Tuesday, Nov 27, 2007
Handbags at ten paces
Business: Darling and King fell out over Northern Rock
A long but very interesting article which gives an insight into the degree of government meddling in the NR fiasco.
"Mr King stood firm, and it was rumoured he would resign rather than cave in to the Treasury. Mr Darling lost his temper with King, at an explosive meeting, and insisted he must inject money into the system to save the banking industry as a whole"
Posted by little professor @ 07:42 AM (637 views) Add Comment
6 Comments
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1. Dave The Box said...
So is the BoE "independent" or not?
I think not.
2. george monsoon said...
Thanks Professor, for posting this concise, well written, no bulshit detailed account of the demise of Northern Rock.
I have difficulty in understanding the financial jargon, often discussed on here with real venom, and this article has enriched my understanding of how the banks work, and how much of a stranglehold the government has over the MPC. I was under the impression that teh MPC had some power, but that illusion has now been shattered. The government will act in any way it sees fit, regardless of (in my opinion) the better judgement of Mervyn King.
Reading this article has also opened my eyes to the fact that our current government has only one agenda - to uphold its public image and preserve the feel good factor. I really cannot believe that these muppets in power are not prepared to pull in the reigns on our banking system to preserve any chance of avoiding a full on depression.
Dumstruck!
3. paul said...
I think this is a given really isn't it?
Summarized much better by the front page of Private Eye soon after the fiasco emerged:
Brown "Everything alright, Darling?"
Darling "No you've given me the rap for Northern Rock"
Interesting however that King actually capitulated, and in doing so banished forever the idea that the Bank of England is independent of the government's political ambitions ...
4. Icarus said...
It's the old story: if you owe the bank £100 grand you're in trouble, if you owe it £100 million the bank's in trouble. If you play with big sums you don't get cut off at the knees as you do if you play with small sums. The big banks know that they ARE the financial system and that the government and central banks will do anything to bolster that system. So Northern Rock IS different from Rover and handwringing about the 'moral hazard' of supporting banks that have been reckless is no more than, er, handwringing.
5. Aaronm said...
And the really annoying thing is that the political interference won't even achieve the selfish political aims of Brown. The credit crunch and house price crash are inevitable - the seeds were planted many years ago.
So this is interference is for interference's sake. The economy is in for a tough time anyway, and it looks like some politicians might decide to make it worse by stoking inflation. Cutting rates now will not change the facts - risky debts are risky debts and any free money supplied by the government will be used to buy gold (in my very humble opinion).
6. inbreda said...
"banished forever the idea that the Bank of England is independent of the government's ..."
Don't think anyone on HPC suffered any illusions in this respect. It's just yet another thing we can all feel smug about now. And when house prices are 50% of their current value we will have every right to feel smug about that as well.