Brown Fights Backlash Over Rock

LONDON -- British Prime Minister Gordon Brown defended his reputation for sound economic management Monday in the face of mounting criticism over his decision to nationalize ailing bank Northern Rock.

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," Brown said at a news conference. "We have contained the problems. It has not spread across to the rest of the economy."

The government, which rejected two private-sector led bids for the bank last 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," Brown said, dismissing questions over why he took months to come to a decision. "We have lost nothing in doing so."

The government has consistently said the nationalization -- the first in Britain since engine-maker Rolls-Royce was brought under public ownership in 1971 by the then ruling Conservatives -- would be only temporary.

But the government declined to comment Monday 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," Brown said.

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, with home repossessions, bad loans and job cuts all likely to increase.

Both Brown and Alistair Darling, the finance minister, said the bank would be run at arms' length and on a commercial basis. 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 renationalization of Railtrack less than a decade ago.