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.
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