News broke last night that Bradford & Bingley would follow the route taken by Northern Rock, and be nationalised by the Labour government.
The government is planning to sell off some assets, before merging the bank with Northern Rock.
The news is worrying because it signifies the end of the free-market as we know it.
Consumers have to realise that when depositing money in a bank account, it is an investment. With all investments, there is some degree of risk. The bigger the risk, the greater the potential return.
Deposit accounts are considered relatively unrisky, hence the potential return, or interest rate, is relatively low.
As with other forms of investment, you risk losing your investment.
It’s blunt, it’s not popular, but it is a fact of life.
Why should Northern Rock, or Bradford & Bingley, be any different to XL?
It shouldn’t!
We are supposed to have a free market in Britain, yet industries are not allowed to fail.
If banks go under because of poor business planning, then so be it. If any other industry went under because of a bad business plan, that would be the end of the story.
It’s not as if depositors have anything to worry about, though. Deposits worth up to £35,000 are protected by the government – and were long before the problems of Northern Rock became public knowledge.
