Reply #12: Banks remain under fire in London [View All]

[ozymandius]

The FTSE 100 fell sharply on Monday as the fall-out from the rescue of Northern Rock continued to hit the markets.

Other lenders also suffered from the growing crisis of confidence, fuelled by comments from Alan Greenspan, former chairman of the Federal Reserve, that US house prices were likely to fall "significantly".

Mr Greenspan's thoughts, made in an interview with the Financial Times, raised the prospect of further contagion from bad debt within the US housing sector spreading around the globe via complex investment instruments based on American mortgage debt.

In London, Northern Rock lost a further third of its value as savers scrambled to withdraw deposits from the bank, with an estimated £2bn withdrawn in just three days.

The Newcastle-based lender's shares fell by a similar amount on Friday following the shock news that it needed to be bailed out by the Bank of England due to a drying up of liquidity in the capital markets.

http://news.yahoo.com/s/ft/20070917/bs_ft/fto091720070643553635