YESTERDAY morning frantic savers once again laid siege to Northern Rock bank branches, determined to withdraw their savings, following the scenes over the weekend, which saw savers recover over £2 billion from the bank.
Under this pressure the bank which had already lost 32 per cent of its share price on the weekend, lost another 33 per cent after its share price fell from 438 pence to 293 pence yesterday morning.
Shares in other mortgage banks also suffered as savers nervously considered their options.
Shares in mortgage lenders Alliance & Leicester and Bradford & Bingley were down, by 14% and 11%.
Chancellor Darling had told the BBC’s Radio 4 Today programme that the money of Northern Rock depositors was safe.
‘If people want to get their money out of Northern Rock bank, they can do it. The money is there and it is backed by the Bank of England so they can get it,’ he said.
Savers took him at his word and got their money out of the bank while it was still there.
Chancellor Darling and Prime Minister Gordon Brown met US Treasury Secretary Hank Paulson yesterday afternoon to discuss Paulson’s concerns that a de-industrialised Britain, whose City of London has an inflated economic importance, was far more vulnerable to the threat of financial collapse than was even the United States.
The meeting came after a grim warning given to the Daily Telegraph by the ex-Federal Reserve Bank chairman, Greenspan.
He warned that inflation would double in Britain in the coming years and that the Bank of England was heading for a double digit interest rate as in Black Wednesday 1992.
This was when hundreds of thousands of homeowners were savaged in the aftermath of a massive run on sterling that forced it out of the EU Exchange Rate Mechanism.
Greenspan’s remarks were on the eve of today’s decision by the US Federal Reserve bank Chairman Bernanke, whether to cut its interest rate as is being demanded and risk a run on the dollar, or keep it as it is and see further mortgage bank collapses.
The two British banks who were interested in acquiring the beleaguered Northern Rock bank have meanwhile got cold feet after they were overcome by their fears about doing such a dodgy deal amid such chaos in the money markets.
They also found that raising money from other banks and financial institutions proved to be impossible.
Meanwhile, the London stock market was 106 points down at 1 pm yesterday, with share prices falling by £25 billion.