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.