16 January 2008
The Prime Minister has said that the Government was right to take action over Northern Rock for the sake of depositors and the wider economy.
Speaking to MPs during Prime Minister’s Questions, the PM said that both the Bank of England and the Financial Services Authority supported the decision to guarantee the savings of depositors and prevent the bank from collapse. The Government was determined to prevent instability from spreading to other parts of the economy, he said.
The PM said:
"The action we have taken was to ensure there is stability in the economy. And to ensure that stability we said we would secure the deposits of all depositors in Northern Rock and stand behind the company with support from the Bank of England.
"In the next few weeks we are looking at the situation of how we can find buyers for Northern Rock. I think everyone in the House would say that we should rule out no option in doing so. That is the right course of action to take."
In an interview last night for ITN News, Mr Brown said that several private businesses had expressed an interest in taking on Northern Rock but that a temporary public ownership should not be ruled out. The PM blamed the bank’s problems on a "bad business plan" that unravelled in the face of the global credit crunch.
The current instability in financial markets began when large numbers of high-risk borrowers in America started defaulting on loans, causing write-offs and a reluctance to lend among financial institutions.
Image copyright Reuters
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