The Bank of England, understanding it's not their role to bail out mortgage gamblers, holds tight [UPDATE - BofE DOES 180, BAILS OUT NORTHERN ROCK]

[FLASH - UPDATE - 180 DEGREE REVERSAL FROM EARLIER POST: MERVYN KING AND THE BofE JUST HAD TO BAIL OUT A FAILING BANK HERE IN ENGLAND - YES, IT'S THAT BAD. THIS IS WHY BANKS AREN'T LENDING TO EACH OTHER RIGHT NOW - THEY DON'T KNOW WHO'S ABOUT TO GO UNDER. NOW WE'RE FINDING OUT, AND NOW ALL CENTRAL BANKS ARE IN PANIC MODE]

[UPDATE #2 - BANK RUN NOW UNDERWAY ON NORTHERN ROCK LOCATIONS IN ENGLAND... NEW PHOTO ABOVE]

The amateur-hour ECB and we-love-bubbles-US Fed are lending could-fail-soon banks hundreds of billions of dollars and Euros on demand, with (get this) toxic mortgage CDO's serving as collateral. Oh, man, is this gonna end badly. But cheers to Marvin King at the BofE for holding tight thus far, and here's hoping Ben Bernanke doesn't have his head up his ass on Monday and cut rates. Discount window, OK, mess with rates, Moral Hazard.

As one observer said about King and the BofE:

"The Bank is right in taking this position and the other central banks are wrong in apparently encouraging moral hazard."

Never have truer words been spoken. [UPDATE - NEVER HAVE SUCH BALD-FACE LIES BEEN TOLD]

And never have the risks of Moral Hazard been greater than they will be on Monday. If Ben cuts, gamblers and bubble-blowers will know that the Fed will always be there if things go wrong, so the next bubble will be even bigger. And even more hurtful. Just look what happened when Greenspan f*cked up and bailed out the dot-com gamblers. The housing bubble was the worst bubble in human history.

Here's more on the Bank of England holding rates tight, although give him a few English bank failures (they'll come) and we'll see if he can stand the heat from No. 10. [UPDATE - MERVYN KING COULDN'T STAND THE HEAT FROM NO. 10, AND KNOWS THAT IF HE DIDN'T DO A 180 TODAY, NORTHERN ROCK WOULD HAVE FAILED. MEANWHILE MERVYN KING LOOKS LIKE A LIAR, HYPOCRITE AND A JACKASS WHOSE WORD IS WORTHLESS]

No time for drastic measures, says King

Bailing out commercial banks would “sow the seeds of a future financial crisis”, Mervyn King, Bank of England governor said on Wednesday.

In making clear that the Bank of England had no intention of following in the steps of the European Central Bank in lending billions to financial institutions for three months, Mr King pointedly distinguished the Bank’s strategy from that of its central bank peers.

In a letter to the Treasury select committee, the famously unflappable Mr King acknowledged that the path ahead was “uncertain”, but made clear this was no time for drastic measures.