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Why Are Investors Deserting Bradford And Bingley?

As the Bradford and Bingley saga continues to roll on there are many outside of the City who just do not understand what is happening at one of the UK's best loved mortgage lenders. The Group has arranged a £400 million rescue package, it has the backing of some of the largest institutions in the sector but the shares just keep falling and falling. Now down to 34p, against the 55p price at which £400 million will be raised, just what is going on?

The situation at Bradford and Bingley is a reflection of the sector as a whole and City's obsession with finding the next victim of the credit crunch. In what could be described as a self fulfilling prophecy it seems as though the knives are out for Bradford and Bingley with one analyst recently suggesting that the bank's shares were worthless. This has prompted many investors to take fright and sell the shares down to the 34p level seen today, with a suggestion that Bradford and Bingley is in no better situation than Barings was prior to the 1p sale to ING some years ago.

While it is obvious that companies such as Bradford and Bingley will suffer if the economic downturn worsens, can the regulators really afford another Northern Rock scenario? Rumours of a possible bid for the group are rife, but what will happen to Bradford and Bingley over the next few months?

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