Northern Rock Bailed out By Gordon Brown
After my blog of a few weeks ago I thought I would follow that up a little bit. Gordon Brown had vowed not to go down the route that the US has which led to instability in financial institutions saying that they were on their own.
With the Northern Rock hysteria caused by the TV and media with news images of pensioners taking out their life savings (the next day they would put it all back in of course) Gordon Brown buckled and said he would cover Northern Rock and any savings that were kept in there would be covered. As if by magic people returned the next day to pay back in their money-cue smug grin from Gordo for saving the day…
Northern Rock have been criticized for selling risky mortgages especially to first time buyers.
The Northern Rock fiasco has made banks think twice about inappropriate lending, many mortgage lenders have pushed their rates up to 11.5% for some higher risk categories. More and more lenders including credit cards have begun turning away potential borrowers, however this message would have been so much stronger if Gordo had not backed down and relented to pressure.
The last financial institution to go under was Barings Bank in 1995, there was no Treasury assitance on that occasion.