The Bank Run has already started in the UK.

Discussion in 'Economics' started by SouthAmerica, Sep 17, 2007.

  1. .
    September 17, 2007

    SouthAmerica: The bank run has already started in the UK – can that spark spread its fire overseas? Is it possible that the PANIC might spread into the US market as well?

    Or the Federal Deposit Insurance alone is enough to prevent that such Panic could occur on the US market today?


    “Northern Rock Share Trading Suspended”
    By Robert Barr, Associated Press Writer
    Associated Press - Monday September 17, 8:54 am ET
    Trading Suspended Briefly in Troubled British Mortgage Company Northern Rock

    LONDON (AP) -- Shares of Northern Rock PLC, one of Britain's largest mortgage lenders, tumbled another 30 percent Monday as customers, driven by fears of insolvency, made a run on the bank and withdrew billions.

    Treasury Secretary Alistair Darling sought to assure depositors that their money was safe, even as former U.S. Federal Reserve Board chairman Alan Greenspan warned of potential trouble for Britain's booming housing market.

    Trading in the bank's shares was briefly suspended Monday morning, but not before they tumbled 140 pence to 298 pence ($2.81 to $5.98), on top of a 31 percent fall Friday. By late morning, shares hovered around 300 pence.

    Northern Rock, Britain's fifth-largest mortgage lender, disclosed on Friday that it had received emergency funding from the Bank of England after other banks balked at loaning it cash in the wholesale money markets.

    The British Broadcasting Corp. reported Sunday that customers had withdrawn nearly 2 billion pounds ($4 billion) from Northern Rock accounts, though CEO Adam Applegarth refused to give a figure.

    Speculation about a takeover ran rampant.

    "The images of customers queuing up in the high street has done irreparable damage to the franchise," said Nic Clarke, an analyst for Charles Stanley & Co. in London.

    "There is value in Northern Rock for a predator with a strong balance sheet but they would have to move quickly to save whatever is left of Northern Rock's reputation," he added.

    "Extensive news coverage of people queuing up to withdraw their savings from Northern Rock could well fuel the fears that other financial institutions will be affected and increase general concern about the economic outlook," added Howard Archer, chief U.K. economist with Global Insight.

    Falling sector prices reflected those jitters. Shares in mortgage lender Alliance & Leicster PLC dropped more than 15 percent, while another big lender, Bradford & Bingley PLC, fell 11 percent. HBOS PLC (Halifax-Bank of Scotland) fell 5 percent, RBS Group PLC (Royal Bank of Scotland) was off 4 percent and Barclays Bank PLC 3 percent.

    The London Stock Exchange lost 99.8 points, or 1.6 percent.

    Customers lined up outside of Northern Rock branches across the country on Friday. On Monday, dozens of customers waited outside for branches in Birmingham to open, and more than 100 waited in Leeds.

    "With the Wall Street crash in the 1920s, people were frightened and reluctant to put their money into banks so they kept it under their mattresses," said Roy Hornsby, 69, who was part of a line of about 50 people in Newcastle.

    "So you can understand why older people are going to want to take money out," he said as he prepared to withdraw some, but not all, of his money from Northern Rock.

    Darling, like he did Friday, appealed for calm.

    "Whatever happens, people can get their money out of the bank, they don't need to worry about that," Darling said in an interview on GMTV.

    "The whole reason that we provide support if a bank gets into difficulties, like Northern Rock, is to help it get the money to tide it over these difficulties."

    Northern Rock extended its opening hours to accommodate customers.

    "The way to restore confidence is very simple -- it's business as normal, it's allowing customers to do exactly what they want to do," Northern Rock's Applegarth told BBC radio.

    "The customers are perfectly entitled to take out their money. We have got their money, the problem for us is the logistics of getting to them."

    Northern Rock's problems came against the background of signs of cooling in Britain's booming housing market.

    In an interview published Monday in The Daily Telegraph, Greenspan warned that Britain was susceptible to some of the problems now roiling the U.S. real estate market.

    "Britain is more exposed than we are -- in the sense that you have a good deal more adjustable-rate mortgages," he said.

  2. You are a bit late there with your breaking announcement. There are several topics already regarding the UK bank run.
  3. .

    September 17, 2007

    SouthAmerica: Reply to Kingofshorts

    That was not a breaking news announcement since the information has been all over the place since late last week.

    The question is: is this mess slowly going to spread into the US banking system as well?

    And if the answer is YES.

    Then which banks are in jeopardy in the US of a bank run?

  4. No.
  5. RhinoGG

    RhinoGG Guest


    I "running" to Bank One, er, umm, Chase today at lunch. Need to pull my $23.45 from the checking account before its too late.
  6. SouthAmerica: Reply to Ivanovich

    I remember when years ago some major banks got in major trouble because of massive losses in the derivatives market.

    A definite possibility in today's market.

    If I can recall it correctly one of the banks was Manufacturers Hanover Trust - a major bank at the time - and eventually that bank was taken over - I think Chemical Bank took them over or some other bank.

    I remember that there was a second major bank in trouble at that same time - maybe it was Bankers Trust - I am giving you all this information from memory please forgive me if some of the information is not accurate.

  7. It already has, there was a run on Countrywide Financial. My mom was involved, it was not easy getting your money out. Right after she did, the Fed stepped up, but if it had not, one can only wonder what would have happened.

    No bank in USA would be able to redeem all or even most of their deposits. Maybe the small local banks, but no major bank.
  8. And what consumers lost money from the MHT buyout?
  9. Excellent. Let's all run to the banks and pull out our money, forcing them down a road of panic and closing. Then, we can all stuff our walls and matresses with the money!

    What joy!
  10. not a big deal
    #10     Sep 17, 2007