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Rock response was right, says PM Rock response was right, says PM
(about 2 hours later)
Gordon Brown has defended his handling of Northern Rock against criticisms of government negligence, saying he took the "necessary" steps to save the bank.Gordon Brown has defended his handling of Northern Rock against criticisms of government negligence, saying he took the "necessary" steps to save the bank.
Opposition parties say a report showing Northern Rock lent £800m in risky mortgages after it was bailed out with public money was "damning". A National Audit Office report said Northern Rock was lending £800m in risky mortgages up to six months after it was bailed out with public money.
The Conservatives said such failings were "inexcusable" while the Lib Dems said they warned ministers at the time. The Tories said failing to end 125% mortgages immediately was "inexcusable" - the Lib Dems called it a "disgrace".
But the PM said the alternative was letting the bank collapse.But the PM said the alternative was letting the bank collapse.
Speaking in Brussels, where EU leaders have agreed a package of measures to support the global economy, Mr Brown said ministers had taken the right action in nationalising the bank.Speaking in Brussels, where EU leaders have agreed a package of measures to support the global economy, Mr Brown said ministers had taken the right action in nationalising the bank.
We acted when Northern Rock got into difficulty Gordon Brown Treasury slated over Rock lendingWe acted when Northern Rock got into difficulty Gordon Brown Treasury slated over Rock lending
It follows criticism from the National Audit Office (NAO) that the government had failed to stop the bank issuing high-risk mortgages even after it intervened to rescue it. "We acted when Northern Rock got into difficulty," Mr Brown said. "I think the NAO agrees this was the necessary course of action."
"We acted when Northern Rock got into difficulty," Mr Brown said.
"I think the NAO agrees this was the necessary course of action."
He said nationalisation was the "better option", adding "the alternative was to allow it to go completely into receivership".He said nationalisation was the "better option", adding "the alternative was to allow it to go completely into receivership".
Mr Brown - who said he had not read the report in detail - said the Financial Services Authority had acknowledged some mistakes in how it had regulated Northern Rock, prior to its near collapse.
However, he said the bank had since paid back about £16bn in loans it had been given, enabling it to start lending again to new customers.
'Astonishing''Astonishing'
Mr Brown - who said he had not read the report in detail - said the Financial Services Authority had acknowledged some mistakes in how it had regulated the business, prior to its near collapse.
However, he said Northern Rock had since paid back about £16bn in loans it had been given and that this had enabled it to start lending again to new customers.
The NAO report concluded that nationalising the bank was the best route to protect taxpayers' interests.The NAO report concluded that nationalising the bank was the best route to protect taxpayers' interests.
Taxpayers will find that truly shocking Philip Hammond, shadow chief secretary to the Treasury Rock report adds to ammunition
But it found the Treasury failed to carry out a thorough assessment of the risks the taxpayer was taking on prior to the bailout or proper scrutiny of the bank's lending policies after it.But it found the Treasury failed to carry out a thorough assessment of the risks the taxpayer was taking on prior to the bailout or proper scrutiny of the bank's lending policies after it.
Northern Rock offered borrowers loans of up to 125% of the value of their properties from the time of its emergency support from the Bank of England in September 2007 until it was on the brink of public ownership in February 2008.Northern Rock offered borrowers loans of up to 125% of the value of their properties from the time of its emergency support from the Bank of England in September 2007 until it was on the brink of public ownership in February 2008.
Taxpayers will find that truly shocking Philip Hammond, shadow chief secretary to the Treasury Rock report adds to ammunition
The Conservatives said the failure to end the 125% mortgages immediately after billions of pounds of public money were injected could not be "excused" by the urgency of the situation.The Conservatives said the failure to end the 125% mortgages immediately after billions of pounds of public money were injected could not be "excused" by the urgency of the situation.
'Terrible waste'
Officials failed to "ask the right questions" about the quality of loans Northern Rock was offering, said shadow chief secretary to the Treasury Philip Hammond.Officials failed to "ask the right questions" about the quality of loans Northern Rock was offering, said shadow chief secretary to the Treasury Philip Hammond.
"It is really astonishing to discover that the Treasury did not clamp down on that immediately," he told BBC News."It is really astonishing to discover that the Treasury did not clamp down on that immediately," he told BBC News.
"Taxpayers will find that truly shocking"."Taxpayers will find that truly shocking".
The evidence over who is responsible for the economic crisis and the regulatory failures which contributed to it all lead back directly to Downing Street Stewart HosieSNP 'Terrible waste'
He compared it to the inability to limit the scale of the pension taken by Sir Fred Goodwin. He compared it to the failure to limit the scale of the pension taken by Sir Fred Goodwin.
The Lib Dems said the Treasury's handling of Northern Rock in the months after the bail out was a "disgrace". The Lib Dems said the Treasury's handling of Northern Rock in the months after the bail out was a "total disgrace".
Treasury spokesman Vince Cable said he had warned Chancellor Alistair Darling several times about the need for Northern Rock to curtail 125% mortgages.Treasury spokesman Vince Cable said he had warned Chancellor Alistair Darling several times about the need for Northern Rock to curtail 125% mortgages.
The evidence over who is responsible for the economic crisis and the regulatory failures which contributed to it all lead back directly to Downing Street Stewart HosieSNP
"We repeatedly warned the government that this was a terrible waste of taxpayers' money," he told BBC News."We repeatedly warned the government that this was a terrible waste of taxpayers' money," he told BBC News.
"The government did nothing, saying this was a commercial matter. It should have intervened and stopped it.""The government did nothing, saying this was a commercial matter. It should have intervened and stopped it."
Treasury minister Stephen Timms said "lessons needed to be learnt" about the handling of Northern Rock.Treasury minister Stephen Timms said "lessons needed to be learnt" about the handling of Northern Rock.
But he insisted the report had "vindicated" ministers in their actions in saving the bank, saying not doing so would have done the wider economy real damage.But he insisted the report had "vindicated" ministers in their actions in saving the bank, saying not doing so would have done the wider economy real damage.
While both main opposition parties supported the September 2007 bailout at the time, both were critical of the government's handling of the crisis, which led to the first run on a British bank for more than 100 years.While both main opposition parties supported the September 2007 bailout at the time, both were critical of the government's handling of the crisis, which led to the first run on a British bank for more than 100 years.
Subsequently, the Conservatives said more efforts should have been made to find a private sector buyer while the Lib Dems said the bank should have been nationalised sooner.Subsequently, the Conservatives said more efforts should have been made to find a private sector buyer while the Lib Dems said the bank should have been nationalised sooner.
Business Secretary Lord Mandelson said the alternative to propping up Northern Rock was letting it go the wall, harming millions of mortgage holders and savers.Business Secretary Lord Mandelson said the alternative to propping up Northern Rock was letting it go the wall, harming millions of mortgage holders and savers.
"We took the right decision but these decisions are never easy," he told BBC Breakfast."We took the right decision but these decisions are never easy," he told BBC Breakfast.
The Scottish National Party highlighted suggestions in the NAO report that the Treasury was warned in 2004 that the regulatory regime was not equipped to handle an institution in trouble.The Scottish National Party highlighted suggestions in the NAO report that the Treasury was warned in 2004 that the regulatory regime was not equipped to handle an institution in trouble.
"The evidence over who is responsible for the economic crisis and the regulatory failures which contributed to it all lead back directly to Downing Street," said Stewart Hosie, the party's treasury spokesman."The evidence over who is responsible for the economic crisis and the regulatory failures which contributed to it all lead back directly to Downing Street," said Stewart Hosie, the party's treasury spokesman.
The government said the issue had been "considered in depth" and "a good deal of detailed work was carried out from 2004 and through 2005 and 2006".The government said the issue had been "considered in depth" and "a good deal of detailed work was carried out from 2004 and through 2005 and 2006".