Can someone explain the finacial crisis?

Can someone explain the Northern Rock crisis to me please?

  • I'd really want to know what caused the Northern Rock crisis. I know it is something to do with the credit crunch in the American subprime mortgage market, but how does this relate to England? Sorry if I sound really stupid here. Any help is appreciated!

  • Answer:

    The banks that gave out the mortgages to the sub prime borrowers in US offloaded a lot of their bad debts - unfortunately Northern Rock was involved in taking on some of these bad debts ( as many banks were - they saw a possibilty to make money from them) and when it came to light that the bad debts were unlikely to be retreived , Northern Rock got bad press and so their share value started to drop - investors got wind of the dropping price of shares and decided to withdraw their money - all at once - no bank can withstand a lot of that as most of their money is not in cash (liquid assets)- but is invested in property etc.

Missy at Yahoo! Answers Visit the source

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The UK public once again, panicked. Banks are constantly borrowing from each other. But when one time it leaked out to the public they panicked. All those people withdrawing their money made a routine problem a disaster. I remember on the news there was hundreds of pensioners lined up and the newsreporter interviewed them all and all of them were intent on getting their money out and wouldn't listen or be convinced by ratioal people explaining to them. And once the pensioners put the bank in trouble everyone else started taking their money out too because they were putting the bank in trouble

ukcufs

if a loan institute or bank is going bust in its home country believe me it will go bust in the UK too. theres your relating link for you.

helmut UK

In short the Northern Rock doesnt have enough money. When a bank wants to lend someone money for a mortgage they either use money other people have deposited as savings or go to another financial institution for the money The northern rock didnt have enough people depositing money into savings accounts to cover all the mortgages they issued so they went to a company in the USA this company has now changed its lending policy leaving northern rock without enough money to pay people thier money out of their account They went to the bank of England who gave them a loan.. I really dont think there is going to be a big problem. In fact I spent just under £10,000 buying shares in Northern Rock someone will buy it out eventually which means the share price will go up again

davetumalty

The Rock was finding it more difficult to find money to lend to borrowers. The banks borrow from each other, but they refused to lend to the Rock. It asked the Bank of England for an emergency loan, customers panicked and started withdrawing their cash. Gordon Brown not to blame.

Phil McCracken

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