On Tuesday a rumour spread about the town - this time not precipitated by John Laws - that Adelaide Bank was going under. On Tuesday night the US Fed cut interest rates by 50 basis points. By Wednesday all was forgiven.That was "the week that was" in the Australian banking sector, dominated by extraordinary television footage of thousands of Brits queued outside branches of mortgage lender Northern Rock, demanding their deposits back. Police were called in to control the unruly mob. As the week progressed and the crisis worsened, the Bank of England went from stating it wouldn't bail out banks caught up in the mortgage security market, to agreeing to a rescue line of credit for Northern Rock which would protect most smaller deposits, to imploring the Chancellor of the Exchequer that nothing short of a full-scale guarantee would save the Rock from crumbling. The Treasury duly obliged, and added that it would indeed guarantee every deposit in every bank in the Kingdom.This act has no precedent in history, inside or outside Britain. Having stood steadfastly unmoved as the global credit crunch had played out, while central banks around the globe were desperately injecting liquidity, overnight the Bank of England had acted in one fell swoop and saved the British banking industry. According to respected market consultants GaveKal, it may also have ended the global credit crunch in one blow as well, even before the Fed announcement.Relative movements for the week ending 19 September 2007:Westpac (WBC) +1.44 per centCommBank (CBA) +1.40 per centSt George (SGB) +0.32 per centANZ (ANZ) -1.41 per centNational (NAB) -4.09 per centASX 200 +1.48 per cent Macquarie Bank CEO Allan Moss must wonder whether he shouldn't simply refrain from opening his mouth in future. No sooner had Moss announced a 40 per cent profit upgrade at a presentation in Europe, and a significant lack of exposure to global credit woes, than the Northern Rock debacle hit. Macquarie's initial sharp share price hike was ultimately wiped out. The same thing happened in July. Moss had only just announced another typical upgrade when Bear Stearns divulged two of its hedge funds were going under. Having flirted with $100, Macquarie shares soon found themselves at $60.All financial institutions had suffered as a result of Northern Rock, from Macquarie to the pillars and down to RAMS Home Loans. And, of course, Adelaide Bank, which, along with the RBA, was quick to quash the rumour it had approached the central bank for a bail-out, and Bendigo Bank, which is about to takeover its interstate competitor. It was looking like this week would be yet another week in which the banking sector would underperform the broad market substantially.The underperformance would also have come despite some positive news from Westpac that it had tested the credit market waters and was able to put away two bond issues. At a total of $850 million, the three- and five-year issues were only minor, and spreads achieved were some 27 basis points above pre-credit crunch