The increasingly global problem that Alan Greenspan never saw coming has forced an unusual intervention by the Bank of England who provided emergency funding to Northern Rock, a UK mortgage firm that offered easy money to home buyers in the turbulent and still increasing (in London) British real estate market. The international banking credit crunch is amazing in that bankers are supposed to be so conservative yet it is their own industry that has triggered this growing financial crisis.
Northern Rock faces the same problems as many other banks, all of which routinely borrow large amounts from each other every day. Since the sub-prime mortgage market crumbled in the US last month, banks have become wary of lending to each other, and the interest rates they charge each other has risen to more than one percentage point above the Bank of England's 5.75% base rate. Two weeks ago Barclays ago had to resort to the Bank's permanent standing facility and borrow £1.6bn although it said that was due to a glitch in its technical operations.
