Dear Jim,

Translation: The bank is insolvent.

The Central Bank will print as much money as necessary to make the depositors believe the bank is not. The depositors will say, 'Everything's OK', for now, but it is not... way not, as we know.

It is important to understand what is happening. It is vitally important to understand what to do next.

Thank you, Jim, for showing us a way.
CIGA MM

Northern Rock Takeover Marks Risky Bet for U.K.
Surprise Move Reveals Global Crisis' Depth; Holders Decry Action
By ALISTAIR MACDONALD and CARRICK MOLLENKAMP
February 18, 2008

LONDON -- The U.K. government has decided to take full control of troubled mortgage lender Northern Rock PLC, in a surprise move that reflects the depth of the global credit crisis and represents an embarrassment for Prime Minister Gordon Brown.

After a tense weekend of last-minute negotiations with two bidders -- a consortium led by entrepreneur Richard Branson's Virgin Group Ltd. and Northern Rock's own board -- the government decided that it could best serve the interests of taxpayers and consumers by "temporarily" nationalizing the bank, Chancellor of the Exchequer Alistair Darling told a hastily called news conference yesterday. He said the government would introduce the necessary legislation this morning, and that a new management team led by former Lloyd's insurance market Chief Executive Ron Sandler would assume operational control of the bank immediately.

"I wanted to see a private-sector solution, but it had to be on the right terms," said Mr. Darling. "Governments have to see these things through." He said the bank would continue to operate as usual, making loans and taking deposits, but that its shares would be delisted before trading opened today on the London Stock Exchange.

Taking full responsibility for one of the country's largest mortgage lenders is a politically treacherous move for the government, which has faced strident criticism for its role in the affair since September, when its announcement of an emergency bailout package triggered the U.K.'s first bank run in more than a century. The decision amounts to a bet that it can manage the lender -- which owes the government some 25 billion ($49 billion) -- and then sell it at a better price sometime later, when financial markets improve. Mr. Darling said he still hopes to find a private owner for Northern Rock as soon as possible, though he declined to set any target dates.

"The government took credit for the economy's strength and now its reputation has been damaged by hasty decisions made on the hoof," said Stuart Thomson, a fixed-income fund manager and economist at Resolution Asset Management in Glasgow. Opposition leaders and analysts said the decision to nationalize could be a prelude to a slow winding down of Northern Rock's business, as loans and depositors are gradually paid off.

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