UK Government acting for shareholders and depositors - PM

Responding to MPs during Prime Minister's Questions, Mr Brown said that it was right to look at "all the options" regarding the bank and that current proposals represented "the best deal" for the taxpayer. The Government had intervened to prevent the spread of instability and to secure the savings of depositors with the bank, he said.

At today's PMQs the Prime Minister stressed that the proposed scheme ensured the Government would be the "first to be paid back" and that it was preferable to any process of administration. Breaking up the bank would result in a "fire-sale" with assets being sold at below value and losing "billions of pounds", he added.

Northern Rock entered difficulty when a large increase in defaults on mortgages in the US filtered through to the financial system. Banks have been reluctant to lend to one another for fear of not being repaid, with a number of large institutions incurring substantial write-offs.

Northern Rock had particularly wide exposure to loans based on high-risk mortgages, a strategy described by the Prime Minister as a "bad business plan" and "bad management". - Source: By 10 Downing Street