The UK’s Government has asked Goldman Sachs to find new financial backers who are prepared to back a private sector solution and put together a financing package to rescue Northern Rock. The two rival bidders, Virgin Money and Olivant’s funding problems may jeopardize their proposals because lending banks are demanding bidders to put up at least $1.8-$2.1 billion of equity capital as a cushion to absorb the initial effects of a possible housing slump and the UK’s deteriorating housing market could make it difficult for Northern Rock to stave off nationalization. Northern Rock holds over 87,000 residential mortgages on its books and 10% of those are now considered high risk. The bulk of Northern Rock’s mortgages are good, however, the lower quality mortgages are driving down Northern Rock’s valuation and if market conditions don’t improve, nationalization may be the only option left for Northern Rock as the bank continues to lose deposits and market value.