My concern with Granite was nenver about tax - and I never said it was. It’s about governnance and transparency - quite different things.

As far as I read what I’ve said there is nothing inconsistent with what I have written and what you are saying except that as a peson who does not supply these things I do not agree with our (might I say) flippant acceptance of their normality.

Saying casually that I can found out Granite is absurd - when I began telling the story there was almost no one I spoke to - from politicians to ordinary very informed people who was not shocked by secuitisation. Shocked too that something so obviously a sham, charade or it you like fraud (and it is a fraud - but fraud does not per se mean illegal) can happen through abuse of charitable structure for what is absolutely not a charitable purpose and where their is a wholsesale deceit about the governnance structure in place that undermines the credibility of all involved and has to be prejudicial to good governance.

Maybe you can live with that deceit and all the ethical compromises involved and be a member of the Labour Party - I could not.

Most people could not.

Most people like straight dealing. I can nad have read the offer documents - if you look on this site you will find I quote them. But this changes nothing about my beleif that a fiancial architecture built on such flimsy foundation needs to be replaced - and a new ethic needs to be built to replace the one we currently have.

This is what my concern is.

Richard

PS Your claims would be so much more credible if you did not hide behind a single name and the use of a false email address. Why do that, I wonder?

It’s conceptually very simple. Northern Rock sold mortgages worth to the special purpose company for some cash up front, and some cash in the future if the mortgages perform. The company finances its purchase of the mortgages by issuing bonds to the capital markets. Because the company is a special purpose company, and its affairs are so simple, capital markets investors didn’t need to assess the general creditworthiness of Northern Rock and could just look to the quality of the mortgages. The funding was therefore cheaper than if Northern Rock had borrowed itself. If the mortgages perform then access cash (i.e. receipts from the mortgages less interest on the bonds) is returned to Northern Rock as part of the deferred purchase price (and fully taxed). A small amount of profit is retained by the special purpose company.

If you want to understand the detail of what’s going on then have a look at one of the Granite offering circulars - publicly available documents. Your failure to look in the right place does not make these arrangements secretive.

I suspect (without having checked) that nationalisation would make the Granite bonds immediately repayable which, in the current market, would make the Granite vehicle insolvent. This does not seem a particularly great result.

Full disclosure: I am a lawyer who has advised on securitisation arrangements, but has no involvement in Granite or Northern Rock. I am also a member of the Labour Party who has no time for tax avoidance, but this is not that.

Again, I’d like to ask you what public ownership of the shares of Granite Finance Holdings, which is what nationalisation actually means, would practically do to improve transparency, accountability, honesty and clarity. The functional relationship between Granite and Northern Rock, and almost certainly the accounting, wouldn’t change one iota.

You seem to be arguing at cross purposes with yourself. On the one hand you say that Granite is a sham - it has no substance. And yet you acknowledge that it is legally separate from Northern Rock. You seem to realise that there is a distinction between consolidation on the basis of control and legal ownership, and yet you insist it means nothing. This is a crucial distinction - if it weren’t legally separate, the structure wouldn’t work. If Northern Rock went bankrupt, its creditors could seize the assets. They can’t. The structure works. This has been tested by the courts (and the markets, for that matter) and approved by parliament.

Do I think the government should have been more upfront? Yes. I’m no defender of Brown or Darling. But to argue that Granite is some kind of fiction, that people, whether it’s charities or investors, are being exploited, is absurd.

Try these:

Transparency

Accountability

Honesty

Clarity

They’re worth having

Granite encompasses none of them - which is why we had the debacle

Failing to address the abuse that fostered that situation allows it to continue

And we’ve seen the cost of that to society

What would nationalising Granite achieve? Most of all, a clean break with the past

I’m no expert on public accounting, but judging from the ONS’s previous decisions on securitisation, Granite would be on balance sheet for accounting purposes whether or not it is nationalised, so ethics don’t come into it.

Which could not be re-funded by another Granite issue….

Richard

But NR wasn’t brought down by the long-term debt owed to Granite bondholders, it was brought down by the inability to fund the short-term loans that funded the core on-balance-sheet mortgage lending business.