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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

(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.

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)

A branch of British bank Northern Rock PLC is seen in Croydon, south London, in this Friday, Sept. 14, 2007 file photo. (AP Photo/Sang Tan, File) (Associated Press)

Northern Rock Chairman Bryan Sanderson talks to the media after the emergency meeting to discuss the future of the Northern Rock at the Metro Radio Arena in Newcastle, England,Tuesday, Jan 15, 2008. (AP... (Associated Press)

Customers queue to enter a branch of British bank Northern Rock in south London in this Friday, Sept. 14, 2007 file photo. (AP Photo/Sang Tan, File) (Associated Press)

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Northern Rock Bailout Plan a Money Shuffle

Deal pays back government loans, but public still on the hook

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Northern Rock Bailout Plan a Money Shuffle

Deal pays back government loans, but public still on the hook

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OTHER STORIES ON OUR RADAR

Richard Branson • United Kingdom • Gordon Brown • subprime mortgages • shareholders • Northern Rock • Alistair Darling • Virgin Group • private investors • financial crisis

MOST POPULAR STORIES

[ By Views ]

[ By Comments ]

More Newser Stories

Brown's Woes Offers Obama Reality Check

Voters don't reward economic competence after crisis: Krugman

Brown Likely to Hang On to Power

In reshuffle, British PM invites Apprentice host to join government

UK Expenses Scandal Hits Alistair Darling

Govt's No. 2 claimed 2 houses at same time, may be demoted

Only Trade Can Rescue World Economy: Brown

'A banking crisis has become a trade crisis,' writes British PM

Branson's Next Launch: Virgin Internet Bank

Exploiting the public's discontent with banks, Virgin could bid for Northern Rock

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Newser By Users

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