September 18, 2007 (LPAC)---Despite the fact that the British Government and the Bank of England announced they would guarantee the deposits of the rapidly sinking Northern (on the ) Rock(s) mortgage bank, depositors continue to withdraw their funds in unprecedented amounts—and this is despite the bank's stock having gone up this morning. Already three billion pounds in deposits have been withdrawn since Friday. Other mortgage lenders whose stocks were hit hard on Monday, including Alliance & Leicester banks, recovered some of their losses so far today.

The Independent today reports that the Bank of England plan to use Northern Rock's assets, in order to guarantee the deposits, would be "tantamount to nationalizing the bank." The Daily Telegraph said that if this move doesn't stop the "crisis in confidence" in the banking system, it could be politically devastating for Prime Minister Gordon Brown..

Meanwhile the Bank of England announced that it loaned 4.4 billion pounds of "exceptional" funds at its benchmark rate of 5.75% and will offer the same amount on September 20 in seven day debt. This following what it said was "intelligence" that demand for money may prolong a surge in the overnight borrowing rate.

"Secured overnight money market rates have again been unusually high," relative to the Benchmark rate, a BOE statement said, according to Bloomberg. "This together with intelligence from counter-parties, suggests that there may have been further rise in the demand for reserves."