questionmark Posted September 24, 2007 #1 Share Posted September 24, 2007 Brown May Hurt Investors to Damp Northern Rock Anger Sept. 24 (Bloomberg) -- Prime Minister Gordon Brown's government, which insured the deposits of Northern Rock Plc customers to stop a run on the bank, seems willing to sacrifice its investors and executives to lawmakers looking for someone to blame. While Chancellor of the Exchequer Alistair Darling guaranteed U.K. savers with accounts at the bank will lose no money, his backing doesn't extend to new accounts. That makes it difficult for the Newcastle-based mortgage lender to remain independent; its shares fell by a third since Darling's decision on Sept. 17. ``Politically, it's pretty savvy to take the position of saying, `We won't allow millions of people to lose their savings but banks are responsible for their own affairs,''' said Andrew Cooper, co-founder of Populus Ltd., which conducts opinion polls for the Times of London. Brown, 56, who took over as prime minister in June, must insulate himself from Northern Rock political fallout to preserve the reputation for managing the economy he gained in a decade as Darling's predecessor -- a period during which he designed the current banking-regulation system and put Bank of England Governor Mervyn King in place. Northern Rock triggered Britain's biggest banking crisis since 1973 when it tapped the Bank of England for emergency funding on Sept. 14. Depositors lined up for three consecutive business days to withdraw 2 billion pounds ($4 billion) until Darling guaranteed their savings. `Bad Decisions' ``No government should ever be in the business of protecting executives who make the wrong call or bad decisions,'' Darling said yesterday at the ruling Labour Party's annual conference in Bournemouth, England. ``My job is to protect ordinary savers.'' It was the third time a European bank sought a bailout since the collapse of the subprime-mortgage market in the U.S. drove up the cost of overnight loans. Dusseldorf-based IKB Deutsche Industriebank AG and state-owned Landesbank Sachsen Girozentrale in Leipzig, Germany, also required rescue funding. Full story, Source: Bloomberg Link to comment Share on other sites More sharing options...
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