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Nationalising Rock not ruled out Nationalising Rock not ruled out
(about 6 hours later)
Nationalisation is still an option for troubled lender Northern Rock, and the government is not ruling anything out, Prime Minister Gordon Brown has said.Nationalisation is still an option for troubled lender Northern Rock, and the government is not ruling anything out, Prime Minister Gordon Brown has said.
Mr Brown also rejected suggestions that he ignored warnings that the Rock was in trouble and said everything possible was being done to secure its future. Mr Brown also rejected suggestions that he ignored warnings that the bank was in trouble and said everything possible was being done to secure its future.
He is facing calls to nationalise the stricken bank, whose aid package from public funds is now estimated at £57bn. He is facing calls to nationalise the stricken bank, which has an aid package from public funds estimated at £57bn.
But the prime minister said he still hoped for a sale to a private company.But the prime minister said he still hoped for a sale to a private company.
Rift denied
On Tuesday, the Treasury expanded its guarantees on Northern Rock's liabilities, prompting talk that state ownership of the bank was a step closer.On Tuesday, the Treasury expanded its guarantees on Northern Rock's liabilities, prompting talk that state ownership of the bank was a step closer.
We are doing everything in our power to help Northern Rock find the right buyer Gordon Brown
It offered to cover any loss by financial institutions providing money to Northern Rock, hoping the move will restore confidence in the lender and let it offer normal services.
The Treasury had already guaranteed savers' deposits held at Northern Rock, after September saw the UK's first run on a bank in living memory.
"We are doing everything in our power to help Northern Rock find the right buyer for the future," the prime minister said."We are doing everything in our power to help Northern Rock find the right buyer for the future," the prime minister said.
"We do not rule anything out for the future.""We do not rule anything out for the future."
Mr Brown said Northern Rock's collapse had been caused by an "unsound business plan".Mr Brown said Northern Rock's collapse had been caused by an "unsound business plan".
But he said the fact that its problems had not spread to other institutions showed the "tripartite" regulatory system of the government, Financial Services Authority and the Bank of England, was "working well". But he said the fact that its problems had not spread to other institutions showed the "tripartite" regulatory system of the government, the Financial Services Authority and the Bank of England was "working well".
Mr Brown designed the system and implemented it in 1997.Mr Brown designed the system and implemented it in 1997.
Rift denied The prime minister and Chancellor of the Exchequer Alistair Darling, who also attended the press conference, denied any rift with Bank of England Governor Mervyn King.
The prime minister and Chancellor of the Exchequer Alistair Darling denied any rift with Bank of England Governor Mervyn King, and rejected suggestions that they had ignored warnings that Northern Rock was in trouble. "The governor and I, and the chancellor, are completely at one in both the way we deal with these events and analyse what's happened," said Mr Brown.
"The Governor and I and the chancellor are completely at one in both the way we deal with these events and analyse what's happened," said Mr Brown.
I don't think anyone wants to go back to the old system of seven or eight different regulators Alistair DarlingChancellor of the Exchequer
Mr Brown also denied that he was hesitating over appointing Mr King for a second term as governor, adding that an announcement would be made in due course.Mr Brown also denied that he was hesitating over appointing Mr King for a second term as governor, adding that an announcement would be made in due course.
The chancellor, who attended the press conference with Mr Brown, said that "wide-ranging" reforms would unveiled early next year that would help prevent banks from running into difficulties. The chancellor said that "wide-ranging" reforms would be unveiled early next year to help prevent banks running into difficulties.
"I don't think anyone wants to go back to the old system of seven or eight different regulators," he said. 'Breathing space'
Mr Darling blamed Northern Rock's problems on its business model. In a later interview with Channel 4 News, Mr Darling said it was "impossible" to calculate the size of taxpayers' exposure to Northern Rock since the guarantees offered by the government had not been called upon.
"Northern Rock underwent a rapid expansion of its business that was totally dependent on being able to raise billions of pounds from the money market every day." These guarantees were essential, Mr Darling argued, "to give the firm the breathing space it needs" to conclude a sale.
"Of course in the summer that became rapidly more difficult and then impossible for it." Two consortia, including one led by Virgin Group, are in talks about rescuing Northern Rock.
Suitors But there are real doubts as to whether either will be able to raise the money needed to pay off government loans because of the shaky state of financial markets.
The auction process for Northern Rock has been thrown into doubt recently, though two high-profile suitors, Virgin Group and Olivant, remain. Mr Darling also said the FSA would "learn lessons" from how it reacted to widely expressed doubts about Northern Rock's business this summer.
Bradford & Bingley has approached Northern Rock about buying assets from the troubled lender, BBC News has learned. "It is clear that the FSA having seen this problem should have done something about it."
Although the mortgage lender is not looking to buy Northern Rock outright, it could become part of a private sector rescue of the company.
Bradford & Bingley said that it was not actively pursuing a bid for any part of Northern Rock at this time, although it said it was one of several parties that received a copy of the bank's briefing memorandum.
On Tuesday, the Treasury offered to cover any loss by financial institutions that provide money to Northern Rock. It hopes the move will restore confidence in the lender and let it operate normal banking services.
The Treasury had already guaranteed savers' deposits held at Northern Rock, after September saw the UK's first run on a bank in living memory.