I know this is off-topic but thanks for the e-mails and yes it is a big deal.
How often have you seen a run on the bank?
Two quick points.
1) Northern Rock will not be allowed to fail. The credit facility the BofE extended is essentially open-ended. NRK has £30bn* in pledgeable assets. Easy for me to say but it's true.
*Thank you Robert Peston for running the numbers
2) The new owners should be interviewing for new managers, NOW.
We learned from our S & L crisis in the early '90's that you don't hire the folks who made the mess to do the clean up.
For our English friends, here's some light reading to while away a Saturday evening:
Who is to blame for the run on Northern Rock?
The credit crunch is global. So why has there only been a run on the banks in Britain? Alistair Darling suggests Northern Rock is a mere domino in a chain which started in America. But John Redwood’s blog points out that the first domino was knocked over by the clumsy fingers of the Labour government. Only in Britain did the central bank refuse to boost liquidity by lending at a non-penalty rate (unlike the ECB, the Fed, the Norwegians, Swiss, Russians etc).
The next bit sounds nerdy, so was the ERM crisis so stay with me. Exacerbated by the BoE’s intransigence, the de facto cost of bank borrowing, three-month LIBOR, has risen from 6% to 6.85%. These costs will be passed on to customers. People are about to feel the pain of a problem which could have been assuaged by better judgement at the Bank of England and more vision from our ministers who failed to realise what would happen.
MORE from Fraser Nelson for The Business
And from GoldSeek:
Britain's Bank Run Coming to Main Street Soon?
"...The queues outside British bank Northern Bank have nothing to do with subprime US home loans. But they have everything to do with today's
ON WEDNESDAY THIS WEEK the
It promised 6.30% interest on cash deposits, more than 250 basis points above the average rate-of-return offered on time deposits by
British savers haven't been offered that much money to keep their cash in the bank in nearly a decade....MORE