Why Northern Rock Crumbled

The mortgage lender, once a star of Britain's housing market, is the latest to fall victim to the credit crunch

Scary lesson of the week: No corner of the global financial system is immune to the turbulence in the markets. Until last week, Northern Rock plc (NRK.L) was the pride of Britain's reviving northeast region and a fast-growing star in the English business firmament. The Newcastle-based mortgage specialist had grown rapidly under its brash chief executive, 45-year-old Adam J. Applegarth. By mid-2007 it had become Britain's fifth-largest housing lender, making nearly 19% of new loans. At its peak in February, the bank's market capitalization exceeded $10 billion. "It was best in class," says Gordon Scott, an analyst with Fitch Ratings in London.

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