Hedge funds and human rights
SRM, a hedge fund that controls 9.9 per cent of Northern Rock, has written what it says is a constructive letter to Chancellor Alistair Darling about the future of the troubled bank.
In the letter, sent before Christmas, it says that it has been advised that if the Rock were nationalised at less than a fair price for the shares, shareholders would have a strong case for damages.
SRM's view of a fair price would be the book value of Northern Rock's assets at the last balance-sheet date - or more than 400p a share.
It says that ministers would be vulnerable to a charge of "misfeasance" if they expropriated the Rock for less - and that there could be a breach of the 1998 Human Rights Act.
SRM has not made a direct threat that it would sue. But since the letter talks of shareholders pursuing ministers through the courts, the implication is unmissable.
The epistle makes the curious statement that the chancellor has already formally ruled out nationalisation.
If he has, I missed him doing so. And so did his officials.
They sent a reply to SRM on the chancellor's behalf at its Monaco offices last week. In it, the Treasury says that the Government would comply with the Human Rights Act at all times - and that all options, including nationalisation, are on the table.
What the discourse shows is the gulf between the Treasury as the leading creditor and the Rock's biggest shareholder.
Can that gulf be bridged?
Only if there is a rescue of the Rock that keeps the bank in the private sector and leaves the current shareholders with the bulk of its shares.
Will there be such a rescue?
There is a frenzy of activity by putative bidders, bankers and the Rock itself to secure one.
Putting a probability on their prospects is impossible - though conditions in money markets are less tight than they were, so it looks a bit less bleak for the Rock than it did before Christmas.