Re-instating its position

The latest bidder reported to making a move on Northern Rock is Virgin Group. This airline, media and gyms group is one of the world's most recognised and respected brands. Furthermore, a recent independent research study has shown that UK public vote Virgin as their most admired brand. http://www.virgin.com/AboutVirgin/WhatWeAreAbout/WhatWeAreAbout.aspx

This fact could be decisive to repair its franchise and to recover the confidence of its shareholders. Moreover, Northern Rock shares closed up 5'9 percent at 273'25 pence on the London Stock Exchange following Virgin's announcement.

On the other hand, the bank's chairman Matt Ridley has stepped down. Ridley told the Treasury Select Committe on Tuesday, that the bank had been hit by "wholly unexpected" events and he defended the way he and his colleagues had been running the bank. http://news.bbc.co.uk/1/hi/business/7052828.stm

It is said that Bryan Sanderson would take over as chairman of the bank as soon as he has been approved by the Financial Service Authority.

Will be Spain after Northern Rock?

Spanish officials have denied reports that the country's property market is heading of a crash and that its financial institutions had required emergency liquidity along the lines of Northern Rock.

The Bank of Spain Governor Miguel Angel Ordonez said that the current market turbulence has increased uncertainty in Spain, as everywhere else. He asked for more transparency in the market, " The biggest favour banks can do is to come clean on losses" http://www.forbes.com/feeds/ap/2007/09/18/ap4129672.html. However, it is known that this is difficult to achieve.

On the other hand, Spanish banks' shares have fallen almost 40 pc since April, as the credit crunch is changing the picture for Spanish lenders. It is expected the turmoil to affect big Spanish companies which want to borrow money to finance their expansion. Furthermore, an economist at the Instituto the Empresas business school in Madrid estimates haf a million families will have trouble paying their mortgages if euro interest rates, which have double in two years, rich much further.

To sum up, banks will all be affected by a drop in confidence, which is really damaging for the market.

Northern Rock too risky

While it is especulating about possible bidders for buying the bank, stockbrokers are advising shareholders to sell their shares ahead of a bid, as the stock is too risky for any investor who is not prepared for large losses.

Although last week Northern Rock share's value was buoyed by speculation that a bidder would emerge, stockbrokers warn there could be further falls.

Furthermore, many financial experts agree that there could still be very negative news for shareholders, because the situation is changing on a daily basis and analysts are having some difficulties to value the company. The main problem is that there is no guarantee that the company will even be bought at market price and this would be terrible for shareholders.

The last new about Northern Rock's bid is that Citigroup is ready to provide more than £5 billion in financing to ease the way for a takeover of the bank. Citigroup is a mayor American financial services company based in New York City http://www.citigroup.com/. The final terms of the deal are still being negotiated. This fund would be very important for Northern Rock, as the Bank of England can not provide liquidity to it for ever.

Who knows Northern Rock' s course?

The most probable Northern Rock's future is being bought by a large bank or any other bidder who could afford bank's financial situation.

Private equity firms in the US and UK are known to be circling Northern Rock. The american JC Flowers seems to be one of the bidders. Mr Flowers is one of the richest americans according to The Forbes 400 http://forbes.com/lists/2006. The Sunday Telegraph reported yesterday he may join the Cerberus Capital Management LP and Citadel Investment Group LLC hedge funds to split up Northern Rock.

While rumors of possible contenders are at every press, the UK's fifth-biggest mortgage lender tries to calm its customers with the message "Your funds are safe with Northern Rock" http://www.northernrock.co.uk/. The reason is that about £1 billion was withdrawn by panicking customers on Friday. As a concenquence the company's shares suffered a big decrease in their value on the market.

The Sunday Telegraph's photo

To sum up, if no bidder appears during the next few weeks the bank may be force to consider separating sales of its mortgage book.

The Crash of´29

The Crash of 1929 was one of the most devastating stock market crashes in American history. It consists of Black Thursday, the initial crash and Black Tuesday, the crash that caused general panic five days later.

While no consensus exits about its exact causes, it argues that one of the principle causes was the attempt by politicians and the media to stop markets speculators. The probable second reason was the great expansion of investment trusts and public utility holding companies. The convential view was that stock prices were too high.

The Wall Street Crash had a tremendous impact on the whole population, because the dramatical prices fall made it very difficult for entrepreneurs to find the necessary money to go on running companies. This problem made more than 100000 american companies close and consequently a lot of workers became unemployed and at that moment there was no national system of unemployment benefit. The final consequense was that the american purchase power fell dramatically.

This crash helped bring on the drepression of the thirties which was a terrible period of crisis in the whole world. The depression also helped to extend the period of low stock prices, because of that it took to the Wall Street bourse 22 years to reach the same level it achieved in 1929.