Britannia Radio

The scandal of Northern Rock goes on !   No wonder our finances are  
in a mess when the government is wasting money on this scale.

An ‘A’ level student would have given better care and advice than  
these overpaid officials and bloated advisers.

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TELEGRAPH            20.3.09
Treasury's Northern Rock blunders attacked by NAO
Taxpayers have picked up the tab for £80m paid in fees to the  
investment bankers, lawyers and other advisers who worked on Northern  
Rock during the crisis of 2007 to 2008.

    By Katherine Griffiths

The public is also liable for hundreds of millions of pounds of  
losses on the riskiest mortgages which Northern Rock continued to  
write even after it was being kept alive with loans from the Bank of  
England in September 2007.

These are the findings of a highly critical report by the National  
Audit Office (NAO) into the Treasury's role over Northern Rock.

While the NAO said the Treasury did the right thing in nationalising  
the Newcastle-based lender in February 2008, it points to a long list  
of blunders by officials.  [The “officials” here are in the very  
protected ‘public sector’ which is ruining us -cs] ,

These include the fact that civil servants allowed Northern Rock to  
continue to write "Together" mortgages, which loaned customers 125pc  
of the value of properties, even when taxpayers' money was being used  
to prop up the bank and when the housing market was deteriorating  
rapidly. Some £800m of these loans were entirely new business and not  
in the pipeline.

Together mortgages account for half of Northern Rock's arrears and  
75pc of its repossessions.

The NAO also criticised the Treasury for accepting far more  
optimistic assumptions from Northern Rock's management about the  
housing market in March 2008, when the bank was completely in public  
hands, than was realistic.

The Treasury accepted a business plan which estimated that house  
prices would fall by 5pc in 2008 and remain unchanged for the next  
three years. Northern Rock's recession case was for a 20pc fall over  
three years.
The NAO said trading in residential property derivative contracts  
between October 2007 and March 2008 suggested annual falls of between  
8pc and 14pc.

The report also lays bare the multi-million-pound fees racked up by  
City firms during the bank's implosion.

Northern Rock itself paid out £39m on professional advice. The bank  
also agreed to pay the costs of the bidders for Northern Rock, at a  
cost of £13m.
The Treasury directly paid out £27m. This brings the total bill to  
taxpayers to £79m.

The NAO highlights the role of Goldman Sachs, the investment bank  
which advised the Treasury. Goldman earned almost £5m from the  
process, but did not earn a success fee, which could have been up to  
£4m.

The NAO said the terms of the success fee were not defined, and  
pointed out that the Treasury did not see the underlying models  
behind Goldman's advice, making it difficult to challenge its advice.