credit update 21 09 07

Bank of England Governor Mervyn King blamed the pastiche of legislations in the UK and European Union for the bank's inability to act properly and swiftly on the Northern Rock debacle. Chancellor Darling believes that the Northern Rock episode could have been prevented had BOE agreed to accept mortgage collateral at its lending window earlier, similar to what the Fed and ECB did. BOE officials, however, insist that this would not have made any difference since the root of the problem was Northern Rocks' over-reliance on short-term funding in the capital markets.

In his testimony before the House Financial Services committee, Fed Chairman Bernanke called for a better regulation of mortgage lending practices, particularly better disclosure and more uniform enforcement of rules in the fragmented market structure of brokers and lenders.

Bear Stearns said its third-quarter plunged 61% form the collapse of its two hedge funds in the subprime mortgage crisis storm. This contrasts sharply with the superlative performance of Golman Sachs which posted a 79% rise in third-quarter profit, despite of a $1.71bn write-down.