Another open letter to Ronnie Campbell MP

Dear Ronnie,

I'm a Northern Rock small shareholder whose shares were obtained on privatization by virtue of being both an investor in and having my mortgage from Northern Rock. As such, they boosted my retirement plans, as did the dividends during the good times, and were valued at upwards of £10,000 at their peak. Consequently, I feel aggrieved at the manner in which the Government has handled this matter and has now arranged for the 'independent' valuation of the shares so that any compensation is likely to be close to zero. Since the re-structured company is paying back all Government loans (with interest) and since ultimately, according to Gordon Brown, Northern Rock may well be returned to private ownership "at a profit", why not return the newly profitable company to its rightful owners, the shareholders, at the appropriate time.

The "Rock" continues to attract criticism for its mortgage lending policy, but this was not very different from numerous other lenders at the time. The "Rock" management had the foresight to recognise an emerging credit problem, soon to be faced by all banks, and seek assistance via the regulatory authorities. Other European banks were allowed to borrow "anonymously" from the European Central Bank while the "tripartite authority" tailed to organise routine inter-bank support for the Northern Rock, which, helped by leaked information and meddling from the media, precipitated the infamous "run" on the bank. After Northern Rock were refused a £2b loan initially, the Government's "Special Liquidity Scheme" subsequently has had to provide multi billions of pounds in facilities for rival banks. Ironically, it turns out that the quality of Northern Rock's mortgage book is better than that of most of these rivals. I wonder if a bank based in the Home Counties would have been allowed to go to the wall in the way we have seen with the "Rock"?

Having retired two years ago, I hope that my advanced planning will enable me to withstand the current economic downturn, but the Northern Rock shares were certainly meant to be a substantial plank in the whole structure and influenced the early timing of my retirement. Like many other ordinary people, homeowners, investors and Northern Rock staff, who are the real losers from the failings of the "tripartite authority", I feel strongly that we deserve a better deal. I feel that Northern Labour MPs could present a united front and be more vocal in their support for the people in the North East. I hope that you can reassure me on this point.

Yours sincerely,

Another Cramlington Constituent

An open letter to Frank Cook MP

Dear Mr Cook,

We have or should I say had, 1500 shares in Northern Rock which was part of our savings to make our life a little easier in retirement and not have to depend on the state to keep us in our latter years.

This is not the case now as our shares have been stolen by this labour government. Northern Rock’s problems were not of their making but more the fact that the treasury cannot keep their affairs confidential.

I would ask if you have any power to bring pressure on the PM or the Chancellor to at least give fair treatment to the share holders and save many of us having to live of the state, we all do not have a gold plated pension.

Yours sincerely,

A Billingham constituent, aged 77

If you'd like to email Frank Cook MP click HERE

An open letter to Ronnie Campbell MP

Dear Sir,

I am an 80 year old pensioner living in the North East who invested in Northern Rock some years ago on the understanding that the banks of this country were regarded as being as "safe as houses" and usually guaranteed to produce a reasonable return to investors. The circumstances that NRK experienced appear to have much in common with those that many of the major banks are encountering at the present time if my interpretation of newspaper reports is right. Yet these banks are being effectively supported by the Special Liquidity Scheme set by the Government after we had our shares removed.

Yvette Cooper quoted recently in the "Guardian" called the action taken by the Government as "nationalisation", but Gordon Brown is quoted as calling it "Temporary Public Ownership" and saying that ultimately NRK would likely be returned to private ownership at a profit. If the Government felt obliged to take it over in order to make it profitable then surely the shareholders who maintained their investment to the bitter end because of their faith in the British banking system should again resume ownership or be compensated for their loss.

As you are a MP for part of the North East I, along with countless others in this part of the country, automatically look to you to press the Government for some satisfactory solution to this situation at the Judicial Review to be held in January 2009, My understanding is that this debacle never should have occurred in the first place had the "Financial Watchdogs" been more effective.

Yours sincerely,

A constituent from Cramlington

An open letter to John Cummings MP

Dear Mr Cummings,

I am writing to ask you for your support in trying to get the government to compensate all the people who were robbed of half the Equitable life pensions they had worked for.

The ombudsman's report recommended that the government should give compensation after 4 years of investigating the reasons for the losses.

I am 79 years of age and living on the totally inadequate state pension and the pittance left of Equitable life pension.

I am from a family of lifelong labour supporters my father being a miner and mother a labour Seaham councillor.

I thought a labour government would look after our welfare but they have also robbed me of the few Northern rock shares that I had.

Where will it all end?

Are they just waiting for us all to die and the problem would go away?

I appeal to you for your help and support.

Yours faithfully,

A constituent in Peterlee, Co. Durham

If you'd like to email John Cummings MP click HERE

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.

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.

Between a Rock and hard place

By Chris Hulme

Unless someone was personally affected by the events surrounding Northern Rock, they might have little sympathy for its investors and shareholders. After all, from what has been reported nationwide the affairs of the company were it would seem, hardly handled well. The company was widely criticised for its lending and borrowing policies, and development of products that provided 125% mortgages certainly raised an eyebrow or two. Accusations of greed and unacceptable risk taking fanned the flames of anti Northern Rock rhetoric.

But in the wider context of the mortgage-lending arena, was Northern Rock so really out of step? Did the reality match a widely held perception that Northern rock possibly got what it deserved?

A closer look at Northern Rock shows things might not have been what had been portrayed. For example, the company was not alone in offering mortgages that exceeded property values. In fact 125% is quite misleading. Northern Rock’s widely publicised ‘Together Mortgage’ capped the maximum unsecured amount above the secured 95% to £30,000 which meant that on a house price of say £170,000 the maximum percentage loan would have been 113%, or to put it in monetary terms, £191,500. Other lenders, whilst limiting lending to 120%, appear to have been far more generous in handing out such mortgages whatever the value of the property, or again in monetary terms a mortgage of £204,000 on our £170,000 property.

There are those who suggest that Northern Rock’s lending policies were cavalier and irresponsible. The decision making process at Northern Rock which determined who could and who couldn’t borrow on the ‘Together Mortgage’ carried much tighter controls and checks than some lenders providing similar products. Perhaps Northern Rock’s lending policies should have been more fairly described as selective and cautious.

Would it also be reasonable to consider the risk element lower for the borrower on Northern Rock’s ‘Together Mortgage’ when compared to similar offerings from its peers? Take account that the secured element of the borrowing is restricted to 95% on the ‘Together’ product and it would be reasonable to assume the risk is lower compared to the whole amount being secured with other lenders.

We can see the results of Northern Rock’s ‘risky’ lending strategy published in its 2007 accounts, which clearly shows its mortgages in arrears measured against the Residential Average published by the Council of Mortgage Lenders. A direct comparison sees Northern Rock’s mortgage accounts in arrears at almost half of the national average, with the ‘Together’ product arrears at similar levels to the national average.

Turning to more esoteric matters, the FSA had apparently rubber stamped Northern Rock’s credentials in terms of its Basel II Capital Adequacy requirement only months before Northern Rock’s approach to the Bank of England for liquidity support. During that period lenders across the board were coming to realise that borrowing climate was becoming much more difficult as funding from the wholesale money markets dried up. Given this was an issue facing all lenders was it not to Northern Rock’s credit that they recognised the problem and proactively sought to resolve it with support from the Bank?

Would it therefore be more realistic and accurate to consider that the failings are not necessarily with the company itself and that perhaps questions should be asked of those who monitored its activities and of those who were asked to provide banking support? Should the accusation levied at the company actually be levied at the Tripartite Authorities?

It’s very easy to see Northern Rock as a corporate failure with investment institutions paying the price. But the Northern Rock saga is about ordinary people – homeowners, investors in pensions and endowments, small savers and of course staff employed by the company. Whilst we all feel the effects from the Northern Rock fallout, is it not time for sound reflection on previous and current events surrounding Northern Rock in the hope of finding a path that gives the real victims a better deal?

Chris Hulme is a Director of a mortgage broker practice based in south Manchester and has 11 years mortgage broking experience. He provides face-to-face advice on lending options and solutions.

All aboard the gravy train

By Adam Douglas, Wallsend

Recently, the Journal up here in Newcastle highlighted the Treasury’s mushrooming bill for consultants, which has jumped to £17m on the back of the ongoing Northern Rock debacle. The Rock, nationalised at great cost to the ordinary shareholder, seems doomed to languish under government control for the foreseeable future. Yet, for all the lack of compensation on offer to you and me, Mr Darling can somehow find the money to pay out a fair whack of cash to finance mandarins and the bank’s senior management, who (for reasons which seem pretty unfathomable) are still getting their bonuses.

Let’s crunch the numbers. Disclosure so far runs to:
- £3.6m paid to PricewaterhouseCoopers to investigate the loss of personal records
- £540,000+ for an IPCC inquiry into this little event and a police investigation
- £2.25m to send out apology letters to folks affected by aforesaid data loss
- £139,000 (at least – this figure dates from January) in fees to Slaughter and May
- £642,000 paid to Clive Briault as a golden goodbye after being shoed out of the FSA

This all out of the Treasury’s pocket, of course – the same one that was empty a few months ago. Yes, when I got into this shareholder game I accepted the line “the value of shares can go up as well as down”, but no-one mentioned the small print, “the value of shares can be wiped out because the government can’t get it’s a*** into gear when a bunch of idiots in top management land the bank in deep water”.

From Northern Rock itself, we have £2.3m in “confidential” retention payouts to 173 “key people” at the Rock. Surprisingly enough, there will almost an outright mutiny over in Gosforth when this news got out. When they were passing around the news of their latest trip on the gravy train, they even had the cheek to say that their cash, “will not be offered to the generality of staff and, as such, must remain absolutely confidential to yourself and not be discussed with others”.

Thankfully for the cause of truth and transparency, that particular information pipeline was leakier than a fifty-year-old metal bucket. However, Andrew Kirkland is now being hauled through the courts for the ‘crime’ of helping us all out on that one, with the Rock using London-based legal heavy-hitters Schillings to try to skewer the poor bloke, at a cost of at least £130,000 and counting.

There was also a question put to Parliament at the end of March by Michael Fallon, of which Angela Eagle said, “Northern Rock has indemnified the Treasury in respect of certain costs and expenses, including adviser costs.” Now, what exactly the cost of this policy has been to Northern Rock remains a bit of a mystery, but judging by the money paid to Slaughter and May outside the bounds of this agreement, it can’t be small change. In particular, Goldman Sachs is getting a big slice of the pie somewhere along the line, though what exactly it’s done to deserve its wages puzzles me (and probably lots more people too).

And I really shouldn’t mention the £750,000 pay-off that went to Applegarth, who, the broad consensus of opinion goes, really deserves to be shot at dawn.

What’s more, they can still find enough money to guarantee an annual income of £15m a year over the next three years to the Northern Rock Foundation. OK, it’s a good cause and it should be supported, but doesn’t anyone see a discrepancy here?

So, why can’t the Treasury, or the Rock, find enough money to give us all something resembling fair value?

After all, it’s not as though we’re all looking for a free upgrade to First Class. But we did pay for Standard, so we’ve got a right to demand that they don’t just pack us all into the mail wagon. Maybe the guys in the top hats are just too busy enjoying the champagne and caviar to care.


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.