February 17-18, 2008: Ailing British Mortgage Giant Is Nationalized

British Chancellor Alistair Darling rejects two bids to keep troubled lender Northern Rock in private hands and says the bank will be nationalized. Darling says that both bids would require a “very significant implicit subsidy” from the taxpayer, so the bank is to be placed into a “temporary period of public ownership.” Ron Sandler, a banking executive sounded out by the government in advance (see January 12, 2008), is placed in charge of the now state-owned bank. [Daily Telegraph, 2/26/2008; BBC, 8/5/2008] Shares in Northern Rock are suspended from trading the next day. Darling says the nationalized bank will operate “at arm’s length” from the government. Prime Minister Gordon Brown says the decision to nationalize is “the right move at the right time” and is one which “protects savers” and is in “the best interests of taxpayers.” Conservative Party shadow chancellor George Osborne tells MPs that Darling “is a dead man walking” and Conservative leader David Cameron demands Darling be fired over his handling of the nationalization. Sandler says it will take years for the bank to pay back its loans from the taxpayer, but declines to comment on potential job losses. [BBC, 8/5/2008]