Jeremy Warner's Outlook: B&B: wake up and smell the coffee

Shareholders in Bradford & Bingley are right to be angered by the mess their board has plunged them into. The eye-watering City fees being charged to get them out of it – more than 10 per cent of the new capital raised – only seem to rub salt in the wounds. But let's get real, guys.

The idea that by way of venting their fury shareholders should vote down the repriced rights issue and 23 per cent Texas Pacific stake is ridiculous, as well as reminiscent of the sort of misplaced bravado hedge funds applied at Northern Rock in attempting to dictate to the Government the terms of any private sector solution.

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In the Northern Rock case, shareholders ended up losing everything when in exasperation the Government nationalised. If they don't watch it, investors in B & B might be wiped out too.

Let's consider what would have happened if Texas Pacific had not agreed to put up the necessary and the original rights issue had proceeded as planned. The profits warning would have caused the share price to plummet and underwriters to the rights issue, who in such circumstances would have been called on to take up the unwanted shares, would have cried "false prospectus".

Reputational considerations might have persuaded them to honour the underwriting contract notwithstanding the fact that the profits warning had caused it to be breached, yet there would inevitably have been doubts about whether the money would in practice be delivered.

Bradford & Bingley has always insisted that strictly speaking it doesn't need the cash. Capital is already adequate for solvency purposes and the mortgage book is fully funded through to next year. Yet the problem is that, once proposals to raise fresh capital have been announced, confidence is going to take a terrible hammering if they are forcibly abandoned.

I don't know about you, but if I had had money in B&B beyond the £35,000 guaranteed by deposit insurance, I would on the safety-first principle definitely have got it out. Post Northern Rock, there remains much nervousness among regulators over the potential for fresh runs on the banking sector. What at the moment is not an immediate funding problem for B & B could fast have turned into one. As a consequence, the company could have ended up worthless, like Northern Rock.

Bringing in Texas Pacific at what some investors regard as a derisory price is actually quite smart, as it puts some sort of a floor, albeit a low one, under the share price. Without that floor, who knows where the price would have ended up, particularly in circumstances where confidence evaporated and depositors started to withdraw their money en masse.

Alternatives to the Texas Pacific buy-in are still just about imaginable. There might be a full-scale takeover bid at a better price, though it is hard to see who it might come from or why indeed anyone would want such an exposure to Britain's buy-to-let mortgage market in current circumstances. Who knows? Thwarted over Northern Rock, maybe Virgin would be interested.

Or perhaps big institutional investors might put up the money on better terms themselves. This wouldn't have quite the same confidence-inspiring effect as Texas Pacific, but it might do the trick. So step forward those institutions willing to subscribe £400m of new capital at the original rights price of 82p a share, or even the new one of 55p. Suddenly everyone seems strangely silent.