A few tiles may go, but Northern can weather this storm

IVAs, where lenders agree to wipe out all debts for a fraction of what's owed, are the latest manifestation of the culture which has encouraged people to believe that nothing is an unfortunate accident or their fault. Originally invented to encourage enterprise by allowing failed entrepreneurs to make a fresh start, IVAs have been hijacked by organisations offering to save overstretched consumers from their own folly.

Even a "perfectly viable" IVA will not get the lender his money back, and in Doling out Northern Rock's case, its shareholders would pay. They might feel they've already paid enough; as the chart shows, their shares have halved this year, and at 670p they yield a net 5.9% on the latest dividends. Northern's bad debts (so far) are no rockier than those of other banks, but it has lent more enthusiastically than most, funding its growth by borrowing in the money markets and bundling up the mortgages to sell on to provide funds for more loans.

This dependence on wholesale money is suddenly very expensive, and the slump in its share price reflects the sharp rise in its financing costs, with three-month Libor, the rate off which loans are typically priced, now hovering around 6.9%. Banks that would normally lend happily to Northern are hoarding cash to meet guarantees given earlier to opaque financial vehicles which are no longer able to renew their short-term loans in the money market.

This crisis looks increasingly like a tropical storm that will sweep right out short rations through the financial system within 90 days (the typical term of a moneymarket loan) from its start at the beginning of August. It will carry away lots of obscure financial structures like Victoria Mortgages, which handed its keys back this week, but in October Libor will subside towards base rate as the storm passes. While it may take some tiles off Northern Rock's roof, the damage will be superficial. Structural damage would follow only if dearer mortgages cause house prices to fall significantly.

The latest lending figures bring that prospect a little nearer, with first-time buyers spending nearly 20% of their income on mortgage payments, the highest since 1991, when monthly payments effectively included a slug of capital repayment. If this storm becomes a hurricane, even Northern's well-covered dividend might be exposed, but that looks unlikely. The share price is discounting much worse weather, which is why they look a good bet if you believe this financial storm is not, after all, Hurricane Katrina..