The Mortgage’s plague spread into Britain from U.S.

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Sep 17 2007
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It was a rare sight though it happened before but those were during the recession period. Sometimes you watched it during some television dramas but in actual fact it’s a rare occasion. What I’m talking about is the panicky depositors showed up in drove to withdraw their savings from financial institution. Well, believe it or not it happened in one of the most developed country in the world – Britain.

For the second straight trading day, the shares of lender Northern Rock Plc (LON: NRK) plunged by more than 30% to 302 pence in late trading on London’s FTSE 100 index, forcing the stock to be suspended briefly in the early Monday morning trading. Last Friday, its shares closed down 31.46% after the Bank of England (BoE) agreed to rescue Northern Rock, the fifth-largest mortgage lender, which fallen victim to the global credit squeeze.

Northern Rock Depositors withdraw moneyBBC (British Broadcasting Corp.) reported that 1.4 million customers had withdrawn nearly 2 billion pounds (US$4 billion) over the counter or online from Northern Rock accounts on last Friday and Saturday, though CEO Adam Applegarth refused to acknowledge it. The Wall Street crash in the 1920s came haunting the depositors especially the old ones, so much so that people were frightened and reluctant to put their money into banks, instead they prefer to keep it under their mattresses once again – joked a depositor.

While Chancellor of the Exchequer Alistair Darling sought to assure depositors that their money was safe, former US Federal Reserve chairman Alan Greenspan add fuel to the fire and warned in an interview on Monday that British consumers were in for more pain as he predicted “difficulties” ahead in the country’s housing market.

According to the Sunday Telegraph, one rescue plan involved carving up Northern Rock’s mortgage book, totalling 100 billion pounds, and distributing it amongst other lenders. Even if Northern Rock can survives this round of onslaught by its depositors, the images of customers queuing up in the high street has done irreparable damage to the brand. With such fragile markets, everyone is watching Bernanke’s next move.

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