RENEE MONTAGNE, host:
And the biggest victim of the global credit crunch in Britain is the mortgage company Northern Rock. When the lender was forced to tap the Bank of England for emergency funding, the country saw its first run on a lender in more than a century. Today, Northern Rock's shares jumped 46 percent, and that was because of news that the British government has approved a deal to save the bank.
NPR's Rob Gifford reports from London.
ROB GIFFORD: Finally, a rescue plan for the damsel in distress. If the British government is the knight in shining armor, it arrived swiftly to fight off the fire-breathing dragon of bankruptcy, but it's been slower in bringing the damsel down to freedom. Now, that looks like it might happen.
British finance Secretary Alistair Darling has announced Northern Rock will issue $50 billion worth of new bonds - basically, IOUs the banks and pension funds around the world to buy.
As the British government is guaranteeing the bonds, it hopes they will be more attractive to investors. So by repaying what Northern Rock owes to the Bank of England for its rescue last fall when the credit crunch began, the government hopes to make the bank more attractive to private investors.
Alistair Darling told the House of Commons yesterday that this was the only way to save Northern Rock.
Mr. ALISTAIR DARLING (Chancellor of the Exchequer): While as conditions are better now that they were before Christmas, they remain difficult. The government's financial advisers believe that there is no chance of achieving a private sector deal backed entirely with private finance in the near future.
GIFFORD: Perhaps, not surprisingly, Alistair Darling proved not to be, well, the darling of the opposition benches.
Conservative Party economics spokesman George Osborne.
Mr. GEORGE OSBORNE (Economics Spokesman, Conservative Party): He wants to the taxpayers of Britain to provide a 25-billion-pound mortgage to Northern Rock for years to come.
GIFFORD: And looming in the background is, of course, a bigger question: With the credit crunch continuing, will there be other damsels in the future to be rescued?
Rob Gifford, NPR News, London.