More Northern Rock scandal in Britain

This is a video from Britain; BBC footage of customers queing to get money at Northern Rock.

By Ann Talbot:

Britain: Northern Rock crisis deepens

21 December 2007

What began as a crisis of liquidity for one bank has become a major political crisis for the British government. The failure of the attempt to bail out Northern Rock has led to serious political recriminations and conflicts among the political and financial elite as the Labour government of Prime Minister Gordon Brown finds itself pouring money into a bottomless pit.

Northern Rock is the UK’s eighth largest bank. It has specialised in mortgage lending based on the availability of cheap credit. The credit crunch that followed the collapse of the US sub-prime mortgage market meant that Northern Rock was unable to raise loans. The Bank of England stepped in to provide loans when depositors scrambled to withdraw their money in the first run on a British bank since Overend and Gurney in 1866. Even Wall Street shuddered at the spectacle. The threat of contagion was felt internationally, and the Bank of England was forced to act.

That was in September. Now, three months later, the Bank’s action has not only not failed to resolve the crisis, but it has deepened it as it transformed bank deposits into public debt.

US Federal Reserve’s subprime regulations shield Wall Street banks: here.

Watchdog warns that corporations’ financial viability is at risk, here.

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