Word: loan
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That's left Northern Rock hanging. But while the bank may have been brazen to rely so heavily on the markets, as a solvent lender with a good quality loan book, the hit it has taken from the subprime mess was unexpected. While French, German and Dutch banks have come clean in recent weeks over their direct exposure to low-quality U.S. real estate loans, it was the barren money markets those loans helped create that upset Northern Rock's model...
...Northern Rock, the U.K.'s fifth-biggest mortgage provider, came unstuck when the wholesale loan markets it leans on for a huge slice of its funds dried up amid the global squeeze on credit triggered last month. An emergency, short-term credit line, agreed with the Bank of England late last week, was supposed to reassure savers their cash was safe. Northern Rock, insisted the Financial Services Authority over the weekend, was "open for business...
...Shares in the lender plummeted by a third in Monday morning trading (they'd already fallen by a quarter on Friday). But Northern Rock is still unlikely to fold. Britain's Financial Services Authority called the bank's loan book "good quality" in a statement issued jointly with the Bank of England and the U.K. Treasury last week. And though it's not yet clear how big the Bank of England's lifeline is, the central bank's cash means savers' own deposits are safe. "We are a well capitalized, solvent and viable business," Northern Rock CEO Adam Applegarth told...
...Shares in the lender plummeted by a quarter on Friday (they'd already fallen by half this year). But Northern Rock isn't likely to fold. Britain's Financial Services Authority called the bank's loan book "good quality" in a statement issued jointly with the Bank of England and the U.K. Treasury. And though it's not yet clear how big the Bank of England's lifeline is, the central bank's cash means savers' own deposits are safe. "If I were a depositor, knowing I have the Bank of England behind me is probably the safest place...
...when recessions have begun, the indicators still point toward growth--albeit less convincingly than two months ago. "Having a jobs report come in negative does not mean that a recession has started," says managing director Lakshman Achuthan. But the risk is there, and Achuthan guesses it will worsen if loan markets fail to calm down. If a month from now a borrower with good credit still can't get a jumbo mortgage at a reasonable rate, a recession will be much likelier...