When I listened to the news this morning that Northern Rock had been guaranteed funds by the bank of England to cover its liabilities, my first thought was that they had gone through the threshold set by the Financial Authorities which means they no longer had sufficient finances to cover their debt. But no, it was clear this was not the case. Northern Rock is in a strong financial state.
To my mind, the very fact that the Bank of England were prepared to lend the Northern Rock money was a clear sign that they were completely satisfied that the Northern Rock was not going to go bust. If it were, the bank of England and the financial authorities would have a responsibility to close the bank down and preserve as many of its assets as possible.
So I am at a complete loss as to why so many stupid people today queued up outside branches of Northern Rock to withdraw all their cash in something like a scene from the Wall Street Crash in 1929. Even as a child watching the film "it's a wonderful life", I was amazed and the dumb short sightedness of the people in the "bank run" scene early on in the film. It appears as a nine year old I learnt more watching that film that those Northern Rock customers have done in a lifetime.
Yes, we can all sympathise for people worried about their savings, but the facts are that with Bank of England guarantees, The Northern Rock is not going bust.