Then, between 1998 and 2007, in a gigantic surge of growth, it quintupled its balance sheet. As house prices faltered, some of its more marginal loans were primed to go bad. It was no surprise that “the Rock” got into trouble. But the obviousness of this connection is deceptive. What triggered the collapse in 2007 were not the loans on its balance sheet but the mechanism of their funding. Northern Rock was the model of a modern highly leveraged bank: 80 percent of its funding was sourced not from deposits but wholesale, at the lowest rates global money markets would offer. The bank’s 2006
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