Northern Rock: Post Mortem of a Spectacular Fall

Reckless play on global stage brought 'Northern Wreck' to its knees
By Jim O'Neill,  Newser Staff
Posted Mar 20, 2008 1:49 PM CDT
Northern Rock: Post Mortem of a Spectacular Fall
Adam Applegarth, ex-CEO of Northern Rock.   (AP Photo)

The collapse of Northern Rock, Britains third-largest lender, was "the messiest banking crisis in the Western world resulting from the global credit crunch,'' a UK lawmaker tells Bloomberg in a post mortem of the disaster. “They really screwed it up,” said one analyst of the bank’s hard-charging and ambitious management team. "They should have had other levers to pull." Unable to save itself or attract a buyer, the bank sarcastically called Northern Wreck was taken over by the government last month.

Northern Rock had skyrocketed after its 1997 IPO, amassing nearly $198 billion in assets by focusing on residential mortgages, reselling packaged debt as bonds on the global market. The bank's collapse resulted from a failure to hedge against the possibility of a shortage of credit. It was an extraordinary error,'' another analyst tells Bloomberg. In June, the Rock began its freefall and saw stock prices plummet 83% in three months. (Read more Northern Rock stories.)

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