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Nine Months After: Northern Rock Blues

If you’d told me nine months ago that I’d be rocking out (well on the inside at least) to a tune about the collapse of one of England’s largest mortgage lenders, more than one eyebrow might have been raised – on the outside.

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Back in autumn 2007, the images of anxious pensioners queuing around the block to withdraw their deposits from Northern Rock branches quickly became synonymous with the credit crunch in the UK. The pictures brought into focus the often unclear reality of a market meltdown, and suddenly words like liquidity and credit crunch were as likely to be heard in a black cab as on a trading floor. The man on the street had an opinion on The Rock, the Bank of England, and even “subprime” actually meant something to the average pundit.

Just ask Robin Tracey (The Time Trader), CNBC viewer and musical ingénue, who felt so passionately about this tale of a bank gone bust he had to put it in lyrics.

Talk about the sub prime mess,
Too many people wanting more for less
Everyone out to grab a buck,
Seems too good, can’t believe their luck

So exactly what is it about the story of ‘The Rock’ that took it into the mainstream?

Northern Rock was a compelling financial story in its own right – it was, after all, the first run on a British bank in recent history. But the story was all the more remarkable in the way it jumped out of the financial arena and into the public limelight.

“What triggered the crossover into mainstream was when the queues formed outside the branches,” said Mark Tinker Global Portfolio Manager at Axa Framlington Gemini. “It made wonderful mainstream fodder, with people pointing their finger at the government and the government pointing at someone else.”

The difference with this story as opposed to other financial unfoldings, said Tinker, is that the government response was played out as sport in the papers, becoming a scorecard for the public of the overall management of the economy.

The Rock was also different, Tracey’s lyrics suggested, because everyone out there got the feeling that the good times of the last decade might just be over.

Buy a home with no money down,
Then you find you’re on your own,

“The story was so multi-dimensional,” Tinker said. “The mix of naked politics, shareholder action and a shock to an individual stock,” was without a match in recent history, he said.

Northern Rock “whizzed to the top of the public agenda” after the government got involved but also after the numerous media reports, Howard Wheeldon, senior strategist at BGC Partners, said.

“The difference with Northern Rock was the way the papers jumped on the story with no knowledge,” Wheeldon said. “They made the fear so much worse.”

When the Northern Rock story crossed over into the mainstream, lasting damage was done by the “inappropriate” manner in which complex issues were handled, Wheeldon added.

Lasting damage might also have been done to the love lives of many a city banker if we believe Tracey:

Did you really want to see,
If the money was for nothing and the chicks were for free?

June 17 will be nine months on from that day when thousands of customers queued outside the bank's branches and investors fled en masse from the group’s stock. The story of Northern Rock’s collapse will always be remarkable for its deep impact on the UK banking system, but perhaps even more so for the way in which one financial story transformed the public awareness and understanding of that system.

So is there a lesson to learn from the tale of The Rock? Wheeldon, for one, says the moral of this story is that going mainstream never was particularly cool – neither in financial nor any other circles.

“It almost beggars belief looking back now, but the lesson of Northern Rock might be that following a fashion is just not the way to go,” he said.

On this point Tracey seems to agree. Maybe next time round we’ll all heed the warning:

It’s all great till the cash runs out
After the joy, comes the doubt.

Listen in full here…