February 19, 2008	Tuesday	Safar 11, 1429

From Our Special Correspondent

LONDON, Feb.18: The capital of the capitalist world on Monday resorted to a socialist course as it decided to nationalise a private UK mortgage bank which was tittering on the brink with the help of taxpayers’ money for the last almost six months following the subprime disaster in the US.

British Prime Minister Gordon Brown at a Downing Street briefing called the decision to nationalise Northern Rock “the right move at the right time for the right reasons”.

As the government moved to finally give up its faith in market forces to correct a situation created by the market itself, trading in Northern Rock shares was suspended.

The government said that it will introduce emergency legislation to temporarily nationalise the stricken Northern Rock bank. Under nationalisation rules, Northern Rock’s shareholders will be offered compensation for their holding at a level set by a government-appointed panel.

The calculation will be based on the bank’s value without government guarantees.

The prime minister said that the government had considered two offers from private sector buyers for Northern Rock, but decided not to accept them.

“We will have and always will put the interests of taxpayers first,” he said.

When asked about the prospect of job cuts at the bank, the prime minister said: “If we hadn’t intervened in August it would have gone under, we ensured an existence for the company.

“It was the best decision to protect depositors, mortgages holders and employees of Northern Rock.”

Chancellor Alistair Darling said the two private takeover offers did not offer the taxpayer “sufficient value for money”.

The government claimed that independent advisers who looked at the situation said the best thing to do was to take the bank into a period of temporary public ownership before ultimately trying to return it to the private sector.

UK taxpayers are now subsidising the bank in loans and guarantees to other lenders to the tune of about £55bn. Under the new strategy this will jump to £110bn, a cost of £3,500 per taxpayer.

Explaining the government’s decision, Mr Darling said it was better for the government to hold onto Northern Rock until market conditions improve and its value increases.

He emphasised that “the long-term ownership of this bank must lie in the private sector”.

A consortium led by Richard Branson’s Virgin Group had put forward a rescue proposal for the beleaguered bank.

“We believe nationalisation is not the right answer and that a commercial solution would have been the best way forward,” Mr Branson said in a statement.

The board of Northern Rock, which had also put together a rescue package for the bank, said that it was “very disappointed” with the government’s decision.