2.2 Once the initial guarantee arrangements had been issued, the Treasury set itself objectives to guide its search for a longer term solution. The objectives, announced publicly in October 2007, were to: protect the taxpayers' interest; to protect consumers; and maintain financial stability. These objectives remained unchanged throughout the search for a solution for Northern Rock.
2.3 In late September and early October 2007, the Treasury identified four key options for the future of Northern Rock. These options fell broadly into two groups:
■ Closure. Stop taking new deposits and writing new mortgages and begin a process of winding down the company to sell assets to pay off liabilities. There were essentially two options:
■ withdraw emergency support and allow Northern Rock to enter administration (an insolvent wind down);
■ continue with emergency support and sell assets to meet liabilities - a solvent wind down, with the company either remaining in the private sector or being taken into public ownership.
■ Maintain a viable business. Continue to take new deposits and write new mortgages, realise a proportion of the assets to pay off the emergency support and put in place a longer term recovery plan, which would keep the company in business. There were again two options:
■ find a private sector buyer for the entire business who would repay the emergency support immediately or over a few years. Such a sale might be financed entirely by the purchaser or through a mix of private finance and continued public support;
■ take Northern Rock into public ownership, allowing a gradual repayment of public support by realising assets and an eventual sale of the remaining business to a new private sector owner.
2.4 The Treasury appointed external advisers to assist its appraisal of the options and its search for a solution. Goldman Sachs and Slaughter and May were both appointed in September 2007 to provide respectively financial and legal advice. Ernst and Young was appointed by the Bank in September 2007 to provide advice to the Bank, and subsequently the other Tripartite Authorities, on the financial position of Northern Rock. The appointment and use of advisers is considered further in Part 4.