Northern Rock PLC - is my money safe?

The e-mail also tells me of another new company created from Northern Rock called Northern Rock (Asset Management) PLC . It also tells me that this "is the existing company that has been renamed. This company is also well-capitalised and holds and services the majority of existing mortgage and unsecured loan accounts. It does not offer any new products or provide the option of additional borrowing to its existing customers."

This is the 'Bad Bank', of course.

The e-mail goes further, telling me that "Both companies remain in Government ownership and are authorised and regulated by the Financial Services Authority."

So far, so good?

Well, what the email does not further tell me, and I think is disingenuous in failing to do so, is the intention of the government to sell Northern Rock plc to the private sector as soon as possible.

My savings, such as they are, reside in the vaults of Northern Rock for one reason only: it was government-owned and was a genuine safe haven. As far as I was concerned, I was depositing my savings with the Bank of England (not, say, the Bank of Iceland).

Indeed, I have told anyone who'd listen this last year to get their savings into Northern Rock for precisely this reason. And Northern Rock and its employees did very well out of the flight to it from the likes of Dodgy Bank PLC and Plummeting From Summit Bank PLC.

The North East could have had a massive failure on its hands in terms of economic self-determination and jobs, but massive redundancies were saved because of the government's intervention. Indeed, employees were having to work overtime, not losing their jobs as they were expecting, just to keep up.

So, why would I leave my savings in Northern Rock PLC if they are going to return to the Dodgy private sector banking casino money-go-round which has not yet undergone the kinds of radical reforms needed?

There is, of course, only one immediate answer as far as I'm concerned: I have to get my money out of Northern Rock and into, say, RBS/NatWest which is 84% owned by the taxpayer and a much better safe-haven for my money. Could this sell-off start another run on Northern Rock?

I believe this sell-off is a mistake - and perhaps as a saver I should have been consulted?

Northern Rock in government ownership was a tremendous success and could continue to be. Northern Rock should stay government-owned and be a crucial presence in the banking sector creating the kind of essential competition needed in an utterly inadequate market place. That market place disaster resulted from bankers and their hopeless, socially-useless banking practices. It is too soon to trust any bankers from anywhere in the world (or even non-bankers who'd like to have a 'go') to have care of our banking system.

Or, for that matter, have care of the kinds of investment in our economy we desperately need and which has spectacularly failed to occur in the hands of our bailed-out bankers or the government's UKFI option of overseeing the system.

Regulation has been shown to be ineffective. The way forward (and also across much of those parts of the private sector dominated by big corporate power) is less regulation and more direct intervention in the market to enforce proper competition. If that means government-owned entities competing in the market, or enforcing parts of markets to be mutualised or econo-diversified for the good of the whole market and consumers, then so be it.

Why couldn't the new Northern Rock PLC been remutualised back into a building society, in any event?

The government needs to make up its mind. Brown and Darling have often repeated the mantra that the government 'does not want to be a banker', but then at other times have floated the contrary idea of turning the government -owned banks into investment entities like a State Industrial Bank, a State Mortgage Bank, and a State Loans & Savings Bank.

These are actually exactly what we need to assist in the engineering of sustainable, robust and long-term growth in the economy, and specifically of the green manufacturing sector. This growth is what will actually pay down the deficit to appropriate levels over the next decade.

The dumping of finance as a driving sector of our economy (precisely what we need to do) will not occur in the hands of a private sector-controlled banking system.

I suspect that the Northern Rock sell-off does, ironically, show that the government has made up its mind: to try to get out as soon as possible from the banking set-up.

It should, instead, be shaping the banking sector directly and radically to re-engineer and re-wire the economy to create the kind of fresh growth and economic development we need.

They've decided, instead, to leave all that to bankers.

Good luck on that one, everybody; and I'm going for a run.

Picture Credit: Wikimedia Commons, Lee Jordan, Attribution ShareAlike 2.0 licence
Two minor amendments were made to the orginal version of this blog, including the headline, further to clarify the position that it is the the policy of sell-off of the new bank to the private sector that could cause an outflow of funds from a sold-off Northern Rock plc by those who do not want their savings in the private bank sector. The blog (and comments by the author) make clear that if the new 'Good Bank' remains in government hands there is no danger whatsoever and that the author believes in these circumstances the Rock is as safe a place as possible to save money. John Clancy