One of the reasons suggested for the latest bout of sterling weakness is the nationalization of Northern Rock. US investors in particular are said to have been spooked by the pictures of people queuing to withdraw their funds in panic when the crisis broke and now won’t touch UK assets with a bargepole. Given the US sub-prime mess, though, you have to wonder how sound their judgement is.
I asked back in September why the UK’s apparently socialist government hadn’t stepped in and discreetly taken Northern Rock into state ownership, or at least provided the same support that has been extended to banks previously, before the panic spread.
No doubt there are numerous reasons why this couldn’t happen but the sorry saga has undoubtedly tarnished the UK’s banking system, even if the destruction of value at Northern Rock turns out to be relatively modest.
The government has parachuted Ron Sandler in to sort Northern Rock out and return it to the private sector. Sandler has a solid reputation, largely based on the job he did at Lloyd’s of London in the 1990s. But older FX hands may recall an earlier bit of trouble-shooting that Sandler performed, when he took the helm at RP Martins (RPM).