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By Jennifer Yousfi
After a five-month search to find a private buyer for Northern Rock PLC (PINK: NHRKF), the U.K. government has decided to nationalize the struggling bank. The law that would grant sweeping powers to the government to place troubled financial institutions under state control is currently being debated in the House of Commons and should be decided on soon.
While both the Prime Minister Gordon Brown and the Chancellor of the Exchequer [similar to our Secretary of the Treasury] Alistair Darling have taken heat for what the Conservative opposition party considers the mismanagement of the credit crisis, both men are convinced nationalizing the bank is the most risk-adverse way to safeguard the $108 billion (55 billion pounds) of taxpayer money the failing financial institution has already received.
"It is impossible to run a bank without making clear who is running the bank," Darling said before Parliament today. "I want to make clear that the government has no intentions at present to use the bill to bring any institution into temporary public ownership other than Northern Rock."
While the proposed law does have a deadline of one year attached to it, some worry about the wide sweeping powers it affords the government.
The bill grants "unprecedented power to take into public hands any bank or building society," George Osborne, the Conservative lawmaker who speaks on Treasury matters, told Parliament, Bloomberg News reported.
"This is a huge blank cheque," Osborne said.
Both Brown and Darling have offered assurances that the bill would only be used in regards to Northern Rock. The bill is expected to pass due to the government’s 67-seat majority in the lower chamber.
The privatization will be the first such maneuver since 1984. Ron Sandler, who was instrumental in the turnaround of Lloyd’s of London, has been selected to helm the newly private Northern Rock.
Trading of shares was suspended Monday.
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