The issue here is confidence. People simply don't believe the Government, the Chancellor, the vested interests any more. Gordon Brown has used the explosion in inflationary credit created by the FED since '98 to create a consumer economy bubble that is going nowhere. The previous Bank of England Governor Eddie George admitted this in March '07. There is no miracle economy but there will be a Gordon "bust". Trust in govt. statistics and their ability to regulate the banks, interest rates, the economy etc has all but gone. Everyone knows inflation is not 1.9%, but nearer 5%+. NR is just a symptom of this financial sleight of hand. There business model shouldn't exist and soon won't exist. The pensioners withdrawing their life savings are correct. The government has to resotre confidence through its deeds not Darling pathetic meaningless words.

John Smith, manchester, uk

As a NR saver, I'm bemused by these people panicking. With the Bank of England and Government behind it, NR is probably the safest bank in the country. I hope NR makes a tidy profit from penalties from these irrational people withdrawing their cash without notice.

Sammy Wong, London,

This reminds of a situation not so long ago in Argentina, when the media reported that the savers who had their funds deposited in the then major foreign banks to be “uncivilized” for demanding their life’s savings, whilst at the same time the central bank backed up by the government reassured the investors that were sufficient funds. So how does it feel be “uncivilized” I have a pan and a wooden spoon if you wish to borrow them.

Paul, Stockholm, Sweden

Northern Rock reject all formal insolvency arrangements for individuals ( IVAs) ensuring that needy and desperate debtors have little alternative but to file for bankruptcy. How do you like them apples, Northern Rock?

Aidy, Manchester, England

Well, I guess notwithstanding all of your smug European commentary regarding the US housing bubble, the fact remains that when the US sneezes, the rest of the world catches the cold. You had better hope that we don't catch a cold -- then you'll catch pneumonia.

Patrick Curry, Irvine, CA,USA

Right now I'd give my right arm to have £50k invested with Northern Rock. And to all you panicking pensioners out there, you seem to have forgotten the proverb your grandparents told you - don't put all your eggs in one basket.

Grahame Veale, Newton Abbot, England

in the Uk only 2000 is guaranteed and then 90% of the next 33

anyone with more than 35 k in Northen rock should withdraw their money as soon as possible.

Mark Joshi, Melbourne,

Northern Rock will get on just fine. Fiat means stability. Nothing to see here people, get along.

Jack, kuala lumpur, Malaysia

So many times the experts have told us not to panic. But where can we put our money to be safe?

My guess is that when another UK bank has the same problem, it will be a signal for more than panic! A few mattresses will be higher that night.

Cash in the hand is worth two in the bank!

SmileyTim, Perigueux, France

The problem is that the banks write the rules and then buy politicians to intact them, People no longer count unless you can get their money. How does hitting someone with outrageous fines for every error and bounced check serve the people if they then go bankrupt and of course then the bank then gets a write off if they cannot get all their money out of some poor slob and the people pay for that too in the end, what a joke . The people were sold out ,the government is owned by the banks and the corporations and they only want more money. Most of us really could not care less about Iraq and Iran. Politicians better start to worry about what's going in their own yard for a change cause we are getting fed up .

GD Mad, Ft Wayne, In USA

The reason house prices as an asset class have to rise signicantly as an investment is to compensate for the fact the houses are one of the most illiquid assets you can hold.
With bond or shares,you can call up your broker get a firm bid price and get you money in a couple of days.
Not so with houses.Just like any other market,the housing market is ruled by sentiment.For the last decade people have been expecting house prices to rise so sellers hold out for their price and buyers are forced to pay up.
Sentiment is changing as it may well swing to a buyers market,meaning buyers will wait ,expecting prices to come off and sellers will have to reduce their prices in order to sell.
Property owners have become complacent in recent years.Banks,outright irresponsible.
The tide is only starting to turn and the U.K's fifth biggest mortgage bank has already in effect gone "belly up."
History tells us when governerments and men in suits tell the rest of us not to panic we should run.

James, London, U.K

Every person in the queues outside Northern Rock branches is behaving RATIONALLY. The have all been lied to by people in company call centres, government officials and politicians. The culture of spin and "pretend everything is OK" is mirrored by a culture of total distrust by ordinary people.

Chris Horton, Market Rasen, Lincolnshire

Let's hope that this will not trigger another run on smaller banks. If this happens, the house of cards will fall

Tortue, Hong Kong, PRC

"I am a most unhappy man. I have unwittingly ruined my country.
A great industrial nation is controlled by its system of credit.
Our system of credit is concentrated. The growth of the nation,
therefore, and all our activities are in the hands of a few men.
We have come to be one of the worst ruled, one of the most completely
controlled and dominated governments in the civilized world.
No longer a government by free opinion, no longer a government by
conviction and the vote of the majority, but a government by
the opinion and duress of a small group of dominant men."
-Woodrow Wilson

Carson, Fremont, United States / California

Its interesting that in the wholesale money market, BANKS are not lending to BANKS. What does this tell us about the current stability in the sterling and dollar fiat currency systems. Yet these banks still expect the man in the street to lend them his money via deposits and savings. Isnt there a very big rat to smell here. Look how much the US banks are borrowing from the Federal Reserve. Lets all not pay our Visa bills this month or our mortgages and see how that leaves these greedy institutions. The whole system is based on deception

City of London Trader, London, England

The vapouring of the chancellor and the failure of the SFO to act on the "Sub Prime Mortgage" racket should finally persuade the British people how completely useless the government really is! The selling of sub prime mortgage investment packages is as close to wholesale fraud as it's possible to get and just because the initial 'victims' were banks and financial institutions, who should have known better, makes them even if unwittingly, accessories to these crimes! Step forward a bold chief constable and lock-up a few bank directors for starters!

Ralph Smith, Victoria BC , Canada

In the US, banks, savings banks and credit unions have $100,000 deposit insurance for each account holder. Therefore, I would at most be concerned about those accounts exceeding $100,000.00.
Does Britain not have an equivalent "guaranty" for at least a portion of people's savings held in banks and savings societies?
I feel great compassion for the couple waiting to obtain their one million pounds. A lot of Americans have retirement investment accounts nearing this amount and, in many instances their company's 401(k) plan does not give them an option of putting their money into cash equivalents (stocks and bonds are sometimes the only permitted options in these plans).
If I had one million in cash, at least in the US I could divide it up between ten different banks and have all of it insured (guaranteed) safe under the Federal Deposit Insurance program
If the British don't have a similar arrangement, I fear that this may be just the first of many runs on British Banks.

Robert C., Atlanta, Georgia, USA

Don't try opening a Northern Rock savings account on a Saturday morning. I had to queue for xxxxxxx hours

robert, lancs, uk

Oh no! What will I do now if I can't find a lender who will advance me a 125% mortgage at 6x my income to buy that two up two down inner-city terrace? Oh well, I guess that I won't be alone in this dilema. If I wait a while the terrace might drop in price to a level that I can reasonably afford. Won't that be a novelty?

Clive, Sussex, UK

Never thought for a moment Alistair Darling was up to the job, but if he authorised unlimited backing to Northern Rock, then the Prime Minister is ultimately at fault.

Brian Seals, Scarborough, Nth Yorks,

Michael from San Antonio - Don't forget the people that were taking out no-down payment, all-interest loans to buy second and third residential and resort properties in anticipation of wind-fall profits through a quick sale at inflated prices. These people were gambling and they lost.

Those that financed a residence for themselves at X price and moved in, only to see the value drop should not be disappointed. A residence is a spending choice not an investment play.

William, Las Vegas, Nevada, USA

The "poor americans" were bilked by people like the banks in the U,k. Bought houses out of their range! Loans with interest only payments. Loans with payments every fourteen days . High interest loans! Wells Fargo was loaning at 29.5% for twenty years. The low payments included taxes , insurance, intrest and principal. In fact they didn"t even cover intrest. The credit cards have raised intrest rates on everyone because of giving everone cards even if they know they won"t be paid. The banks need to be controled. Greed has caused this!!!

Roger, Amesville, USA

What's really heartening is that all the experts are saying that everything is OK, there's no need to worry, no need to withdraw your money, Northern Rock is well run, people's money is safe etc etc etc. And the public are ignoring them and withdrawing their money in droves. Why? Because they smell a rat. Or rather several rats. When a government minister says 'There is no need for panic' start digging a trench in your back garden.

eric campbell, harrogate, uk

I wonder how long it took before they ran out of cash.

Farrukh, Woking, UK

This kind of panic reaction by the public can be the pebble that starts the landslide. Perhaps Northern Rock will go under, and perhaps it will be the result (in part or in whole) of didgy lending practices. The one sure way to GUARANTEE that they sink is to pull capital out en masse.

In the worst-case economic scenario, including runaway inflation, all the cash in the world does no good because inflation devalues the money anyway.

I am not saying "do not panic at all," though it is better not to, but this kind of reaction is not helping.

Tim, Dunedin, NZ

I agree with Simon of Worcester. The biggest frustration was not being able to view our online account and with insufficient messages as to why we could not do so. I did not know whether there were too many people online, or whether it was maintenance, or perhaps deliberate shut down on the part of the Bank. The inability to get through to help lines did not help. As the account is under the maximum compensation level we would lose under 10%, so finally decided not to panic yet. However my wife has written to Mr Applegarth personally saying that her confidence is dented and she will close the account if online banking and helplines are not fully activated in 7 days time. We await Mr Applegarth`s response with interest and in the meantime have found that Bradford & Bingley pay a better monthly interest rate for a branch based product but with a 6 months term rather than a 30 day notice period.

G.D& K.M.Breton, Otley , West Yorks UK

I have most of my savings with Northern Rock and have not withdrawn them. I trust when this furore is over those of us who stood behind the bank will be rewarded with a 'loyalty' bonus.

Sue Parkes, Birmingham, West Midlands

The best way to stop a bank run is to pay out the money so fast queues are unable to develop. Instant printed cheques or £50 notes, without charge, all more complex transactions put off until the run is over. Flood local branches with paper money to keep the transactions flowing. All full and part-time employees should be recalled and all branches’ opening hours extended – overnight if necessary. Extra bandwidth should be found to prevent the website from crashing. The first priority is that all ‘panic’ transactions are paid promptly and with minimum fuss. No ‘panic’ customer should be turned away from the bank under any circumstances, even at the expense of bending withdrawal regulations.

Northern Rock, to be fair, have done most of this, but not in a timely enough manner to be effective. The real culprits are the other banks which have refused to lend, the Bank of England for not pre-empting the panic and especially Alistair Darling's ignorant and contradictory statements.

Ed, Leeds, UK

People are their own worst enemies. They listened to the news that Northern Rock had approached the Bank of England, but not to the fact that it was still trading normally or to the assurances that their money was quite safe. Even were the bank to go bust, all but a small percentage of their savings would be protected, as your financial writers make clear elsewhere. Panicking can only make the situation worse than it need be.

Barry, Wallington, UK

How many back-drops can an enonomy withstand?
And how many can mostly average people withstand with their stagnating income?

Debts, war, rising prices, falling consumption.

This looks like the one drop adding up to ... too many...

PS: Excuse my english...

Peter Vernunft, Berlin, Germany

Despite all the assurances we are being given, the fact that NR has had to borrow from the bank of England means just one thing: that NR is effectively BANKRUPT, and is unable to cover its costs, so it has been forced to ask the Government to bail it out. Thats what these events really mean. People are wise not to believe the reassuring statements of the NR bank's bosses. People remember how they have been lied to over and over again by company executives in recent years when companies go bust; just think of Rover and Marconi as two recent appalling examples. One thing is for sure, I'm taking every penny of my savings out of Northern Rock first thing this morning. You cant trust an inch of what the bosses say. The real situation is certain to be much very worse than they are saying in public.

Charles Standen, Maidenhead, UK

The biggest worry for Govt should be that, even with calming statements from the FSA, the Treasury and the BOE people do not trust what they are being told. If somehow that is not dealt with we can expect continued unstbilility in financial markets

Les Cantlay, York, UK

We have the same problems over here in the United States. Major mortgage lenders/banks are failing. US Federal Reserve is almost on a daily basis pumping money into the banking system to prevent a liquidity crisis. We are covered here in the US for $100,000 USD in the bank. From what I read you are only covered for $64,000 USD. At this stage of the crisis, do not keep more than the insured amount in your accounts. I am no financial brain, but know enough that something in the world economy is in deep trouble and you should do everything you can to protect your assets. Good luck.

Ed, Miller Place, New York, USA

Its interesting that in the wholesale money market, BANKS are not lending to BANKS. What does this tell us about the current stability in the sterling and dollar fiat currency systems. Yet these banks still expect the man in the street to lend them his money via deposits and savings. Isnt there a very big rat to smell here. Look how much the US banks are borrowing from the Federal Reserve. Lets all not pay our Visa bills this month or our mortgages and see how that leaves these greedy institutions. The whole system is based on deception

City of London Trader, London, England

Michael from San Antonio,

2500 square feet (232 m²) does not make a McMansion. I'd put the start of the McMansion range at roughly 4000 square feet (372 m²)

Greg, Westfield, Indiana, USA

I think that the media could have been a lot more responsible in the way that this has been reported. Sensational news headlines and filming panicking savers clambering to withdraw money from deposit accounts does not help to create confidence in a sector thats foundations are built on confidence. This is fast becoming a self fulfilling prophecy. Whilst not an investor with Northern Rock I purchased a large number of shares for £4.41 yesterday which I guess I need to thank the media for!! Here's to an interesting 12 months.

Richard, Newcastle Upon Tyne, Tyne and Wear

time to buy swiss francs again...

ernie, london,

Regardless of the finer points there is a chance that Northern Rock will be in effect taken over by the Government and compensation paid to the savers.
However history shows that they may die waiting like members of busted pension schemes. No wonder savers are withdrawing their money.

Brian Gilbert, HAMPTON, Middx

How can they have a 'good quality loan book' when they typify the excesses of the British version of sub-prime lending (5 times salary over 50 years etc..) ? That is how they became the 8th. largest bank so quickly. Four weeks ago I placed a middling sum with a major Spanish bank in sterling at 10%. That is the reality of interest rates. Now comes the crunch lads.

Robert D., Almeria, Spain

Perception is everything. If the perception by the public is that the bank is unstable, unreliable, or shaky, then the bank will take a hit. People on both sides of the pond are less confident in the financial systems....right or wrong.

Name Withheld, Iowa, U.S.A.

Should I have faith in the Bank of England? My savings are in Northern Rock, I cannot access them online and the information provided by their web site (as pointed out by another blogger is zero - less than zero in the circumstances). I can only conclude that I will not be able to access my account in the near future and as I am not in the UK I cannot go to a branch. So what are my options Trust that the Bank of England will still be the lender of last resort in a months time when Northern Rock's online banking is functioning again? I grew up with the internet, I love the internet, but my faith in internet banking is shattered. You cannot place your life's savings in portals that can be so easily shut off. I read the Times Online to understand the situation, Northern Rock says only - Unfortunately, the system is currently very busy. We apologise for any inconvenience caused and ask that you try again later. Thank you for your patience in this - This response is hardly adequate

Emma, Palma, Spain

Michael of Texas has an odd view, His view seems based on a bit of envy. Home sizes and value are all relative. We live in an extremely modest area in a 2500 sq.ft. home that was very inexpensive but lovely. However, I remember when we started out in a 980 sq. ft. home that could have caused me to have felt that his 1600 sq.ft. home was a McMansion. I do agree that people buying more than they can afford and lending companies greed have opened Pandora's box.

Vicky, Macon, GA, USA

You are guaranteed 100% of the first £2,000 and 90% of the next £33,000 by the government. Of course if Northern Rock goes bankrupt (a major possibility) you'll be asking for your money back, along with millions of other savers. You won't see a penny for months (or possibly over a year) and will lose the interest you'd have gained if you'd transferred your money on Monday. The price you'll pay is maybe a few tenths of a percent in interest. What price is peace of mind?

Justin, Nr. Lincoln, UK

I can certainly understand the skepticism of savers when they hear platitudes from the banks or the government over the safety of their savings. There have been several cases in the past 15 years where people have lost their shirts in supposedly safe havens of savings such as Insurance companies, Pension Funds and also Banks. Government pontificates after the event, it talks about tightening regulations, never goes far enough but never offers a 100% safety net if something fails. I can fully understand why thousands are demanding their money back from Northern Rock, as being probably the most reckless lenders in the UK they can't cover their customers when theres a run like this. Its about time Gordon Brown spoke up and gave cast iron guarantees to savers if he wants people to calm down and not panic. Otherwise this could escalate quickly out of control to other banks. After all, money under the mattress could well be safer there than with the irresponsible banks at the moment.

Mike, Alicante, Spain

We are finally seeing the transition from a cycle of greed to a cycle of fear. What a shame the Chancellor chose yesterday to caution lenders, when Mervyn King has been issuing warnings to deaf ears for two years.

Claire, Much Hadham, Hertfordshire

When a member of this cabinet tells you there is no problem, it can mean only one thing.

David Masu, Zürich,

Northern Rock is only the tip of iceburg, Banks have been lending excecively & they have been passing buck to investers as AAA bonds. This is fine as far as the house prices held, but UK property is overvalued by any immagination.
Once the house prices start falling (& its already happening) the domino effect will set in. It won't take time for Prime to become Sub-prime mortgage as defaults increase. Writing is on the wall.
Reducing interest rates( inspite of high inflation) will only delay the inevitable but can't stop it.

Dr K G Advani, Scunthorpe, UK

We live on the financial edge of the abyss. People that don't believe that playing the markets is gambling pure and simple will be jumping out of windows.

You cannot count on the government to bail out these institutions as they don't have it either. Get out and stay out.

Things are going to get very ugly in our lifetime.
8 % CD rates in just a few years - go to cash/gold

Tin soldiers and Hillary coming we're finally on our way........

jim, jupiter, USA / Florida

Just in case bargain hunters think the dividend will be great. if companies have trouble with cash or profit or loans, they may not pay out a dividend, and companies can send out statements immediately without notice to say no dividend will be paid in the meantime. So don't Northern Rock bank on this.

I am not a fan of banks getting bailed out easily as the average citizen never gets help with loans. However, banking is based on confidence. If it fails, no one trusts money and credit anymore. This can lead to an economic collapse and bartering will become more the norm. Simply because no one will want a million pounds because whoever gets it cannot put it in a bank and guarentee to get hold of it in the future, because you cannot store that under your bed safely. Imagine every house in Kensington having half a million stored in their homes.

Finally, I sent a letter to Nationwide earlier saying the balance sheet is 90% mortgage loans and said do something. No reply. Are they next?

Jason Li, Blackburn, Lancashire

To Michael of San Antonio,
Whenever one derides the so called "McMansion", it's always due the speaker not being able to afford one and envying those who can.

dave, ft. lauderdale, FL, USA

How is it that Northern Rock can pay out a 100m dividend and fund it from the BOE? What happened to the 500m they raised from selling mortgages on to Lehman on August 20th?
Why have they not looked at other ways of raising capital/for an investor?

Fergus, Edinburgh, Scotland

It seems Northern Rock borrowed from a credit card to get the cash to lend to people who pay their mortgages by cash from a credit card given them by Northern Rock, fine as long as you keep getting new credit cards. Out wise Government saves the bank by paying the credit card bill (of the crooked bank) from our taxes.

Reginald Peterson, London , UK

John from Hong Kong Sounds like he could be speaking of the US.

I have to take exception with "poor Americans struggling to meet increased mortgage bills".

Most of the people now defaulting are not poor by any stretch of the imagination. These were people in the middle class who purchased 2500 sq/ft McMansions that were out of their reach by standard fixed rate loans.

Instead of settling for 1600 sq/ft houses that were within their means, they got greedy and now are paying for it. Hopefully they don't drag the rest of us down with them.

Oh and by the way, Yes I live in a 1600 sq/ft house in a modest section of town.

Michael , San Antonio, TX, USA

The run on the bank is not really a problem. Government banks that guarantee deposits for bank corporations will print money if they have to to meet cash withdrawals. Savers who pull money out are mostly not going to spend it, and they're not going to put it under the mattress, they're going to put it back in the system--at which point all that paper comes right back out.

Money's all electrons bipping away as ones and zeros anyway.

Globally, government banks will do what they have to to keep the money supply where they want it.

In the US, there will be a short-term bailout of borrowers, and then a regulatory change to eliminate some predatory lending practices that caused the whole thing.

Julie Cochrane, Marietta, GA, US

As a Northern Rock saver I did not 'Panick', but reacted to the lack of information Northern Rock's Chief Executive was putting out. Eg When I couldn't get into the on-line savings I would have expected some explanatory notice on the home page. messages 'not to withdraw' do not provide the reassurance that was required. In short, if savers' money is safe with the Northen Rock then this has been poorly handled from a communications/PR perspective. Presume that the Northern Rock is now borrowing to pay out it's savers.
By the way, still waiting on the CHAPS transfer I arranged yesterday with the Building Society to go thru, I cannot check on-line to see if it was processed. Fills one with confidence!

Simon, Worcester, UK

Whilst this is just plain (but understandable) fear and ignorance on the part of the customers could this be the beginning of the end of the UK's defiance of economic laws? The economy ultimately depends on consumer confidence in the future. The UK has an over-valued currency, core inflation, over-valued property and consumers who have long been borrowing from an uncertain future (be it equity release or cheap, unsecured credit) to fund lifestyles their incomes cannot support. When that confidence is eroded, as here, that house of cards could fall. But perhaps not, perhaps it will wobble onwards for a while yet...

john gearing, hong kong,