Vincent Cable, Liberal Democrat Shadow Chancellor and MP for the London borough of Richmond , has launched a scathing attack on the hedge fund industry in advance of Northern Rock’s Extraordinary General Meeting, to be held tomorrow, at which two hedge funds will attempt to pass a motion which effectively blocks temporary nationalisation.
“The special interests of a couple of hedge funds who are out to make a quick buck must not be allowed to jeopardise billions of pounds of taxpayers’ money. An awful lot of effort is being taken to secure the 380m investment of Northern Rock shareholders, while scant regard has been paid to the security of 60 billion of public money. This is a very small tail wagging a very large dog. We have now had months of dithering by ministers while Northern Rock continues to bleed to death,” says Cable.
“If the proposed company rule changes are passed at this meeting, Northern Rock’s outlook will be even worse, as any takeover or nationalisation will become even more difficult. As we get closer to the March deadline, it would seem that no private bidders are able to either raise the necessary capital or guarantee the repayment of taxpayer loans. In practice we face the choice of administration with the business being run down or temporary nationalisation leading to a resale in happier circumstances. It would seem that the least bad option left for Northern Rock is temporary nationalisation,” he adds.
Cable’s rebuke comes amid reports that Northern Rock’s two largest investors, SRM Global and RAB Capital, have proposed four resolutions which would restrict the board’s ability to buy or sell assets and issue new shares.
This appears to be an attempt by the hedge funds to stop the troubled bank, which has been lent more than ₤ 25 billion by the Bank of England, from being sold off too cheaply.