Northern Rock Bailout Plan a Money Shuffle

Deal pays back government loans, but public still on the hook
By Kevin Spak,  Newser Staff
Posted Jan 21, 2008 2:21 PM CST
Northern Rock employee's stand with their sign's outside of the emergency meeting to as shareholder's go in to discuss the future of the Northern Rock at the Metro Radio Arena in Newcastle, England,Tuesday,...   (Associated Press)
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(Newser) – The British government today unveiled its last-gasp plan to hand off the Northern Rock hot potato and prevent nationalization, the London Times reports. Under the plan, the bank would immediately pay back the £25 billion it owes the government by selling the debt to private investors as bonds. But since the government is backing the bonds, taxpayers are still on the hook if the Rock defaults.

In exchange for its generosity, the government intends to profit from any Rock rebound, though it wouldn’t say how. Private bidders have until Feb. 4 to make final offers. If no deal is completed, the bank will become publicly owned, and shareholders could end up with nothing, something one insider described as a “pistol to the head” proposition.