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Bank of England Bailing Out Northern Rock

“NORTHERN Rock has turned to the Bank of England as the “lender of last resort” after difficulties raising cash from the wholesale markets.

The move is expected to spark fresh concerns that the impact of financial market turmoil is having a deeper impact on some banks than previously thought.

A £4.4 billion relief fund offered by the BoE yesterday was drained by banking giants in less than an hour as they struggled to secure finance.

The BoE pumped the extra cash into the system in a bid to ease soaring overnight inter-bank borrowing interest rates.

But the move did not help Northern Rock’s share price, which fell 5 per cent yesterday.”

Source: Scotsman

The same thing is happening over in the States as well with Countrywide (America’s largest Mortgage lender) getting bailed out by numerous players and its still apparently not enough. However, the mortgage/credit crunch crisis is moderating a bit lately. The question is how bad will this get in the UK and the rest of Europe? Will France and Germany have equal trouble?

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Originally Posted by Sensei

The question is how bad will this get in the UK and the rest of Europe? Will France and Germany have equal trouble?

I don't think so. Nowhere on the continent do the predatory lending practices of America get copied - except the UK. The kind of loans given in the USA and the UK are unthinkable in Europe (e.g., variable rates with 1% in the first year, and prime plus x in subsequent years?). I've even heard tell of no-capital loans in America, where borrowers never pay off the capital, only the interest, in the hope of property speculation.

However, Europe has happily funded the American lenders - they will get burned on that score. by pingpong_fiasco

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Bank of England Bailing Out Northern Rock

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