Where do we go with this story? How about into the realm of particle physics and quantum chemistry, where the relativistic concept of antiparticles is extended to matter, producing antimatter?
Because what we seem to have here is an anti-bank. And we can only guess at the destructive force that might be unleashed if and when this entity collides with the real world.
But for now we are still playing fantastical finance, as illustrated by the HM Treasury guidance being regurgitated to the media on Tuesday. We quote:
At the request of Northern Rock, the Treasury has extended the guarantee arrangements for the purposes of ensuring that Northern Rock maintains the credit rating of its unsecured and unsubordinated wholesale funding obligations.
Clearly, this move will “ensure that Northern Rock’s period of stability continues,” leaving the bank free to consider all its strategic options. And the Greater British Public can be confident the “government will make sure that savers’ money is safe whatever option Northern Rock pursues.”
We can all see that this extension is in line with the previously announced objectives of the Tripartite Authorities of financial stability and the protection of the taxpayer and consumer. As a spokesperson confidently declared:
It is business as usual at Northern Rock.
And, no, we are not making this up.
Every conceivable creditor of the stricken mortgage bank (bar the shareholders) now seems to be covered after a Treasury statement on Tuesday, which, in particular, extended the government’s guarantee to both Northern Rock’s covered bondholders and also to all the paper issued by its Granite securitisation vehicle.
What does that all add up to? Well, to keep the dreaded credit agencies at bay, the government is now standing behind £50bn or so of parcelled mortgages, £14bn of covered bonds, £20bn of medium term notes and more swaps, futures and FRAs than we can count in a hurry. With the taxpayer having already extended £25bn or so to Rock, we stopped when the total topped £100bn.
Bank of England governor Mervyn King is due to appear in front of the Treasury Select Committee at 10:45GMT on Tuesday morning.
What an anti-climax.
