British Prime Minister Gordon Brown defended his handling of the nationalisation of Northern Rock today, as the man he has charged to revive the bank said it would take years to repay state loans.
Mr Brown, who helped transform the Labour Party in the 1990s by ditching an attachment to state ownership, has been accused of dithering in a five-month crisis in which the government lent around £25 billion ($49 billion) to keep Northern Rock afloat, while it cast around for private bidders.
"We did the right thing, at the right time for the right reasons," Mr Brown told a news conference. "We have contained the problems. It has not spread across to the rest of the economy."
British Prime Minister Gordon Brown
The government, which rejected two private sector-led bids this weekend, announced legislation allowing it to take over Britain's fifth-largest mortgage bank.
"It was right to look at all the options available to us," Mr Brown said, dismissing questions over why he took months to come to a decision. "We have lost nothing in doing so."
Day-to-day running of Northern Rock passes to Ron Sandler, the troubleshooter who rescued the Lloyd's of London insurance market from the brink of collapse.
Mr Sandler, executive chairman, told reporters the bank had been granted a "period of stability" and a chance to pull back after a torrid few months.
"Public ownership is not about running down this bank," said Mr Sandler. "It is all about stabilisation and building back from a sound, solid platform."
He declined to comment on job losses at the bank or on a business plan, which he will hammer out with UK regulators.
The bank is likely to shrink its mortgage book while boosting retail savings, aiming to revive funding while capital markets remain uncertain.
European Union rules will also force the bank to pull back from being one of the sector's most aggressive lenders.
Mr Sandler, speaking at the bank's headquarters in Newcastle, northern England, said operations had not degraded during the crisis, but added it would still take "some years" to repay the government's loans.
The government has consistently said the nationalisation - the first major such step in Britain since engine-maker Rolls-Royce was brought under public ownership in 1971 by the then ruling Conservatives - would be only temporary.
But Brown declined to comment on how long public ownership could last: "We can't have a timetable when we're talking about the return of better market conditions as a first step."
Even a temporary state role, however, will carry political and financial risks for a government already tarnished by the debacle, linking its fate to a shrinking mortgage bank at a turbulent time for Britain's housing market.
The government also faces the threat of a drawn-out legal battle with disgruntled shareholders, reminiscent of the damaging fight with investors over the effective renationalisation of Railtrack less than a decade ago.