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Northern Rock: Post Mortem of a Spectacular Fall

Posted Mar 20, 08 1:49 PM CDT in World,  Business 

(Newser) – The collapse of Northern Rock, Britains third-largest lender, was "the messiest banking crisis in the Western world resulting from the global credit crunch,'' a UK lawmaker tells Bloomberg in a post mortem of the disaster. “They really screwed it up,” said one analyst of the bank’s hard-charging and ambitious management team. "They should have had other levers to pull." Unable to save itself or attract a buyer, the bank sarcastically called Northern Wreck was taken over by the government last month.

Northern Rock had skyrocketed after its 1997 IPO, amassing nearly $198 billion in assets by focusing on residential mortgages, reselling packaged debt as bonds on the global market. The bank's collapse resulted from a failure to hedge against the possibility of a shortage of credit. It was an extraordinary error,'' another analyst tells Bloomberg. In June, the Rock began its freefall and saw stock prices plummet 83% in three months.

Source Bloomberg

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Adam Applegarth, ex-CEO of Northern Rock.   (AP Photo)
A sign on the facade of a branch of Northern Rock is seen in London.   (AP Photo/Matt Dunham)
The facade of a branch of Northern Rock is seen in London, Monday, Feb. 18, 2008.   (AP Photo/Matt Dunham)
A Northern Rock clock outside of a branch of the bank in Newcastle, England.   (AP Photo/Scott Heppell)
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Financial Crisis • credit crisis • subprime crisis • Bank of England • Northern Rock • bank failure • CDO • Adam Applegarth


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