Credit Crunch

Next week sees the 10^th anniversary of the biggest economic change since the war. Its fall out is still blighting many aspects of rural life. This is how the Guardian remembers it..

The ninth of August 2007 was the first day of Mervyn King’s holiday. The governor of the Bank of England spent it at Lord’s cricket ground where he was interviewed by the former England cricket captain Michael Atherton. While Lord King was watching the cricket, the French bank BNP Paribas announced it was freezing the assets of hedge funds that were heavily exposed to the US sub-prime mortgage market.

It was the first and last day of King’s holiday. He would not have another for several years. Within six weeks, members of the Bank’s court – its oversight body – were being whisked into the back entrance of Threadneedle Street in a people carrier with blacked-out windows to be told that money was haemorrhaging out of Northern Rock.

For three days in the middle of September 2007, queues formed outside branches of the former building society – the first run on a UK high street bank since the 1860s.

The writing was on the wall for Northern Rock from the moment the markets turned sour on 9 August. Its business model relied on it being able to borrow money from other banks and investors, and that was no longer possible in the panic-stricken conditions of August 2007, when none of the banks trusted each other.

Recalling the drama a decade on, King said Northern Rock “literally ran out of money” even though on paper it appeared to be in a stronger position than any of its UK rivals. It was taking too many risks and had no alternative sources of funds if the markets dried up.