It has just been announced that Northern Rock, the bank that prompted the first run on a British Bank in over a hundred years, is to be nationalised.

This means taxpayers will give the shareholders a “fair price”, set by an arbitration panel, for their shares.

The only really fair price is nothing.

Just as the man who bets on horses – see earlier blog – must take responsibility when his gambles do not pay off, so must those who invest in bank shares.

After all, entrepreneurs should – and usually do – take responsibility for their wrong business decisions. Why should there be one law for small businesses and another for big banks?

These shareholders were trying to get rich by using a business model that was fundamentally flawed: any half-competent businessman should know that financing long term loans with short term borrowing can only work for a short period.

Their greed having led to a predictable result, the shareholders then showed incredible arrogance in their attitude to restructuring proposals that might have kept the bank in the private sector.

By rights, the bank should be in receivership, like any other business that cannot pay its debts: then the shareholders would count themselves lucky to get anything back after the creditors were paid.

However, after the government intervened – sensibly – to guarantee deposits, in order to protect the stability of the British banking system, but – foolishly – neglected to secure those guarantees against assets, the shareholders held out, secretly hoping that nationalisation would follow. Do not be fooled by their protests: taxpayers’ money is what they were counting on – and what they do not deserve.