securities (representing 80% of the US mortgage market) on issue that the US government is now officially backing (as opposed to NRK's mortgage book which was approximately one twenty-seventh of that amount).
I spotted the following differences between these two takeovers:
| | US treatment of GSEs | UK treatment of NRK |
| 1. | Conservatorship (i.e., shareholders retain rights to residual profits as per normal, however, management control temporarily passed to the government authorities) | Nationalisation with strenuous attempts made to pay shareholders close to nothing in compensation with complete deprivation of shareholders’ basic rights to corporate profits made in the interim. |
| 2. | Dividends forcibly suspended in order to conserve capital as part of conservatorship plan. | Confiscation of shares after dividends were voluntarily suspended. |
| 3. | Intended 10% p.a., wind-down in Mortgage backed security book through natural attrition with the aim of emerging as a more robust business in several years’ time. | Intended complete payback of government lending within three years to the exclusion of all else. Competitors permitted to “cherry-pick” best quality assets at low prices in order to achieve this goal more quickly at the expense of long-term stability. |
| 4. | Co-operation and co-ordination between Federal Treasury and FHFA. | Very little co-ordination between the Tripartite authorities. |
| 5. | Government support payments recognised as “senior preferred stock” with warrants issued to provide taxpayer protection. Government authorities recognise that this entails that the returns to the taxpayer will be strongly linked to the health of the business. | Government payments recognised as debt facilities. Government authorities fail to recognise this fact and are presently attempting to gain both equity-holders’ upside gains and debt-holders downside protection simultaneously. |
| 6. | Cancellation of all GSE political activities (i.e., lobby-groups, political donations etc.) and likely cancellation of all corporate philanthropy to further assist in the conservation of capital. | Maintenance and extension of corporate philanthropy and sponsorship of sporting teams indicate dysfunctional populist decision-making. |
| 7. | Outgoing management recognised as being in no way responsible for the credit conditions that have precipitated these problems. | Outgoing management used as scapegoats. |
Friday 5 September 2008
More Money Matters
by Chris Hulme
Good afternoon all,
Good afternoon all,
As we had thought in previous bulletins, this mornings meeting of the MPC has brought no surprises in leaving the rate unchanged at 5.0%, although the persistency of increasing inflation still bears heavily on these decisions.
July's MPC meeting saw an even split in the voting by the nine members, seven voting to keep rates at 5%, one voting for a 0.25% cut and one for a 0.25% increase and we see the same voting structure in the August meeting as per my prediction from our last bulletin - 'I would expect to see a similar voting pattern emerge when the minutes of this months meeting are released on August 20th'.
As inflation continues to weigh heavy on the British public' expenditure, the pressures from Unions representing their members still fight on for inflation linked pay structures despite the pleas from Mr Darling and Mr King for restraint.
This weeks reports from the Organisation for Economic Co-operation and Development (OECD) that the UK economy will officially slip into recession in the last 2 quarters of this year, pressures the MPC to reduce rates to stimulate the economy, but again I would reiterate my expectation for the MPC to retain the rate at 5.0% for the balance of this year.
Recently we have seen Oil prices fall to as low as $108 a barrel from its near $150 a barrel high a few months ago which is some relief to those who directly rely heavily on this commodity which ultimately feeds through to the costs of goods in supermarkets and shops and affects us all.
Alistair Darling and the Treasury made an announcement on Tuesday this week that Stamp Duty Land Tax threshold is increased on the lower band taking the threshold up from £125,000 to £175,000 on property purchases for a 12 months period from the 3rd of September. Stamp Duty will therefore not be payable on such transactions at or below £175,000 but will still be payable at 1% of the chargeable consideration above £175,000 up to and including £250,000.
Whilst this will encourage some buyers back into the market place, the higher limits of £250,000 and £500,000 at which Stamp Duty is charged at 3% and 4% respectively should perhaps also have been reviewed and increased accordingly to encourage buyers at these levels to further their house purchase goals.
The new level will assist those buyers (especially First Time Buyers) wanting to purchase properties below this new level, but unless the sellers of those properties have some incentive to make their onward move, potentially into these higher bands, it is unlikely to have much of an impact.
The estimated cost of this increase is £600 million and in conjunction with this announcement, the Communities Secretary has announced a £1 billion fund to assist 6,000 families under threat of repossession and assistance to 10,000 First Time Buyers with loans of up to 30% of their property purchase. Eligibility is understood to be clients with incomes of below £60,000 which I would hazard a guess includes almost all First Time Buyers.
Mortgage products have continued to reduce in price with some lenders relaxing slightly on the loan to values at which they are willing to lend. We do see however that the reductions mainly benefit those borrowing less than 75% of their property's value with those wishing to borrow at the higher levels still paying the price of high mortgage product rates and arrangement fees.
I would expect these product reductions to level off in the next couple of weeks and as such September could well be the time to secure that remortgage product you have been waiting all summer for.
Borrowers who took out 95% or 100% mortgages in recent years will still continue to find difficulty in obtaining lending from the market leaving their options limited at what the existing lender will provide. Many are finding that their existing lender is unwilling to accommodate requests for 'new products' and worse still where there are options to choose a new lender we have seen the Valuation reports for properties come in at below market value.
I have written a letter to the Royal Institute of Chartered Surveyors (RICS), the governing body for surveyors, in order to get a handle on this practice and will let you know in due course what RICS stance is.
The official press release from the Bank of England is available via the link below.
http://www.bankofengland.co.uk/publications/news/2008/045.htm
I have continued to be active in my role on the Committee of the Northern Rock Shareholders Action Group.
We have had a tremendous response from the private individual shareholders who support our case and have suffered personal losses in this respect but the legal case is expensive and we are urging former shareholders to support this financially with nominal contributions based on their former shareholding.
Every Northern Rock shareholder whose shares were confiscated on the day of nationalisation, whether they be a private investor, windfall shareholder, pension fund or institutional investor will receive the same level of compensation whether they contribute or not, but we do need the donations.
The UKSA has given some guidance on the likely donations but any donation would be welcome, which can be made via the following link http://www.uksapay.org.uk/donation.cfm
A court date has now been set for the case to be heard. The three separate actions being taken by the Plaintiffs for the private shareholder (UKSA), SRM Global and RAB are to be heard as one case over 4 days from the 13th of January 2009.
More information on this is on our website and the recent update from the UK Shareholders Association detailing this further can be found at www.uksa.org.uk/NorthernRock.htm
Again, I trust you find this monthly update timely and useful. I am looking to enhance the level of information provided and would welcome any suggestions on the content or news items you would like to be kept abreast of. As ever, should you not wish to receive these bulletins, please let me know.
Kind regards
Chris Hulme
Director , The Clayton Hulme Partnership
Thursday 4 September 2008
From a Northern Rock shareholder
A letter from Angelique Hunt
We lost roughly twenty thousand shares, and we're discusted with the way the government handled the whole situation.
They used the taxpayer as a scapegoat to get support, knowing that the taxpayer would never get to ever see this money anyway. As a taxpayer, I would be asking why the government has got so much of their resorces left over to play around with like this - we are not just talking about a few quid.
What about the interest alone? Surely there should be some sort of reduction in taxes for this, if they have nothing better to do with the money! Maybe they should have built another millenium dome, or even better more opera houses for the everyday taxpayer to go watch Swan Lake. It's not as though I can go every week.
So, after all, we were duped by the government again. And it's actually the taxpayer who has been done for , though no one will ever get it through to them, because they will imagine that they will receive something back from Northern Rock.
Which poses another question. What does the government intend to do with any profits made by Northern Rock if all turns out well? Will every tax payer get a lump some for using their money? Not on your nelly!
I suggest Dick Turpin runs for the next Prime Minister - at least we stand a small chance at a normal life before we kick the bucket.
Thanks for taking the time to look after the rights of Northern Rock shareholders.
Editorial Note: Posting of comments and editorials by members of NRSSG is provided as a service to members. Comments made by individual members should not be construed as representing the opinion of Northern Rock Small Small Shareholders Group or the editors of this blog.
We lost roughly twenty thousand shares, and we're discusted with the way the government handled the whole situation.
They used the taxpayer as a scapegoat to get support, knowing that the taxpayer would never get to ever see this money anyway. As a taxpayer, I would be asking why the government has got so much of their resorces left over to play around with like this - we are not just talking about a few quid.
What about the interest alone? Surely there should be some sort of reduction in taxes for this, if they have nothing better to do with the money! Maybe they should have built another millenium dome, or even better more opera houses for the everyday taxpayer to go watch Swan Lake. It's not as though I can go every week.
So, after all, we were duped by the government again. And it's actually the taxpayer who has been done for , though no one will ever get it through to them, because they will imagine that they will receive something back from Northern Rock.
Which poses another question. What does the government intend to do with any profits made by Northern Rock if all turns out well? Will every tax payer get a lump some for using their money? Not on your nelly!
I suggest Dick Turpin runs for the next Prime Minister - at least we stand a small chance at a normal life before we kick the bucket.
Thanks for taking the time to look after the rights of Northern Rock shareholders.
Editorial Note: Posting of comments and editorials by members of NRSSG is provided as a service to members. Comments made by individual members should not be construed as representing the opinion of Northern Rock Small Small Shareholders Group or the editors of this blog.
Northern Rock on Facebook
For web readers, a signpost to Northern Rock on Facebook might be interesting - some of them are still relevant, and UKSA has been considering the possibility of starting an ex-shareholder-specific group
Help keep the Rock Northern
Northern Rock’s fate could be sealed in the next week, amid fears of a takeover bid for the bank. This would have a huge effect on the North East. Back the rock and keep it in the North East!Members: 1,590 (including Robin Ashby!)
http://www.new.facebook.com/group.php?gid=6304801372&refurl=http%3A%2F%2Fwww.new.facebook.com%2Fs.php%3Finit%3Dq%26sf%3Dp%26n%3D-1%26q%3Dnorthern%2Brock%26k%3D200000010%26s%3D0
Back Northern Rock
http://www.new.facebook.com/group.php?gid=5031130955&refurl=http%3A%2F%2Fwww.new.facebook.com%2Fs.php%3Finit%3Dq%26sf%3Dt%26n%3D-1%26q%3Dnorthern%2Brock%26k%3D200000010
Our aim is to inform the British Public of the events surrounding Northern Rock, and to drive up support for the Rock from depositors, borrowers, and investors alike. If we, the public, can change the perception and back them by depositing into NRK - we can rebuild trust and confidence into one of the UKs favourite mortgage lenders.Perhaps more importantly however, by backing Northern Rock - we can help restabilise the British financial system. Would you want what happened to Northern Rock to spread and effect your bank?Members: 400
Keep the Northern Rock Northern
Northern Rock is an important part of the fabric of the North East and, should it be taken over, its Head Office and staff should remain in Gosforth.Members: 295
http://www.new.facebook.com/group.php?gid=24819530256&refurl=http%3A%2F%2Fwww.new.facebook.com%2Fs.php%3Finit%3Dq%26sf%3Dt%26n%3D-1%26q%3Dnorthern%2Brock%26k%3D200000010
Nationalize Northern Rock
(Obvioulsy don't agree with this one!)
http://www.new.facebook.com/group.php?gid=6445749951&refurl=http%3A%2F%2Fwww.new.facebook.com%2Fs.php%3Finit%3Dq%26sf%3Dt%26n%3D-1%26q%3Dnorthern%2Brock%26k%3D200000010
The Government must nationalize the Northern Rock bank immediately and without compensation to protect the public interest and prevent the biggest rip-off of tax payers in the condtions of a buy out by wealthy speculators.Tax-payers' underwriting to save this bank was unprecedented. Tax-payers must now demand their right to command the company and directly defend their massive stake in this concern and to fend off speculators looking to hold the public purse to ransom.
There are a large number of smaller groups of 40 people or less which have mainly the same aims as well as some with tongue in cheek titles.
Help keep the Rock Northern
Northern Rock’s fate could be sealed in the next week, amid fears of a takeover bid for the bank. This would have a huge effect on the North East. Back the rock and keep it in the North East!Members: 1,590 (including Robin Ashby!)
http://www.new.facebook.com/group.php?gid=6304801372&refurl=http%3A%2F%2Fwww.new.facebook.com%2Fs.php%3Finit%3Dq%26sf%3Dp%26n%3D-1%26q%3Dnorthern%2Brock%26k%3D200000010%26s%3D0
Back Northern Rock
http://www.new.facebook.com/group.php?gid=5031130955&refurl=http%3A%2F%2Fwww.new.facebook.com%2Fs.php%3Finit%3Dq%26sf%3Dt%26n%3D-1%26q%3Dnorthern%2Brock%26k%3D200000010
Our aim is to inform the British Public of the events surrounding Northern Rock, and to drive up support for the Rock from depositors, borrowers, and investors alike. If we, the public, can change the perception and back them by depositing into NRK - we can rebuild trust and confidence into one of the UKs favourite mortgage lenders.Perhaps more importantly however, by backing Northern Rock - we can help restabilise the British financial system. Would you want what happened to Northern Rock to spread and effect your bank?Members: 400
Keep the Northern Rock Northern
Northern Rock is an important part of the fabric of the North East and, should it be taken over, its Head Office and staff should remain in Gosforth.Members: 295
http://www.new.facebook.com/group.php?gid=24819530256&refurl=http%3A%2F%2Fwww.new.facebook.com%2Fs.php%3Finit%3Dq%26sf%3Dt%26n%3D-1%26q%3Dnorthern%2Brock%26k%3D200000010
Nationalize Northern Rock
(Obvioulsy don't agree with this one!)
http://www.new.facebook.com/group.php?gid=6445749951&refurl=http%3A%2F%2Fwww.new.facebook.com%2Fs.php%3Finit%3Dq%26sf%3Dt%26n%3D-1%26q%3Dnorthern%2Brock%26k%3D200000010
The Government must nationalize the Northern Rock bank immediately and without compensation to protect the public interest and prevent the biggest rip-off of tax payers in the condtions of a buy out by wealthy speculators.Tax-payers' underwriting to save this bank was unprecedented. Tax-payers must now demand their right to command the company and directly defend their massive stake in this concern and to fend off speculators looking to hold the public purse to ransom.
There are a large number of smaller groups of 40 people or less which have mainly the same aims as well as some with tongue in cheek titles.
Monday 1 September 2008
Northern Rock Shareholders Action Group - Update No. 42
Will the Government Profit or Not from the Nationalisation of Northern Rock?
On the 24th August the Sunday Times published an article headlined "Taxpayers face £1bn Northern Rock loss". This was based on the evidence that the Government has submitted to the judicial review, and specifically the evidence of Treasury official John Kingman on the the advice given by Goldman Sachs to the Government before they decided on nationalisation.
His evidence does indeed suggest that the Government received advice that all the options (nationalization and the private sector solutions) would involve a "subsidy" from the Government, and that nationalization might require less subsidy than the private sector solutions. The Telegraph put it another way - they said "Rock sale to Virgin risked £2bn loss".
This surprised many people because did not Gordon Brown suggest in his press conference on the 18th February that it was entirely possible that the Government might make a profit on the deal when Northern Rock was subsequently sold?
Either Gordon Brown was being economical with the truth, or there is more to this than is apparent. What was the basis for this claim of "subsidy"? Unfortunately the details of the Goldman Sachs advice have not been disclosed. We will not know the truth unless full disclosure of the Goldman Sachs advice is made which the Government has been avoiding so far.
MP Criticises £23m Charged to Northern Rock
Jim Cousins, M.P. for Newcastle Central, has criticised the Tripartite Authorities for imposing demands of £23m on Northern Rock - see the mention of this in our comments in our last newsletter on the interim results. He said "I am writing to the Chancellor about these fees because I want these fees cancelled and the money handed back to Northern Rock". In our view it is totally unreasonable to charge the company for the advice that was obtained by the FSA and other parts of the Government because this was advice that they required and it was not advice to the company. The company had no control over that expenditure and there is no indication that they agreed to pay those fees at the time.
New Donation System Implemented
The UKSA web site previously enabled you to make credit card donations to the Northern Rock Campaign Fund via Paypal. However we found them somewhat difficult to deal with and many people also had problems using the system, so we have now implemented a solution based on the Worldpay service (part of the Royal Bank of Scotland). You can access this system from the Appeal page of our web site - see www.uksa.org.uk/Appeal.htm. We have retained the Paypal service as on option for those people who already have Paypal accounts, but we certainly recommend the Worldpay system as a preference. Any comments on the new service would be welcomed, particularly if you have any difficulties - we have tried to make it as easy as possible to use.
The Quality of the Northern Rock Loan Book
Comments from a number of sources continue to blame the problems of Northern Rock on its reckless mortgage lending policies. For example, Vince Cable MP repeated this recently on BBC radio. But nothing could be further from the truth. One of our committee members, Chris Hulme, had a lengthy letter published on this subject recently in the Daily Telegraph, also republished here on the NRSSG blog. If you are unclear on this issue, please read it.
Another Sad Story
As Chairman of the Northern Rock Shareholders Action Group, I have heard many sad stories. Of people relying on their investment in Northern Rock under the impression that it was a sound company, well regulated by the Government. But one case recently brought to my attention was that of someone whose mother owned shares but died in a car crash. At the time of her death, the share price was at its peak of £12. So her estate paid inheritance tax at 40%, resulting in a tax bill of £2,400. Probate was not obtained until much later so the shares could not be sold to recoup that bill. So tax was paid to the Government on the shares but they have now confiscated them and are likely to pay nothing in recompense.
Northern Rock Woes Take Toll on City's Reputation
The above headline was the title of an article in the Financial Times on the 27th August. It compared the City of London to New York and other major financial centres and included the following quotation from Tim Linacre of Panmure Gordon: "The brand of London has taken a hammering because of Northern Rock". Undoubtedly the handling of the crisis at Northern Rock has raised international concerns about the regulation of the London market, the regulation of financial institutions and the attitude of the Government to shareholder rights which may take some years to die down.
And Finally
Here's a comment received in response to our last newsletter: "Philippians Ch 4 vers 8 ( King James Bible ) says it all. The Government has no virtue, is neither honest or just, so will not beat us".
Roger Lawson
Chairman, Northern Rock Shareholders Action Group
On the 24th August the Sunday Times published an article headlined "Taxpayers face £1bn Northern Rock loss". This was based on the evidence that the Government has submitted to the judicial review, and specifically the evidence of Treasury official John Kingman on the the advice given by Goldman Sachs to the Government before they decided on nationalisation.
His evidence does indeed suggest that the Government received advice that all the options (nationalization and the private sector solutions) would involve a "subsidy" from the Government, and that nationalization might require less subsidy than the private sector solutions. The Telegraph put it another way - they said "Rock sale to Virgin risked £2bn loss".
This surprised many people because did not Gordon Brown suggest in his press conference on the 18th February that it was entirely possible that the Government might make a profit on the deal when Northern Rock was subsequently sold?
Either Gordon Brown was being economical with the truth, or there is more to this than is apparent. What was the basis for this claim of "subsidy"? Unfortunately the details of the Goldman Sachs advice have not been disclosed. We will not know the truth unless full disclosure of the Goldman Sachs advice is made which the Government has been avoiding so far.
MP Criticises £23m Charged to Northern Rock
Jim Cousins, M.P. for Newcastle Central, has criticised the Tripartite Authorities for imposing demands of £23m on Northern Rock - see the mention of this in our comments in our last newsletter on the interim results. He said "I am writing to the Chancellor about these fees because I want these fees cancelled and the money handed back to Northern Rock". In our view it is totally unreasonable to charge the company for the advice that was obtained by the FSA and other parts of the Government because this was advice that they required and it was not advice to the company. The company had no control over that expenditure and there is no indication that they agreed to pay those fees at the time.
New Donation System Implemented
The UKSA web site previously enabled you to make credit card donations to the Northern Rock Campaign Fund via Paypal. However we found them somewhat difficult to deal with and many people also had problems using the system, so we have now implemented a solution based on the Worldpay service (part of the Royal Bank of Scotland). You can access this system from the Appeal page of our web site - see www.uksa.org.uk/Appeal.htm. We have retained the Paypal service as on option for those people who already have Paypal accounts, but we certainly recommend the Worldpay system as a preference. Any comments on the new service would be welcomed, particularly if you have any difficulties - we have tried to make it as easy as possible to use.
The Quality of the Northern Rock Loan Book
Comments from a number of sources continue to blame the problems of Northern Rock on its reckless mortgage lending policies. For example, Vince Cable MP repeated this recently on BBC radio. But nothing could be further from the truth. One of our committee members, Chris Hulme, had a lengthy letter published on this subject recently in the Daily Telegraph, also republished here on the NRSSG blog. If you are unclear on this issue, please read it.
Another Sad Story
As Chairman of the Northern Rock Shareholders Action Group, I have heard many sad stories. Of people relying on their investment in Northern Rock under the impression that it was a sound company, well regulated by the Government. But one case recently brought to my attention was that of someone whose mother owned shares but died in a car crash. At the time of her death, the share price was at its peak of £12. So her estate paid inheritance tax at 40%, resulting in a tax bill of £2,400. Probate was not obtained until much later so the shares could not be sold to recoup that bill. So tax was paid to the Government on the shares but they have now confiscated them and are likely to pay nothing in recompense.
Northern Rock Woes Take Toll on City's Reputation
The above headline was the title of an article in the Financial Times on the 27th August. It compared the City of London to New York and other major financial centres and included the following quotation from Tim Linacre of Panmure Gordon: "The brand of London has taken a hammering because of Northern Rock". Undoubtedly the handling of the crisis at Northern Rock has raised international concerns about the regulation of the London market, the regulation of financial institutions and the attitude of the Government to shareholder rights which may take some years to die down.
And Finally
Here's a comment received in response to our last newsletter: "Philippians Ch 4 vers 8 ( King James Bible ) says it all. The Government has no virtue, is neither honest or just, so will not beat us".
Roger Lawson
Chairman, Northern Rock Shareholders Action Group
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