At least the banks are still solvent…

Whoooooops!

The Bank of England will on Friday throw a lifeline to Northern Rock [a bank that is also the biggest mortgage lender in the UK] by providing emergency funding to the beleaguered [firm] that has fallen victim to the liquidity squeeze in the banking sector. [We’ll come back to that “victim” thing in a minute.]

In an unprecedented move, the Bank… will step in to bail out Northern Rock by providing it with a short-term credit line that will allow it to carry on operating. The rescue, approved by the Chancellor of the Exchequer, is the most dramatic illustration to date of how the British banking sector is being hit by the wave of turmoil that has paralysed the money markets.

It will lift the uncertainty that has been hanging over Northern Rock’s future for much of the past month because it could not access the wholesale funding [short-term debt] upon which it is heavily dependent. The Bank is also expected to reassure thousands of Northern Rock’s customers that their deposits are secure. [I’m reassured — aren’t you?]

…The bail-out is a devastating blow for the bank, which grew from its roots as a building society in the north-east of England to become the most efficient mortgage lender in the UK, winning wide praise for its business model and its ability to take advantage of the innovations in the capital markets.

Since hitting their peak in February, shares in Northern Rock have lost half their value…

Now, how could Northern Rock have gotten into such trouble? Hmmm. Well, let’s check their web site right now:

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