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Northern Rock needs yet more taxpayer subsidies

While only a few weeks ago there were rumours that the UK government was looking to sell Northern Rock it now appears as though UK taxpayers will again be asked to invest billions of pounds more into the operation. The headlines from the UK government over the last few months have given the impression that Northern Rock was ahead of schedule with regards to debt repayments to UK taxpayers but this seems very much not to be the case.

It is alleged that various documents in front of the European Commission, which needs to rubberstamp any national bailout of the company, suggest that the operation to split the company into a pure mortgage play and a traditional UK bank will need further finance from the UK government. There is also intense speculation that the stress test which the FSA carried out on all UK banks could, in a worst-case scenario, see the UK government inject a further £3 billion into the mix.

All in all even in a best case scenario UK taxpayers will be expected to inject more money into the bank in the short to medium term. This has the potential to turn into a bottomless pit!

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