Today is the deadline set by the Government for private-sector bids to take over the stricken mortgage bank Northern Rock. No new bidders are expected to emerge at the last minute, so the choice looks likely to be between Richard Branson's Virgin Group, Luqman Arnold's Olivant and a consortium made up of the present management of Northern Rock.
The Government insists that nationalisation is still an option if the rescue packages prove unsatisfactory, but it is clear where the preference of ministers lies. Gordon Brown wants a private-sector solution. The £25bn of Bank of England loans made to Northern Rock to stop it going under are to be converted into Government-backed bonds and gradually sold off to private investors. Taxpayers will have a stake in the bank for many years, though with less exposure than under full nationalisation.
So is this the nationalisation of losses and the privatisation of profit, as the Liberal Democrat shadow Chancellor, Vincent Cable, has argued? It certainly has the potential to be a very good deal for the buyer. But the Government is now apparently demanding that any future losses fall first on the Rock, before hurting taxpayers. The Treasury also wants guarantees over the taxpayers' share of the potential upside.
Some have suggested that, if the package were as attractive as it has been portrayed, it would have drawn more bidders. On the other hand, this absence of suitors could be explained by the lack of time for bids to be prepared. General uncertainty in the global financial markets is also likely to be a major factor behind the small field.
But whatever the truth, it is now incumbent on the Government to get the best possible deal for taxpayers out of this process. The repayment of the £25bn in loans, over the shortest possible period, must be the top priority for the Treasury. The interests of Northern Rock's shareholders – who failed to spot that the company's management was operating an irresponsibly risky borrowing strategy – should be an afterthought. The process should also be as transparent as possible.
The Government's handling of the collapse of Northern Rock up until now has been clumsy. If Mr Brown and the Chancellor, Alistair Darling, had been more decisive when the crisis broke, they could have taken the bank into national ownership at an early stage, broken it up and sold its mortgage book to other high street banks. Having failed to grasp that opportunity and decided on a private sector solution, they need to display a good deal more sharpness now if they are to recover their reputation as responsible stewards of the economy and taxpayers' money.