An open letter to the Prime Minister and Chancellor

Dear Gordon & Alistair

RE: COMPENSATION FOR NORTHERN ROCK NATIONALISATION

I am going to set out once again the case for giving fair compensation to Northern Rock shareholders following the farcical preliminary report by Andrew Caldwell based on ludicrous and unfair assumptions that you imposed (In administration, Not a Going Concern, No state support) which effectively ruined any chance of arriving at a FAIR & INDEPENDENT VALUATION.

I have to say that HM Government's ethics are pretty close to Karzai and Mugabe in terms of rigging the desired result. Much worse, you have exercised blatant discrimination and failed to move from Denial into Accceptance & RESPONSIBILITY. Only you Dear Gordon will be surprised why 5  million voters will chose to change from Labour to other "ethical" leadership / parties. Let me summarise the reasons for my strong views in the hope that Reason and Justice will prevail IF you abandon your EGOTISTICAL, UNETHICAL and HYPOCRITICAL position to date.

There is substantial evidence to contradict Andrew Caldwell's preliminary conclusions. A Lloyds TSB tentaive offer in excess of £3 per share was not supported by the Tripartite in August / September 2007. The private sector options --pre nationalisation-- offered shareholders an embedded value of between £2 and £4. Finally the "Market Value" of Northern Rock shares were at a very depressed level of 96 pence immediately prior to "Confiscation" of the shares in "the national interest" on 17 February 2008. Clearly any 100% bid for Northern Rock in February 2008 would have seen the shares rocket up to £5/6 for a successful bid. Therefore Andrew Caldwell's preliminary view of zero is farcical!

The Tripartite ineptitude, major errors of assessment and miserable LOLR execution turned a £5 - 8 Billion liquidity problem at NR into a major crisis and banana republic style Run on Northern Rock. A £8 Billion problem became a £25Billion requirement because of Tripartite errors of execution and dithering. This destroyed over £2 Billion of shareholder value and is WHOLLY due to Tripartite mismanagement, government dithering, and useless execution of Lender of Last Resort. The leak to the BBC was unchallened or clarified or reassurance/guarantees being given for FOUR days in the world of modern IT global markets. Quite frankly the Tripartite gave miserable leadership, failed to understand the financial Tsunami which I WARNED the BoE and Treasury about on numerous occasions. Eight months late, the huge Special Liquidity Scheme of several hundred billions was launched in April 2008. The "piecemeal " support for a private sector solution for the Rock post September 2007, with more incentives and concessions grudgingly offered by the Treasury during October 2007 to January 2008 diluted  billions more of shareholder value. The very poor management parashuted into the Rock and farcical oversight from the Tripartite was cricised by the National Audit Office.

Mistakes were compounded post nationalisation. Accelerated impairments, repossessions, deliberately sending the best customers to rival mortgage providers, panic debt collection, continuation of 100% plus loans all added to losses at Northern Rock in the interests of "politically motivated" loan repayment schedules. Then you did a 180 degree change of policy in January 2009, encouraged the Rock to lend more, no urgency in loan repayments! But your management had destroyed £4 Billion of Value! Lost the best customers, increase3d the risk proportion in the Balance Sheet of a UK bank with the lowest level of toxic debts. The SLS was followed by guarantees, Quantitative Easing, interest rate cuts to 0.5%, proactive support for the Alliance & Leicester takeover by Santander. You nationalised Bradford and Bingley and instructed a Valuation on the basis of a Going Concern! You gave £1.6 Billion support for the Dunfermline! You supported £63 Billion of SECRET loans to RBS and HBOS/Lloyds! ALL GOOD INITIATIVES but too late for Northern Rock! Over  £2 Trillion of support, subsidy, guarantees to other UK banks that enabled record profits and bonuses for 2009!

You proactively supported the Lloyds / HBOS merger despite competition hurdles! CANT YOU SEE the blatant DISCRIMINATION you have imposed on 180,000 small shareholders/savers? Cant you admit that there WAS a learning curve for the Tripartite, that policy execution was miserable in 2007, that Northern Rock shareholders at least (market valuation convention would suggest 125% of NET ASSETS equal to £5 per share) deserve the NET ASSET VALUE at 31 December 2007 of £3-80 per share? Do you think, Gordon, that people cant see the hypocricy, ego, denial and total inconsistency in your policy and assessment of the banking crisis? Leading the world is great, please ensure justice at home! Dogma and obduracy destroyed the Bank of England's credibility: do you want to go the same way?

Finally at no stage were Northern Rock shareholders consulted, allowed to vote on the options pre or post nationalisation. Confiscation "in the national interest" is justified IF you pay a FAIR price for  Northern Rock (£5 to £6 per share in my view) as if you had purchased the whole shareholding on the Open Market. The irony of "selling" the good bank which you do not have legal title to (confiscation without compensation is theft) is adding insult to injury.

Try to show decent standards of  ethics, morality, equity. Accept that Tripartite errors of assessment and execution and poor advice from Consultants and Advisors to HM Treasury  wiped out a highly profitable bank. £2 Billion in FAIR compensation is pretty trivial in relation to the Trillions of support for UK banks, billions wasted by the Departments of Health and Defense in ill conceived IT projects and procurement. Dont you want to do the right thing, end the disastrous episode in a British way? Search your conscience, consider the 180,000 poor people of the North East who have lost everything, and the 5 million who will NOT forgive or forget this disgraceful act of discrimination that defies all human rights.

Happy to meet and discuss further with you as always: do you have the guts for a face to face meeting? Should I canvass Joanna Lumley or HM The Queen?

A Happy New Year

Yours sincerely

Pradeep Chand