British Government Moves to Ease Bank Crisis
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From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.
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And I'm Melissa Block.
They have given us the Mini Cooper, David Beckham and a raft of Shakespearean actors to fill our sitcoms. Well, now it seems we have given Britain credit problems courtesy of the subprime mortgage crisis.
Today, the British government said it will guarantee all existing deposits at Northern Rock Bank, which is Britain's fifth largest mortgage lender. Thousands of customers have besieged the bank's offices, demanding their money back. Northern Rock asked for emergency funding from the Bank of England last week just in case it ran short of funds.
NPR's Rob Gifford has the story from London.
ROB GIFFORD: Chairs tumbled, but the lines outside Northern Rock branches moved only slowly today as the public continued to withdraw their savings. So far, more than $4 billion of savings have been withdrawn by customers such as Andreas Constantice(ph), who said it was only natural that people would want their money.
Mr. ANDREAS CONSTANTICE (Northern Rock Bank customer): The more delay there is in being served, the more the fears could be unfounded. But nonetheless, to that person, they are real. It is of no comfort or very minimum comfort to say to someone, your funds are safe. Come back tomorrow.
GIFFORD: Northern Rock CEO Adam Applegarth has been at pain to stress that the Bank of England would not have given its support if it believed Northern Rock was not fundamentally secure. He insisted that anyone who wanted to take their money out could do so.
Mr. ADAM APPLEGARTH (CEO, Northern Rock Bank): Customers are perfectly entitled to have their money. It's a problem of those getting organized to get it to them. So I have to say sorry for the customers that they're having to wait. Thank you for their patience. And we will get to them.
GIFFORD: But that was not enough to reassure Nazia Ahmed(ph), another Northern Rock customer inline in London today.
Mr. NAZIA AHMED (Northern Rock Bank customer): I don't know what's going to happen to the bank. I still have my pension. I want to make sure that I get my money just in case everything to go wrong. I can't believe everything what they say.
GIFFORD: Northern Rock became the fifth largest mortgage lender in Britain by relying heavily on income from mortgages rather than savings from customers. Now, the global credit crunch sparked by the problems in the U.S. subprime mortgage market means that Northern Rock has been unable to borrow in order to finance its mortgages.
British Finance Minister Alistair Darling said the government will guarantee all deposits at Northern Rock and any other solvent bank that needs help. He insisted that there is nothing fundamentally wrong with the British banking system or the economy.
Mr. ALISTAIR DARLING (British Finance Minister): The problem hit Northern Rock because of its particular business model. But other banks are trading with each other, other banks who have got strong balance sheets because they've built up, you know, quite large profits over the last few years, another, say, against a background of an extremely strong, growing economy with good prospects.
GIFFORD: That's not how the opposition party see it. After years of being unable to attack the Labour Party government on Britain's booming economy, the Conservative Party was quick to play some of the blame at the feet of Prime Minister Gordon Brown, who was Finance minister for the last decade.
Philip Hammond is a senior Conservative Party spokesman on economic affairs.
Mr. PHILIP HAMMOND (Spokesman, Conservative Party, Economic Affairs): Gordon Brown has presided over the British economy for the last 10 years, and therefore, he has to answer for the general condition of the economy for the large amount of personal debt that's been built up over that period.
GIFFORD: Shares in another big mortgage lender, the Alliance & Leicester, fell more than 30 percent today amid concerns that the problems could spread. Analysts say the panic surrounding Northern Rock means that the bank is very likely to be sold off.
Rob Gifford, NPR News, London. Transcript provided by NPR, Copyright NPR.