Northern Rock shareholders living in Cloud Cuckoo land

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Accountancy Age reports that:

Northern Rock shareholders are reportedly planning to sue the UK Government over its plans to value shares in the newly nationalised lender.

The Northern Rock Compensation Scheme Order is expected in the House of Commons early this week.

Under the terms of the order, an independent valuer will be appointed to decide on the appropriate level of compensation. However, the order says that the valuation should be based on the assumption that without the Treasury's intervention, Northern Rock was unable to continue as a going concern, and was in administration.

Shareholders argue the Government has no right to specify such terms which are likely to render their shares worthless.

Well, let's be honest, wiser men than me have already said that based on the objective facts that's the case. And as a matter of fact without the Treasury's intervention, Northern Rock was unable to continue as a going concern.

But, as is always the case with market enthusiasts, facts should not be allowed to get in the way of cash. So what should the government pretend then? That in February this year Northern Rock had just reported bumper profits, was issuing new mortgages faster than ever before, the sub-prime crisis hadn't happened and there had never been a run on Northern Rock?

Roger Lawson, chairman of the shareholders action group has apparently said:

We consider it ethically and morally unjust for a government to contrive to fix the terms of compensation.

So do I. But I think it's unethical and immoral to ask for a valuation based on a fantasy rather than the facts. I wonder why these people are wasting their time?