Congratulations to Northern Rock for achieving something of a miraculous volte face. Instead of remaining the pariah of the banking world, unloved and untrusted by any of its depositors, it is now the safest bank in the UK for depositors to place their money.
How did Northern Rock achieve this 180 degree turn around in its fortunes?
Suffice to say, it has nothing to do with the actions of the board!
The Treasury has stepped in, and guaranteed all deposits until financial markets become less volatile. This means that money deposited after September 19th will now be covered by the Bank of England, the Treasury and the Financial Services Authority. The authorities previously only protected deposits made before then.
This news, whilst cheering for the depositors, also gave the long suffering shareholders some respite as well. Shares rose yesterday by 20% to 206p, as the news gave Northern Rock (irreparably holed below the water line) more time to sell itself to third parties.
The talks with third parties are likely to drag on for a few more months.
Needless to say, this debacle should never have occurred in the first place. Had Northern Rock's directors operated a more sensible business model, and the FSA actually done their job of monitoring the situation, much heartache and financial loss would have been avoided.
As if by chance, the Financial Services Authority (FSA) Chairman Callum McCarthy found himself being grilled on this very subject by the Treasury Select Committee yesterday.
Discussing the ability, or rather lack of ability, to predict the closure of the markets both for securitisation and for short-term repurchase agreements, he said:
"We didn't identify the probability of that happening.
No regulator anywhere around the world succeeded in predicting that."
Not everyone was particularly impressed with his performance. Sion Simon, a Labour Party member of the committee, said that he had heard that relations between the FSA and the Bank of England were "poisonous" and compared McCarthy to a boxer.
"You are the Sugar Ray Leonard of the financial-services sector. You are a world-class ducker and diver.
There was a run on the bank, the nation was a global laughing stock, and you say the provisions worked?"
The first run on a British bank in 140 years, quite a success in the FSA's narrow view of the world! A shambles and an embarrassment by anyone else's standards.
It is clear the the tripartite market monitoring system introduced in 1997, whereby the Treasury, Bank of England and FSA, share an uneasy responsibility for watching over the financial services industry, is not working.
One of these bodies will have to be placed in charge over the other two, and made responsible for monitoring and regulating the markets.
Unfortunately, given the nature of the parties involved, there is likely to be a protracted turf war for which body takes on that role. In the meantime, the UK financial services industry and the UK economy will be left exposed to further shocks and scandals.
A very shoddy state of affairs indeed.