Here are four quotes from Adam Applegarth, chief executive of Northern Rock, on yesterday's deposit run:
The quotes are worthy of some comment and reveal much about recent thinking within the UK mortgage industry.
"Nobody could see the squeeze on global liquidity."
Mr Applegarth must have been asleep when the Bank of England was raising interest rates. Global liquidity conditions have been tightening for quite some time. Did he not notice that the Federal Reserve in America have been hiking rates for at least three years? A casual read of the financial times would have been sufficient to point to the tightening liquidity conditions.
Despite the obvious signs of a changing interest-rate environment, Northern Rock kept pumping out the mortgages, paying scant regard to risk management. Let us not forget that it was one of the first banks to offer mortgages at 125 percent of house valuation.
Mr. Applegarth did not see the squeeze coming, because he did not want to see it. If he sat back and considered the implications of higher interest rates on the UK housing market, he would have stopped lending.
"Whatever the bank base rate is, you are going to see higher mortgage interest rates."
This is an interesting and undoubtedly accurate observation. The world inhabited by Mr Applegarth has just rediscovered risk and chancy banks like the Northern Rock now look rather unattractive.
The obvious implication of higher mortgage interest rates is a crashing UK housing market. It is already started to happen, with prices stalling in most parts of the country. The Northern Rock disaster merely serves to wake up the rest of the country to the reality that house prices are about to tumble.
"We can't see the end of this. We don't know how long it will last. We decided we had to move earlier rather than later. There was no point sitting around like Mr Micawber waiting for something to turn up."
This quote inspires a mixture of responses. For some time, Mr Applegarth and his colleagues at Northern Rock have been waiting around like Mr Micawber, waiting to something to turn up. Despite rising interest rates, and the blatantly bloated housing market, primed for a crash, Northern Rock kept on pushing out the mortgages. It shouldn't be surprising that Mr Applegarth "can't see the end of this". He didn't see the beginning of it, and clearly doesn't have strong perceptive skills.
"The (Northern Rock) business model is not appropriate and we will have to evolve and change. Though we will not be the only ones. I think you will see the whole lending environment change,"
The Northern Rock business model was never appropriate. It was an accident waiting to happen, and the car crash happened yesterday. His comments about evolving and changing are amusing. The only change at Northern Rock will see is a hurried takeover from one of the high street banks, who will be offered the Northern Rock loan book at a knockdown price. The shareholders will take the hit. As for Mr Applegarth, he will probably find himself out of a job.
Yesterday marked the end of the road for Northern Rock, but are there any other Northern Rocks out there, waiting to explode? You bet. Applegarth and his Northern Rock weren't the only lender out there fueling the housing bubble.