but they didn't mention the flood of withdrawals on their Friday night broadcast...Hmmn?

There was something about Northern Rock again this afternoon but I didn't pay attention...my bad! (I was in the car to move it and the radio was still on, only caught a piece of what they were saying.)

This is indeed an 'interesting' development.

Dr. Liu is of the impression that even the central banks can't support a run on the banks (without destroying their currencies.)

Makes me wonder if they aren't trying to keep this quiet...you know, monkey see, monkey do.

Liu is much more than correct.

There isn't enough money in reserves to handle a run on banks and the method we use to introduce currency begins with debt. So even if they wanted to monetize enough cash to settle accounts the banks would have to be the borrowers, thus ruining the banks.

The inherent flaw in fractional reserve banking is that the banks can never handle a run on the banks. In the GD the central banks allowed the second tier banks to fold. I think they would do that again if they can't restore confidence.

Another article I read was very specifically advising customers how much they needed to withdraw and how much they could leave on deposit and be covered by government insurance. Right down to warnings about making sure that the banks that held your deposits were not subsidiaries of one another.

Be aware that the banking system itself has but one mechanism to deal with full bank runs; closing the doors.

Northern Rock was cash strapped as it was. How this will compound their probs is a test for the minds that engineered this mess.

as if on cue:

"Troubled bank Northern Rock was the subject of break-up rumours on Sunday as it sought to reassure panicking customers and investors following an emergency bail-out by the Bank of England.

Northern Rock's share price slumped by almost a third on Friday on news of the emergency loan, and the lender's chief executive conceded in a newspaper interview Sunday that this made it a takeover target.

"Our share price has come off 30 percent," Adam Applegarth was quoted as saying by the weekly Sunday Telegraph. "You have got to be vulnerable if your share price has come down. It's up to the bidders to make a bid.""

http://afp.google.com/article/ALeqM5hYFUXCIFCbpp0rFU15xUC8976lQQ

wouldn't start 'til Tuesday...which could be particularly interesting if the UAW goes out on Strike Monday...

You're making me wish I had been paying more attention to the radio when I was moving the cars yesterday.

And yes, it's the 'cascade effect' we have to be on the lookout for.

Not for nothing, I'm beginning to wonder where my bank rests within the world's pecking order.

Are we seeing the tip of the iceberg? Only time will tell.

"WOW! And I thought the 'fireworks'
wouldn't start 'til Tuesday...which could be particularly interesting if the UAW goes out on Strike Monday...
"

I like to watch meltdowns as they teach us a lot about how the New economic wizards are prepared to cope with problems.

Countrywide, very similar firm to Northern Rock, had credit probs, maxed out it's credit lines for about $11 billion and Citi Bank promptly bought them probably at bargain rates.

REFCO had accounting irregularities, surrendered itself to creditors and was dismantled entirely within 7 days, no more REFCO, Snap!

Dueschte bank is discovered to have an account so laden with bad debt they had to hide it off the books, they freeze the accounts triggering an inadvertant market panic.

Amaranth loses 30% of it's (employee pension fund) value in a week because it was long on natural gas futures when the market closed short. They had to liquidate assets to meet margin calls and ended up losing 50% of their net worth in a week. Insiders say they were victimized by sharks at JP Morgan who Took advantage of inside knowledge about what Amaranth had to sell in order to make those margin calls, so JPM took short positions driving down the price of those assets and then buying them up cheap. They cleaned up twice, once on the way down and then on the rebound.

Goldman Sachs owned the commodities exchange that set Unleaded and oil prices throughout the US. They deliberately manipulated prices of natural gas and unleaded both by investing in 30% of the futures contracts issued at their own exchange and then by liquidating all of those holdings a few months before the midterm (ahead of price declines). "In 2007, ownership of the GSCI transferred to Standard & Poors amid suggestions of price manipulation by Goldman Sachs."

Again a heat of the night sale of one of the most influential exchanges in the world.

http://en.wikipedia.org/wiki/Goldman_Sachs_Commodity_Index#Sale_to_S.26P

The market collapse of a month ago, $350 billion pumped into markets within a week by the US Fed and ECB just to ease jitters and make everybody feel safe again.

The interest is clearly in making problems go away asap. And there is lots of money floating around to do it.

I expect the entire prob at Northern Rock to be resolved by week's end. To maintain confidence.

And I expect somebody to make a little fast green on the deal too.

I think at the very least we can expect to see reruns of most of the scenarios above.

UUUUUUUUuuuuuuu...

"Terry Mays and his wife, both British pensioners, decided over the weekend that the promise by the Bank of England on Friday to provide emergency financing for Northern Rock, the troubled British mortgage lender that has most of their savings, was not enough to calm their nerves.

The couple joined hundreds of other Northern Rock customers today as lines formed for a third day in front of branches where people waited to withdraw their savings.

Mr. Mays, who had been waiting in line at a central London branch for an hour and expected to wait for at least two more, said the Bank of England’s commitment helped him realize his savings will not be lost but, he still fears delays and other complications to get his money back.

“I don’t think the bank will collapse, but we just don’t have the nerves,” he said, surrounded by a group of people that had traveled with him to the central London branch from another outlet in the south of London after being told the wait there would be at least six hours. “I took some financial advice over the weekend, and I’m taking the money out to get peace of mind.”

Shares in Northern Rock dropped 40 percent to a seven-year low in early trading in London after customers reportedly withdrew at least £2 billion, or $4 billion, and some analysts said the bank might be split up or bought.

Investors’ nervousness spread to other banks
"

Banks are ill equipped to handle bank runs because they simply do not have the money that was deposited by customers, and they never will. Such is the slow moving quasi ponzi scheme that private banking is.

Government banking on the other hand is backed by the full faith and credit of a government that citizens own.

I will be surprised if this goes much further without the government stepping in or the doors to the bank shutting. If this spreads to more banks we could be looking at serious fallout.

http://www.nytimes.com/2007/09/17/business/worldbusiness/17cnd-rock.html?_r=1&adxnnl=1&oref=slogin&ref=business&adxnnlx=1190052601-gXBpefvYuoFwYkjGjNO2eQ

http://www.bloomberg.com/apps/news?pid=20601102&sid=aT_rdLXz_6P4&refer=uk

"U.K. stocks climbed, paced by Alliance & Leicester Plc after the government and the Bank of England moved to shore up confidence in the banking system.

snip

Chancellor of the Exchequer Alistair Darling said late yesterday the government will guarantee all accounts held at Northern Rock Plc. The Bank of England today also made emergency loans to U.K. banks to bolster the financial system.

This followed three days of Northern Rock customers queuing up outside branches to withdraw their savings since the central bank offered the mortgage lender emergency funding last week.

``This is good news and a relief,'' said Jimmy Yates, a trader a CMC Markets in London. ``Now we need to hope that members of the public whose money is held by Northern Rock feel that their cash is safe and stop withdrawing funds, which was only making the problem worse.'' "

GB was on the edge of a domino bank(s) default and the new GB (Gordon Brown PM) stepped up and did the right thing:

"GORDON Brown's gamble to stem the British banking panic appeared to be paying off yesterday, as withdrawals from Northern Rock began to tail off and shares in other banks rallied sharply.

The Prime Minister last night declared victory in the greatest trial his government has faced so far, lauding yesterday's improvement as a sign of the government's strength.

On Monday, the Treasury took the unprecedented step of promising to cover all of Northern Rock's deposits - more than £21 billion - while the bank struggles to survive the international credit crunch.

But in an ominous reminder that the credit shortage which took Northern Rock to the brink has not eased, the Bank of England injected more than £4 billion into Britain's banks in the form of new loans. "

This isn't over. I suspect Northern Rock is outta the deep water, but the credit/mortgage industry woes need a LOT more triage than a bandage and a pat on the back.

I doubt 1 in 1,000,000 people even realize how close we just came to a worldwide financial meltdown. Gordon Brown does.

"The Prime Minister last night declared victory in the greatest trial his government has faced so far"

http://business.scotsman.com/index.cfm?id=1498282007

"As the crisis around the bank deepened Northern Rock's shares plunged more than 30% to a new low of 176p, although by 4pm they were 26% lower 189p.

Citigroup analysts forecast that the shares had further to fall, and warned that in the worst case scenario they could be worth as little as 6p each. This figure would value Britain's fifth-largest mortgage lender - worth over £5bn earlier this year - at a mere £25m."

This is a classic example of how quickly ficticious wealth can dissappear back out of the economy.

Apparently in an effort to prevent folks from opening accounts with a broader than policy government backing the Crown and Gordon Brown hedged

"Shares in Northern Rock went into freefall again today, crashing more than 30% to an all-time low after the Treasury warned that it will not protect new customers who open savings accounts with the troubled bank."

This is a baaaaad omen.