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British PM Defends Nationalization of Troubled Northern Rock Bank

Prime Minister Gordon Brown has defended the nationalization of Britain's troubled Northern Rock bank. Six months ago the financial institution became caught up in the U.S. sub-prime meltdown and a run on the bank ensued. For VOA, Tom Rivers in London has the latest.

Speaking at his monthly new conference, Prime Minister Brown said nationalizing Northern Rock was the right move at the right time and done for the right reasons.

Prior to his intervention, two prospective buyers submitted bids for the business, Richard Branson's Virgin group and a management team from the bank itself. But Mr. Brown said the decision was made not to accept either.

"Having looked at the options and having had the bids in from the Branson group and then from the Northern Rock management itself, it became clear the best interests of taxpayers were served by moving forward with a temporary public ownership solution on the road back to the private sector," he said.

The bank has been through a turbulent six-month period in which the government had to step in to guarantee assets as customers began massive withdrawals in the wake of Northern Rock finding itself in a cash crisis brought on by the U.S. sub-prime mortgage meltdown.

Opposition Liberal-Democrat treasury spokesman Vince Cable said the government really had no other option but to nationalize the bank.

"At each step of the way there will be a great deal of political grief, but they have made the right decision, they are now in the right position to do what is the most important thing of all, which is insure that the vast sum of money that the taxpayer has put in or guaranteed, that that money is now safeguarded," said Cable.

But the Conservative Party's treasury spokesman, George Osborne, says the stakes are high and the real risk is being shouldered by each and every taxpayer in the country.

"Every single person in this country is in this bank now for several-thousand pounds, and every time, just think of it, every time they have to foreclose on a mortgage, that is you and me and every single taxpayer who has to pick up the bill for that," he said.

The former head of the Lloyds's of London insurance market, Ron Sandler has been brought in the oversee Northern Rock through its nationalized phase.

"It is all about stabilization and building back from a sound, solid platform. That is the focus of what we are here to do. Stabilize the bank and then revitalize it and return it to the private sector," said Sandler.

The idea is to find other interested parties once market conditions improve, which would give British taxpayers a better deal.

In it current public-ownership state, the cost of underwriting the bank's loans and guarantees works out to seven-thousand dollars per every working person in Britain.