The British government introduced emergency legislation Monday to take temporary public ownership of Northern Rock, a major mortgage lender threatened with failure as a result of the sub-prime-spawned credit crunch.
The government stepped in with about $104 billion in loans and guarantees in the fall. Now, it has rejected two private rescue plans for the ailing bank and hopes to stabilize the bank, then resell it.
Chancellor of the Exchequer Alistair Darling, in announcing the move Sunday, said it was the best way to "protect the taxpayers' interest."
But the proposal was immediately met with a hostile reception from Conservative opposition leaders.
"Never before in the history of his office has a chancellor ever had to come to parliament to announce the nationalization of a high street bank," said George Osborne, the party's shadow chancellor.
"Nationalization means the slow, lingering death of Northern Rock and Britain's reputation as a major financial services center, with [Darling] cast in the role of the undertaker. . . . He is now politically a dead man walking."
Like most British banks, Northern Rock didn't have a significant portion of its loan portfolio in the sub-prime market.
The bank was nonetheless caught up in the turbulence because of its substantial reliance for funding on short-term money markets, which rapidly eroded as banks lost lending confidence.
Darling defended the move Monday as the only way to protect both depositors and the nation's financial stability.
"There were choices," he said. "We could have let this bank go under. But the risks to the wider financial system, the savers and the general public were not acceptable."
Parliament was scheduled to act on the proposed legislation after a second round of debate today.