February 18, 2008 (LPAC) -- The British Government has nationalized Northern Rock, the bankrupt bank which was hit last year with huge losses on mortage-related securities and suffered serious runs by depositors. The move, which occurred Feb. 17, was announced by Chancellor of the Exchequer Alistair Darling, and represents the first British bank nationalization since the 1970s. The bank has over £100 billion (nearly $200 billion) in questionable assets including undisclosed billions in worthless subprime mortgage securities. Over the past six months, the Bank of England has extended £25 billion in emergency loans to the bank.

Northern Rock, which was Britain's fifth largest mortgage bank, ran into trouble last August, hit by long lines of depositors waiting to withdraw their funds, withdrawing according to some reports at least £20 billion of its £24 billion of deposits. Now that the bank is nationalized, the government is responsible for all of its liabilities, costs which could increase the government's budget deficit from the current £44 billion to as much as £144 billion.

The bank, which once had a market value of more than £5 billion, had seen its stock plunge to the point that it have a value of just £380 million as of its closing on Friday, Feb. 15, and its shareholders--including a large contingent of hedge funds--will take a bath.