Northern Rock

This may be the biggest story last week that you didn't hear anything about:

There was a very large bank run in London. The mortgage banking firm Northern Rock is suffering from the mortgage/credit/housing debacle and investors demanded their money .... in very large numbers .... in lines extending around the block. Some call that a "bank run".

Why is this a big story for us? Well, financial failure has a way of becoming like falling dominoes, affecting other institutions and other economies. It's perceived as a big enough problem that Treasury Secretary Hank Paulson flew over to London on an emergency trip to try and help sort the mess out.

Experts warn that a decade-long borrowing binge has left Britain dangerously exposed to the fallout from the global liquidity crisis. US Treasury Secretary Hank Paulson flies in to London tomorrow to discuss the worsening global credit crisis with Chancellor Alistair Darling, as fears intensify that the lending squeeze could be the last straw for Britain's buy-now-pay-later economy.

City economists warned that a decade-long borrowing binge had left the UK economy dangerously exposed to the fallout from the credit crunch. 'I think the UK is extremely vulnerable to this,' said Danny Gabay, director of consultants Fathom. 'The UK has a double vulnerability. We are vulnerable because of our hugely over extended consumer sector, and because of our large financial services sector.

'This is a financial market event; but the longer it goes on, the greater the risk that it becomes a real economy event - and I think we are at a tipping point.'

I suspect the big money boys will bail Northern Rock out. We all better hope so.

Added: It's pretty bad when a mortgage company (in this case an American mortgage company) sends out property tax checks and they bounce.