Rewarding bad behaviour - Northern Rock

Jenny Challenor, Mortgage Strategist at Torquil Clark said: Should Chancellor Alistair Darling be offering to bail out Northern Rock, pledging the Bank of England would guarantee all existing deposits? No, I don't think he should.

Northern Rock sailed too close to the wind with their desire to make profit. They took the gamble and it backfired and this behaviour by a British Bank is not acceptable. Northern Rock relied too heavily on short-term loans to fund its mortgage business. Now taxpayers’ money is being promised to clear up the mess.

Savers at Northern Rock savers knew they were only covered by an insurance scheme that protected them up to around £35,000 each. Those with larger sums should have followed the basics of financial planning, this means spreading your assets between providers to reduce your exposure to risk.

The events surrounding Northern Rock should be served as a warning to other lenders. Instead the Chancellor is floundering at his first opportunity to signal the end of the era of easy money as he promised. Is this his way of calling on banks to think about returning to good old-fashioned banking?

Alistair Darling is opening the floodgates for bad behaviour. Lenders have got the green flag to do as they please and if it all backfires, the Bank of England will wade in to bail them out.

I hope this is not an indication of things to come.