[Twilight]

Not necessarily, although they have similarly severe exposure. It is probably more a result of having their shares downgraded to 'sell'. With all this going on, no-one needed a second invitation.

[CrudeAwakening]

$this->bbcode_second_pass_quote('Tyler_JC', 'T')he federal reserve is perfectly capable of printing more paper in order to back up the electronic money.

Fractional reserve banking is a problem when the public demands gold because the bank only has 1/10 of the physical gold it needs.

But with regards to paper money, it is a rather simple process to create more of it without causing hyperinflation or chaos.

Just delete some 1s and 0s and create some dollar bills.

If the creation of paper money is balanced out by the destruction of electronic money, I don't see what the problem is.

(am I missing something here?)

[dorlomin]

The source of the problem seems to be that Nothern Rock financed much of the new leanding on money raised from the debt markets. As the debt markets became more expensive the so called credit crunch meant that the other banks were not prepaired to lend to Nothern Rock (as they are not prepaired to lend to virtually any other bank) until they got a grip on the exposure to bad debts; especialy but not exclusivly US sub-primes through CDO's and the like.

To ease Nothern Rocks problems the Bank of England gave the markets assurances it would act as a lender of last resort. The story hit the mainstream press which turned it into a panic that the bank was near folding.

No bank can really handle a big run and NR wobbled badly. It did so in the full glare of public light.

Like a machine dependent on constant motion the banking system seazes if there is not a constant flow of liquidity, as banks are lending to each other like a machine lacking oil the banking system seems to be freezing.

[Madpaddy]

Someone made alot of money on that huge swing in Alliance and Leicester. Share have recovered almost all yesterday's loss and Northern Rock are also up 23% as of now. 1000 GMT