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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: Paul Kern who wrote (86283)	9/14/2007 7:33:12 AM
From: stan_hughes	Read Replies (1) of 110194

Anxious customers crash lender’s website By Peter Thal Larsen Published: September 14 2007 01:43 \| Last updated: September 14 2007 01:43 Early on Friday, anxious Northern Rock customers reported they were unable to access their online accounts following news reports of the Bank of England rescue. It appeared the volume of traffic from depositors and mortgage holders had caused the website to freeze in an indication of the level of customer concern the bank is likely to face when it opens for normal High Street business this morning. Although there was no official statement from Northern Rock, the Bank of England or the Treasury, behind the scenes officials insisted there was no risk to customers of the troubled bank. John McFall, parliamentary Treasury select committee chairman, said: “I don’t think customers of Northern Rock should be worried about their current accounts or mortgages.” But although the bank’s mortgage book is sound – and the Bank of England rescue means its depositors’ money is secure – Northern Rock’s run as the plucky upstart of the banking industry is over. Shareholders were braced for further falls in its stock, which has been tumbling for several weeks. Few institutions sum up the risks and opportunities of today’s financial markets like Northern Rock. In the decade since it abandoned its building society status and floated on the stock market, the Newcastle-based bank has ridden a wave of technological and financial innovation to become one of the UK’s largest mortgage lenders. While other former building societies merged or were taken over, Northern Rock has maintained its independence while wielding a financial clout far greater than its 72 branches would suggest. Until recent market turmoil exposed the cracks in its business model, Northern Rock had concentrated almost exclusively on the mortgages, establishing itself as the country’s most efficient lender. To finance this growth it imported innovative financing techniques from the United States, such as issuing securities backed by mortgages, which were eventually copied by other large banks. Northern Rock was showered with praise by the investment banks that helped arrange this financing, and its executives could often be seen picking up awards at industry events. But just as Northern Rock benefited from the markets, so it has fallen victim to their fragile confidence. Copyright The Financial Times Limited 2007

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