BBC News
watch One-Minute World News
Last Updated: Saturday, 17 November 2007, 17:00 GMT
Lib Dems call for Rock takeover
Northern Rock boss Adam Applegarth
Adam Applegarth will leave his post by the end of January 2008
The Liberal Democrats are calling for the government to take over control of ailing bank Northern Rock after its chief executive resigned.

Acting Lib Dem leader Vince Cable said a temporary government takeover was the best way to safeguard the 24bn of public money loaned to the bank.

But the Treasury has dismissed the idea of the government taking control of the bank at this stage.

The Tories are demanding assurances taxpayers' money is being safeguarded.

The bank's shares collapsed after it was forced to seek emergency funding from the Bank of England in September.

'Least worst option'

Mr Cable told BBC News there were three options for the government - let Northern Rock go into receivership, seek a private buyer, or take it over itself.

He said the first option would be a "desperate measure", which would lead to the government losing billions, bank workers losing their jobs and the Northern Rock Foundation - the bank's charitable arm - being imperilled.

He said any private buyer would be looking for "a lot of public money", making a government takeover the "least worst" option and the "best way probably of guarding the vast amount of public money now tied up in the bank".

A Treasury spokesman told the BBC that taking control was not the right option at this point.

The bank needed "breathing space" to consider its choices and said the takeover was a matter for the board, he said.

There's going to be a deal announced before Monday because if not, on Monday morning, Northern Rock will be an institution without a board
Will Hutton
Work Foundation

Earlier, Northern Rock announced its chief executive, Adam Applegarth, was to step down in the New Year.

Shadow Chancellor George Osborne said Mr Applegarth's departure had added to confusion surrounding the mortgage lender and was not enough to reassure taxpayers.

"The confusion and indecision surrounding the handling of Northern Rock grows and grows," he said.

Two private investors - a consortium led by Richard Branson's Virgin Group and investment firm Olivant Advisers - confirmed they had made proposals to rescue the bank by a Friday deadline.

BBC business editor Robert Peston
No deal can be done until Alistair Darling makes up his mind how long he is prepared to sustain the enormous financial support he has provided
The BBC's Robert Peston

US private equity firms JC Flowers and Cerberus are among other firms expected to come forward with offers for the Newcastle-based bank, which is responsible for about one in five mortgages in the UK.

As well as Mr Applegarth, Northern Rock said four non-executive directors, were resigning immediately.

At the same time, four board directors were standing down from the board but would stay with the firm.

'Deal before Monday'

Will Hutton, of the Work Foundation, said the resignations meant a takeover was imminent.

"It's no surprise, and they were there to steward Northern Rock through, and their resignation obviously signals that actually that period is over, and that puts a lot of heat on the authorities.

"It means that actually there's going to be a deal announced before Monday because if not, on Monday morning, Northern Rock will be an institution without a board."

There's no way out of this position that I can see, other than some form of break-up of Northern Rock
John Moulton

Northern Rock has been in trouble since getting caught up in the global credit crunch over the summer, which left it unable to borrow money from other banks to fund its business model.

Concerned customers rushed to withdraw their money and the bank has since been seeking bidders to rescue it.

Analysts say there are a number of options for the bank going forward, ranging from an outright buy-out to a breaking up of the bank's assets.

John Moulton, a founding partner of private equity group Alchemy, said the whole affair had done an "enormous" amount of damage to the whole banking system.

"The moment it was decided to try and rescue it, it was a one-way game," he told BBC Radio 4's Today programme.

"There's no way out of this position that I can see, other than some form of break-up of Northern Rock - liquidate as much as you can for the government. That'll be the best outcome.

"Anything else is going to result in very large losses to the taxpayer."

The events that lead to the top staff resigning

Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit


Americas Africa Europe Middle East South Asia Asia Pacific