So this is prudence is it?
I expect much comment in the Sunday press about the almost unprecedented run on the Northern Rock by their customers.
The 1929 crash was caused in part by a complete collapse of confidence by the public in their financial institutions and the regulatory authorities ability to protect them. Todays troubling pictures of anxious investors queueing up to get their cash out of their bank because they fear it going bust is, in my view, a damning indictment of both the FSA and the Bank of England.
In fact any banker will tell you that the base ingredient for a stable economy is trust, trust in the value of money and trust in the banks that store it for you; this is one reason why we like our banks to be big, boring and institutional - it's reassuring.
One of the often repeated side effects of this spin-obsessed Government is a lack of trust. People just don't believe Government ministers or even the Prime Minister to tell them the truth anymore. All Government institutions are damaged by association, threatening the entire workings of Government itself. Statistics, like the number of immigrants or the rate of inflation aren't trusted.; Policemen aren't believed like the used to be in court, government officials find their evidence scoffed at so we have a resurgence in mumps and rubella because people stopped having the MMR vaccine and so on.
When Gordon says 'the economy is fine' we don't believe him. When Chancellor Darling says 'Norther Rock is fine, your money is safe', evidently investors don't believe him, either.
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3 comments:
This could go either way for Gordon Brown, on the one hand he could be seen by voters as a safe haven in a storm and on the other he could take the blame for encouraging a boom all of his own.
In my opinion although this banking crisis is not actually his fault it has the potential to damage his credibility - the one message that New Labour have succeeded in delivering is that the economy - once the undoing of every previous Labour administration- was safe in their hands.
The FSA have failed in their prime task, maintaining confidence in our financial institutions.
After BCCI and Barings; then Standard Life and now Northern Rock it's obvious the regulatory authority is not fit for purpose.
Yes but who was responsible for establishing the FSA anyway?
Gordon Brown was warned that his proposal for a single regulator for savings, investments and banking ran the risk of having too many conflicts of interest and not being specialist enough to stay ahead of the complicated derivatives and instruments that banks use these days.
He didn't listen and this is the result.
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