Former building society Bradford & Bingley has joined Northern Rock in government administration, making it the last of the building societies that became banks to exit the City. Building societies started turning themselves into banks in 1989 when Abbey National, then the second largest mortgage lender after the Halifax, became a quoted bank in 1989. Abbey threw in the towel in 2004, after investing unwisely in financial instruments it didn't really understand (where have we heard that before?) and was bought by Spanish giant Santander. Santander has since snapped up Alliance and Leicester and has now bought B&B's branch network and deposits business for £600m, leaving the Government the unhappy owner of £40bn or so of less than blue chip mortgages. The credit crunch did for the former building societies (including the Halifax, now part of bank HBOS which has had to be rescued by Lloyds TSB) because they depended on the wholesale money markets to fund a big part of their lending. Northern Rock needed to roll over £50bn every six weeks. These have gummed up as banks have become afraid to lend to each other so the mortgage banks were all about to run out of money. So will the Government be the next to go bust, with all those Northern Rock and B&B mortgages? It will have to take a few short term hits but it's actually quite profitable to run a mortgage business even in today's straightened times if you don't need to run a branch network or spend millions on marketing. Northern Rock has already paid back £10bn or so of its £50bn, even though it still has a branch network. Is this the beginning of the end of the credit crunch in the UK? It would be nice to think so...