[OPE] Northern Rock

From: Jurriaan Bendien (adsl675281@tiscali.nl)
Date: Sat Feb 23 2008 - 06:17:43 EST

It's not exactly clear how much extra debt the UK govt takes on by nationalising Northern Rock, never mind the total final cost. The Telegraph comments:

To the 25 billion direct loan to the bank must be added the 30 billion in guarantees, making the total exposure for the taxpayer 55 billion. But when the Rock's mortgage book is thrown into the pot, the total increase in public sector net debt is 100 billion. http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2008/02/08/dl0802.xml

UK GDP in 2006 was about 1,300 billion, in which case a sum of 100 billion is equal to 7.6% of GDP. However, it is not clear that 100 billion will necessarily be the final cost, that depends among other things on the total costs of running bank operations and the reallocation of debts, versus how much income it will earn in future. 

The Guardian reported "[Ron] Sandler is expected to halve the mortgage book to 50bn and increase saving deposits from 10bn to 16bn, but his main task is to ensure that Northern Rock is stabilised enough to return to the private sector." http://www.guardian.co.uk/business/2008/feb/23/northernrock.banking


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