Does Northern Rock now have an illegal advantage?

The Bank of England today extended their support of Northern Rock to guarantee money lent to them by other banks. This follows an initial liquidly loan, which started the saga, and the decision to guarantee the money held by savers.

The first two actions are understandable, but the latest move raises serious questions. Banks lend money to other banks every day, but the crunch in the US market has made them reluctant to do this, as the risk is higher than it was in the past.

However, we now have one UK bank (Northern Rock) who other banks can lend to with absolutly zero risk. Does this not give Northern Rock an unfair competitive advantage. If I were a CEO of any other bank struggling to borrow money at the moment, or paying above-average rates, I'd want the BOE to be guaranteeing my loans as well.

This comes on top of the news that the Government's support for The Rock cannot extend beyond six months, which means this has to be sorted one way or another very soon. A decade of economic competence?

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