They don't like it up 'em

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Corporal Jones must be turning in his grave. That’s what came to mind when I read this morning’s Guardian report about Nationwide’s swoop on Dumfermline Building Society’s tasty morsels. For once, the Guardian seemed to have totally missed the point in reporting:

Under a deal announced this morning, Dunfermline’s retail arm and its £1bn book of healthy mortgages have been sold to the Nationwide Building Society following negotiations with the Bank of England.

However, Nationwide has refused to take ownership of the high-risk assets, such as self-certification mortgages made at the height of the housing boom. These will now transfer to the taxpayer, to sit alongside the bad loans made by Bradford & Bingley….

So far, so good but what’s the damage to the UK taxpayer?

Dunfermline’s problems lie at the heart of the credit crunch which has brought havoc to the financial sector. Its property investments include £650m in commercial property and £150m in sub-prime mortgages in England. These are thought to have included loans bought from a subsidiary of failed US lender Lehmans and GMAC, the struggling finance arm of General Motors. It also lost £9m on its own IT system.

Darling said these losses meant Dunfermline would have required between £60m and £100m from the taxpayer to prop it up – which it would have struggled to repay.

So the taxpayer could’ve been on the hook for £60-100 mill, instead of which it picks up a rotting carcass with a minimum £150 mill price tag. Is it any wonder the banks must think the UK government are a bunch of suckers? But how much longer will the British people put up with such nonsense? Doesn’t government understand that if it plays hardball with the financial services industry it should at least get a decent accountant on the job? Brings a whole new meaning to the expression ‘mark to market’ don’t you think?

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Tagged as: Bradford & Bingley, Dunfermline, GMAC, Nationwide Building Society