LONDON - Northern Rock, which suffered the first run on a British bank in 140 years, will be nationalized after the government confirmed yesterday that it had failed to reach a private-sector deal.
Treasury chief Alistair Darling ended months of speculation by saying the ailing mortgage lender will be placed under temporary public ownership.
He said neither of two private proposals - from Richard Branson's Virgin Group and an in-house bid from the bank's management team - "delivered sufficient value for money to the taxpayer."
The government had said more than $49 billion in government loans must be paid back within three years.
Darling said the two private proposals involved risks for taxpayers and significant government subsidy.
Northern Rock ran into trouble in September because it relied too heavily on short-term money markets instead of deposits for funding. A subsequent profit warning and appeal to the Bank of England for an emergency loan led to long lines at branches nationwide.