[NYTr] British bank run expected to continue

[All the News That Doesn't Fit]

sent by Steven L. Robinson (activ-l)

[Note how Alan Greenspan - of late the darling of US liberals for
his opportunistic badmouthing of George Bush - apparently has no
problems with bailing out "greedy and egregious" speculators to
"ensure stability."

Greenspan, of course, would take a different approach to helping
working people facing foreclosures or bankruptcy because of medical
debts. Such lesser beings should be consigned to the mercies of the
free market. -SR]


AFP via Google - Sep 17, 2007
http://afp.google.com/article/ALeqM5jD4FVQO0rStJh6bmnSJXtOKZWV_g

British lender braced for more chaos despite government backing

By Agence France-Presse

London  - Troubled British bank Northern Rock was braced for another
day of chaos at its branches on Tuesday, despite a government promise
that it would protect customer savings.

The lender's chief executive stressed that it was "open for business
as usual" in a full-page advertisement published in several major
newspapers, insisting that Northern Rock was "a safe place" for
customers to keep their savings.

Regardless, customers were expected to queue for a fourth day to
withdraw their savings as the bank lost about half of its market
value since the close of trading on the London Stock Exchange on
Thursday, and its share price dropped to an all-time low.

Fears that problems could spread also led shares in another major
British home loans specialist, the Alliance and Leicester, to plummet
by over 30 percent Monday.

In response to the panic, Chancellor of the Exchequer Alistair
Darling announced the savings guarantee after talks with Britain's
central bank, the Bank of England (BoE), and Financial Services
Authority (FSA) regulators over how to deal with the mounting sense
of crisis.

"Should it be necessary we and the Bank of England would put in
place arrangements that would guarantee all the existing deposits
in the Northern Rock bank during the current instability in the
financial markets," he said.

"That means that people can continue to take their money out of the
Northern Rock bank ... but if they choose to leave their money in
the Northern Rock bank it will be guaranteed safe and secure."

Under normal FSA regulations up to 33,000 pounds of deposits are
protected, but anything more is not guaranteed. Darling's announcement
covers all savings, whatever the amount.

According to the Financial Times, which did not cite its sources,
British officials had already begun reviewing the overall system
of guaranteeing savings.

Northern Rock chief executive Adam Applegarth, meanwhile, declared
in the full-page advertisements that the savings backing from the
government had ensured that customers' funds were "totally secure
during the current instability in the financial markets."

"These have been troubled times but Northern Rock will prevail. We
will not let you down."

On Monday, savers showed up at dawn to pull their money out of
Britain's fifth-largest mortgage lender, which last Friday was
granted an emergency lending facility by the Bank of England as it
struggled to borrow from other banks.

A global credit squeeze has emerged as banks refuse to lend to one
another in the aftermath of a sharp downturn in the US subprime
housing sector and a wave of defaults by high-risk US borrowers.

The future of the group remains uncertain and the company scotched
speculation that it was on the verge of agreeing a rescue takeover
deal.

The BoE's role in the crisis was, meanwhile, coming under greater
criticism, with former US Federal Reserve chairman Alan Greenspan
telling the Daily Mail newspaper from his Washington office that
"you cannot calibrate liquidity to only rescue the deserving."

He added that helping the "greedy and the egregious" was a price
that had to be paid to ensure stability.

BoE Governor Mervyn King had recently warned a parliamentary committee
that providing a cash injection to the financial markets while they
were experiencing trouble served to encourage "excessive risk-taking
and sows the seeds of a future financial crisis".

Northern Rock's share price hit a historic low of 257.25 pence
Monday. By the end of the day's trade, it stood at 282.75 pence,
down 35.45 percent.

The bank's market value has now slumped by more than half to about
1.1 billion pounds (1.6 billion euros, 2.2 billion dollars) since
the close of trading last Thursday.

About 2.0 billion pounds was withdrawn over the counter or online
by Northern Rock's savers over Friday and Saturday, reports said.

Northern Rock, which has 1.4 million savers, has yet to confirm
whether it has begun borrowing from the BoE's emergency fund.