Did the Bank of England help bring down the damaged commercial banks?


          The most serious issue that the  Enquiry into the Bank should raise is its role in the collapses of Northern Rock and RBS. We have seen that it failed to influence the tripartite regulators into controlling the surge in bank balance sheets in the years of expansion. In the two years of collapse it failed to make enough liquidity available in time to avoid a run on one bank and a near cessation of trading at another.

            One of the prime tasks of a Central Bank is to be the lender of last resort to banks in its system. All banks are meant to be solvent. The banking regulator supervises them and certifies they are. The Central Bank has to ensure they are also liquid. A strong bank may have a lot of its money invested in high grade loans. If too many depositors want their deposits out at the same time it may not have the cash to pay them. Given time it can sell its loans on to someone else and free the cash. The Central Bank is meant to step in and lend to bridge the gap.

                In the torrid banking summer of 2007 some of us were urging the Bank of England to make the banking markets more liquid by injecting cash into the system. The Bank refused. The inter bank markets dried up as banks lost confidence in each other. Northern Rock depended on a lot of inter bank borrowing to support its large mortgage business. It was obviously at risk. The Bank of England argued that it would induce moral hazard if it lent more to Northern Rock or other banks short of liquidity. The result became well advertised when Northern Rock ran out of cash.

                   After the collapse of the Rock the Bank of England did inject more liquidity into the system, showing it could do so. It repeated this performance on a larger scale with RBS a year later.

                            The Review needs to ask why didn’t the Bank act as a lender of last resort to a greater extent earlier to ward off bank collapses?  Wouldn’t it have been better if the Bank had made cash available to prevent these collapses? Wouldn’t short term loans have been cheaper and better for taxpayers than forced purchase of shares? Wouldn’t such action have staved off the worst but forced the banks to cut costs and sell assets to repay the loans? Isn’t that the new system they say they now wish to operate in a future crisis?Why didn’t they do it when they had a live crisis? If living wills are good for a future crisis, why didn’t they use a controlled form of administration, where the authorities kept the main deposits and payment systems going?


  1. Single Acts
    May 29, 2012

    I don’t want to come across as a Jeremiah, but your final paragraph is fundamentally calling for better subsidy rather than capitalism. I’m not sure people vote tory for the slightly more competent administration of socialism, but that seems to be the offer.

    In this as in so many areas, the political settlement seems to have run aground on the left of centre social democratic rocks. This may go some way* to explain awful voting turnouts and the inability of the conservatives to actually win last time.

    (*There are other factors of course)

  2. colliemum
    May 29, 2012

    I think these questions, while important, are questions which are, if you like, ‘downstream’ of the real problem.
    I think the far more important question which needs to be asked is ‘upstream’ of all those questions: shouldn’t the bank, the FSA, or the government have interfered when Northern Rock made mortgages of 105% available, and allowed self-assessments of the mortgage customers of their income?

    You do say “Northern Rock depended on a lot of inter bank borrowing to support its large mortgage business.” – Northern Rock did so because there was no regulation of mortgage lending, and I suppose this was allowed to happen because of the mortgage practices introduced by Clinton, i.e. sub-prime mortgages for those who couldn’t afford paying back what they owed but were lent the money anyway.
    This is where it started – and yes, in hindsight mortgage lending should have been regulated far earlier.

  3. lifelogic
    May 29, 2012

    Indeed not providing liquidity was certain to result in the outcome that resulted the queues outside the branches of depositors withdrawing cash. To be followed by the rushed and incompetent rescues.

    I see we have finally had the U turn on the what are now, in the UK, luxury items of pasties and a caravan home. He still needs to change the complex almost unworkable arrangements on withdrawing the child benefits for people earning more than £50K.

    Then Osborne needs to do something to encourage some growth for a change rather than just trying to tax, inconvenience and kill all business. It is rather late now though Milliband may be a useless, state sector union place man but he is not as unpopular as Brown was.

    Cameron will not beat him with his socialist, fake green, EU lapdog performance so far.

    1. lifelogic
      May 29, 2012

      I see that the pleasant enough (but rather dopey and out of her depth) Baroness Warsi (yet another lawyer) has got herself into some local difficulty and is giving rather vague answers – intentionally one assumes.

      It seems, once again, we are all in this together. Unless we we are in the house of Lords where one gets tax exempt potential “profits” from £165 overnight “subsistence” and restaurants subsidised at about £100 a day per member too. All it seems tax free (even any profit).

      Alas should I give my staff even so much as a £3.00 lunch voucher then even the 15p tax break was recently abolished by Osborne in his absurd recent budget. All in this together as usually. Osborne and Cameron have no credibility left to win again – even against the absurd Unison puppet Miliband.

      No one can believe a word they say. Actions are what counts and theirs have nearly all been in the wrong direction. Say one thing and do the opposite will only wash a while!

    2. lifelogic
      May 29, 2012

      And if that were not enough we now have the huge “welfare to work” scandal with Cameron’s Tsar Emma Harrison and her £8.6 million dividend?

      We do not need these useless PR gimmick schemes with tsars (or ex tv personalities). Even if they were honest and well run they are nonsense, we need working banks, a smaller (less than 30%) state sector, fewer regulations and a cheaper (non green religion) energy policy.

      Cameron is doing all the wrong thinks while still pretending to be pro business.

  4. Mick Anderson
    May 29, 2012

    The BoE is partly culpable for not providing liquidity at the right time, but the biggest problems were allowed by politicians.

    Rot set in when Mr Clinton repealled the Glass-Steagal act, effectively making the American taxpayer liable to back investment banking. Couple this with all sorts of dubious insurance policies to give a feeling that you can never lose money no matter how terrible the deal, and the US banks could dig themselves into a massive hole.

    As the UK has a reputation for being a world leader in financial services, it essentially followed suit (sic). Mr Brown failed by not realising the flaw in the American boom. Presumably he liked the idea of higher cash velocities because it meant easy money for the Treasury, so the UK banks were allowed to join in. His dreadful tripartite system helped because nobody was responsible for any resulting mess – there was always someone else to blame.

    Low interest rates added fuel to the debt fire. When it started to unravel, the BoE was slow to act, although I’m not sure that it’s entirely their fault. It has always seemed bizarre that they are charged with trying to control slow-reacting inflation with the single tool of interest rates. It’s a little like trying to manually control the height of the tide at Littlehampton by adjusting the position of the moon. There are other rather large forces in play….

    Then the politicians let us down again by insisting that the banks had to be supported, rather than by supporting the depositors and letting the failed businesses die a natural death.

    So, American politicians might have started the problem off, but British politicians componded the errors. The banking system was due a contraction, but it didn’t have to be anything like this bad.

    No matter how bad a situation is, it’s a safe bet that adding more politicians is going to make things worse.

    1. A Different Simon
      May 29, 2012

      “Rot set in when Mr Clinton repealled the Glass-Steagal act, effectively making the American taxpayer liable to back investment banking. ”

      I agree with you that allowing taxpayer guaranteed banks , retail deposit taking no less , to engage in this sort of activity was negligent .

      Actually transferring the losses from a zero-summ game to the taxpayer is plain criminal yet that process was used to recapitalise insolvent institutions .

      The term “investment bank” is used when it is innappropriate to confer respectability to instutions were investment banking is only a minor interest and the main business is proprietary trading .

      Things like synthetic credit default swaps are nothing to do with underwriting as there doesn’t have to be an insured interest . Investment bank activities would not require the enormous balance sheets these institutions have .

  5. Kevin Ronald Lohse
    May 29, 2012

    I’d also like to know, did the BoE have the authority to do so without the PM’s OK. and what was Gordon’s input into the mess?

  6. Richard1
    May 29, 2012

    Very well set out. It is critical that before the next election the public come to understand that the financial collapse was a direct result of long-term mismanagement of the economy by Labour, followed by a panicked and botched bank recapitalisation, which need never have happened. Labour’s attempt to blame the whole thing on a few greedy bankers must be exposed for the fraud it is.

  7. Pete the Bike
    May 29, 2012

    The result of this will be some tinkering with regulations, maybe some solemn sounding pronouncements and absolutely no real change in a central bank system that has undermined our currency, allowed unrestricted government spending, destroyed savings through both inflation and low interest rates and saddled the country with enormous liabilities for bank debt.
    The reason nothing will change despite it’s catalogue of failures is that it allows politicians to buy votes from the economically illiterate.

  8. Jed Dawkins
    May 29, 2012

    I find it hard to understand why you would advocate for the saving of an obviously bankrupt business model. The subsequent saving of these banks has led to Zombie organisations which are sucking the life out of the system. Why do TPTB insist on saving banks? They are businesses and if they have failed they should go bust. They will have to go into liquidation in the end anyway or be completely nationalised (Bankia et al) once their bad debts come home to roost and the derivative bubble bursts (watch JP Morgan’s losses mounting), the dominoes will soon start to fall.

    Saving these organisations is folly over the long term and only forestalls what will now be a much greater global disaster. It was clear that the banking crisis in 2008 would become a sovereign crisis as governments added huge losses to the national balance sheet. It is a time for strong leadership. We in the UK need to take some lessons from Iceland and reintroduce some moral hazard into banking. You might also note that in Iceland there has been substantial mortgage forgiveness, something not reported in the mainstream media. They are writing off the debts, which in the end, is the only solution going forward.

    1. Tony Baverstock
      May 29, 2012

      Sorry Jed but before you make such comments can I suggest you do a bit more study. First can I suggest you understand just how complicated words such as insolvency and bankruptcy are. Many companies would be insolvent if not valued on a going concern basis. In the same way a company which is solvent on a going concern basis may have to go into administration.

      Also you mention JPM and Bankia but these are nothing to do with the UK.

      Finally, when you mention Iceland you should remember Iceland acted illegally by rescuing the domestic element of its banks but allowing the international part to default.

      1. nicol sinclair
        May 29, 2012

        @ Tony. The Icelandic Govt may have acted illegally but – so what? Who has inflicted sanctions upon the GoI? No one? Therefore, we might ell do the same…

        1. uanime5
          May 30, 2012

          The UK and Netherlands forced Iceland to pay back this money. Also there has been a large scale migration from Iceland and protests against the Government.

      2. Lindsay McDougall
        June 1, 2012

        A few facts about Iceland’s recent economic history:

        “The foreign exposure of Icelandic banks, whose loans and other assets totalled more than 10 times the country’s GDP, became unsustainable.” (Source: CIA factbook). So they could not afford not to default. Gordon Brown was the only person to fail to recognise this.

        From Icelandic quarterly real GDP growth statistics:
        Over the course of 10 successive quarters (2008 Q2 to 2010 Q3), real GDP declined by a total of 15.8%.
        For 5 of the 6 quarters from 2010 Q4 to 2012 Q1, Icelandic GDP growth has been positive.

        Ireland and Greece have experienced similarly large contractions but have not had the recovery.

        Moral: Keep private debts private, don’t bail out private sector banks and don’t join the Euro zone.

  9. Mike Stallard
    May 29, 2012

    Who was in charge during this crisis?
    I don;t think either the FSA or the Bank was.
    I reckon it was the Scottish Genius who was actually in charge, as usual making all the wrong decisions – as you so carefully prove above.

    1. nicol sinclair
      May 29, 2012

      @ Mike Stallard

      Shred springs to mind. I have been a customer of RBS for 51 years and never have I been so embarrassed that a bank in the land of thrift could behave in such a carefree and careless manner.

  10. Denis Cooper
    May 29, 2012

    Firstly, it cannot be repeated too often that under Brown’s tripartite arrangement the Bank of England was no longer responsible for the prudential supervision of commercial banks.

    That task was passed to a bunch of novices and incompetents at the FSA, headed by:


    I put his name in capitals because he was little known to the general public at the time, and as he was allowed to slink off into obscurity after the crisis had hit he is still little known.

    The Telegraph ran a profile of him in July 2011, and it’s well worth reading that article:


    “McCarthy was chairman of the FSA from 2003 to the dark days of Lehman Brothers’ collapse in September 2008. As such many blame him for being asleep at the wheel while the credit market boomed and financial markets ran wild.”

    “Does he feel he was to blame?

    “I think that undoubtedly I had responsibility for various things, some of which worked and some of which didn’t. I take those responsibilities very seriously.”

    So, with retrospect, how does he reflect on it?

    “If you look at what went wrong – because clearly things went very badly wrong – it was a combination of things,” he says.

    “There were individual mistakes in individual organisations, but much more fundamental was the thinking that lay behind what was called the great moderation – descibed by Bill Rhodes of Citibank as the Goldilocks years: not too hot, not too cold. That thinking wasn’t correct.

    “The model … has been shown to be badly flawed. It’s an interesting question – when you have a period of apparently huge success, how do you actually think through what is wrong with the model you’re operating to.”

    So is it something he still grapples with?

    “Yes, of course. Because I don’t think the task of intellectual rebuilding has been properly gone through yet. It took us 15 to 20 years to develop the model behind inflation targeting, the responsibility of central banks, finance ministries and regulators as being fairly separate – very clever people thought of that. It’s something we didn’t get right.”

    Does he feel guilty? Was the FSA asleep at the wheel?

    “They’re very difficult issues,” he says. “It’s important to understand the responsibilities that were then given to the FSA and they were very largely responsibilities for individual institutions. One of the things the model didn’t deal with was the gap between macroeconomic issues and the supervision of institutions. That’s now being addressed.”

    All of that might be true but he was in charge when Northern Rock went down. A pretty straightforward miss surely?

    A long pause. “One of the things the FSA has been good about doing is publicly looking at what it did right and wrong, and publishing those findings,” he says.”

    “So what or who was to blame for RBS’s failure?

    “I think that … It’s a very complex set of issues… I’ll pass on that,” McCarthy trails off.”

  11. javelin
    May 29, 2012

    Great article on the parallels between the collapse of the Soviet Union and the European Union. Political Elites who believe it cannot happen and push dangerous policies as a result.
    In 1992, the world woke up without the Soviet Union on the map. One of the world’s two superpowers had collapsed without a war, invasion or any other catastrophic development. Although the Soviets had been in irreversible decline since the 1970s nothing had predetermined their collapse at the end of the 20th century. In 1985, 1986 and even in 1989 the disintegration of the Soviet Union was as unconceivable for the analysts of the day as the prospect of EU disintegration is for today’s experts. The Soviet empire was too big to fail, too stable to collapse, and had already survived too much turbulence. But what a difference a decade can make. What was perceived as unthinkable in 1985 was declared to have been inevitable in 1995. And it is exactly this twist of fate, this leap from the ‘unthinkable’ to the ‘inevitable’, that makes the experience of Soviet disintegration a useful footnote to the current discussions on the European crisis and the choices that European leaders face

    1. Mark
      May 29, 2012

      As a long time Soviet watcher (and having spent time living there) while Brezhnev was still in charge I called the collapse of its empire accurately to a degree that startled me when it happened.

      At the time of the launch of the Euro, I estimated it would break up by 2015. History, anthropology and economics are a far better guide than politics to future events, although they are often triggered by the demise of key individuals.

    2. uanime5
      May 29, 2012

      One major difference between the EU and Soviet Union is that most countries didn’t want to be in the Soviet Union. This is why most countries in the Soviet Union didn’t try to prevent its collapse and revolted in 1989.

  12. javelin
    May 29, 2012

    Just to follow up the article on the Soviet union – this quote stuck out.

    “It is not the divergence of interests, but the lack of empathy that should bother us most. ”

    Empathy – the ability to put yourself in another persons shoes. What is also forgotten is alltruism. Your girlfriends can woffle on about how good they are at empathy, but it is alltruism – the ability to give – that is what really matters. And Germany needs to give for the EU to survive.

    Psychological studies show that empathy comes first, but you need a sense of “oneness” with the other to be alltruistic. With close family and friends. I cry at the theatre, but I don’t leave the actor a tip at the door.

    This too is true of Germany, the more Merkel uses the language of the lazy Greeks – there is a greater separation of self-and-other. Less one-ness. Less alltruism. Her act of attacking the periphery, her act of seperating self-from-other, is creating a rift in the psychological sense of a seperate self in the core. Germany will not be there for the Eu when the Eu needs her because Merkel has not created a sense of one-ness. If this is to be, it is to be.

    Germany, Core no more.

  13. Denis Cooper
    May 29, 2012

    Secondly, I found it difficult to understand why some sections of the media appeared to be pursuing a vendetta against Mervyn King.

    I could understand why the general public might be persuaded to lay all the blame on him, because he is still in post and a household name while Sir Callum McCarthy is no longer in post, was never a well-known figure and was allowed to slip away into comparative obscurity.

    Three weeks ago Liam Halligan blew the gaffe on that:


    “My view is that much of what has been written about King in recent days is not only nonsense but dangerous and commercially-motivated nonsense. Yes, the UK economy is struggling and, yes, the public are looking for scapegoats. As a well-paid and “clever” civil servant, the Governor fits the bill.

    It needs to be clearly and widely understood, though, that the City is trying to destroy King’s reputation for the simple reason that he is pretty much the only senior UK policy-maker still arguing for the kind of robust bank regulations, much tougher than those currently proposed, that are needed to prevent another serious financial meltdown.

    The negative-publicity campaign against King, years in the making but seriously escalated last week, is being staged by the same “vested interests” which he, almost alone among Western central bankers, has dared to face-down. As such, the investment banks drip their poison, the PR agencies punt it and knocking-copy sells papers – not least when times are tough.

    The Governor is determined to do everything he can, before his term expires in June 2013, to rein-in UK banks. The City doesn’t want that, of course. So history is being re-written, with King being accused of all manner of things in order to undermine his authority.”

    “What really got the City’s goat about King’s latest speech is his on-going determination to separate “ordinary” retail banking from “risky” investment banking.

    It is vital, said King, that the Government brings the Vickers reforms into law “sooner rather than later”. These changes, which “ring-fence” investment and retail banking in the same institution, aren’t set to bite until 2019 – long enough for the banking lobby to water them down even more.”

    “Within the Square Mile, King’s latest speech was a declaration of war on a banking sector that has wrecked our economy, been mollycoddled and remains astonishingly bloated.

    Little wonder the money-men have buried the Governor’s message under a pile of self-serving vitriol.”

  14. Leslie Singleton
    May 29, 2012

    Because they didn’t think it was as serious as it in fact was of course.

  15. Mark
    May 29, 2012

    When banks that are heavily dependent on wholesale borrowing are bailed out it is no longer just the borrowing bank that is being bailed out, but also the banks that lend to it. If a bank has a balance sheet dominated by loans to other banks a failure at one of those banks an strain its balance sheet and prevent it from being able to roll over lending to other banks.

    This poses two questions: if the wholesale lending banks are in a different jurisdiction, which central bank should do the bailing out? why aren’t there limits on interbank lending that prevent this (international) contagion within the banking system?

    UK banks that got into trouble were heavily dependent on international borrowing to fund their lending in the UK. The expansion in mortgage lending after 2000 was entirely funded this way: some £800bn of privatised borrowing that pumped up the economy and fed government spending. When the BoE did act, it eventually pumped in at least £319bn via the SLS and CGS, and £200bn of QE, as well as other undisclosed lending – effectively bailing out foreign banks, and limiting the losses of those exposed to the Lehman bankruptcy, and propping up the GB property market rather than letting it correct from bubble conditions (for reasons best known to itself and the banks concerned, no attempt was made to maintain the bubble in Northern Ireland). More was spent on bailing out depositors with Icelandic banks.

    Even if there is some agreement on how to spread the burden of bailout between central banks (and there is strong evidence that this did emerge with some UK banks effectively being bailed out at least partially by overseas central banks and quasi central banks rather than the BoE), there is the question of how the banks should then resolve their problem loan books.

    In the UK, all the reduction in lending has been borne by businesses and the interbank market: the housing market has not been touched. This has created severe economic problems, causing businesses to shut down and to place zero trust in banks as sources of funds.

    The failure to tackle mortgages and let house prices fall is adding to numbers of households who have made major investments and borrowing commitments at bubble prices, and who will inevitably become the victims of negative equity when prices do correct. It also acts as a continued bailout of those overseas lenders who have bought UK mortgage securities; prevents banks from having funds available to lend to business; and increases housing benefit bills, both because of higher rents, and because fewer renters can or are willing to afford property purchases at bubble prices.

    1. Denis Cooper
      May 29, 2012

      The latest scare story from the government is that if Greece is allowed to leave the euro then mortgage rates will go up.

      The story is transmitted through various housing industry players, but I’ve grown cynical enough to believe that it’s been instigated by the government to help persuade us that we should be prepared to fork out to support their policy of preserving the eurozone intact at all costs.

      They know that a majority of voters have been conditioned into believing that rising retail prices are a bad thing but rising house prices are a good thing, a direct consequence of the high level of owner-occupation, and the threat of rising mortage rates and falling house prices is a button they can press to generate support for their policy.

      I wonder how a “property owning democracy” can work, when those owning property are so easily seduced into voting for politicians who will arrange for destructive property price bubbles.

      1. A Different Simon
        May 29, 2012

        Yep , there is a lot of scaremongering going on isn’t there .

        Clegg was on the TV at the weekend claiming the sky would fall in if Greece left the Euro .

        1. nicol sinclair
          May 29, 2012

          And his wife’s Spain perchance.

  16. Lindsay McDougall
    May 29, 2012

    The question is: what was it reasonable to expect the Bank of England to do (and have prepared for) given the knowledge available at the time? I don’t think that we can blame anyone for failing to anticipate the collapse of Northern Rock because the operating environment for that bank changed from benign to malign very quickly. By the time that the RBS crisis and HBOS crises came, both the Chancellor and the BoE should have been ready.

    When Freddie Goodwin walked into Gordon Brown’s office saying that he had ‘a little cash flow difficulty’, what he should have been told was:
    – Shut your doors and stop trading for a week
    – Conduct a fire sale of sellable assets
    – Make a full statement of your assets and liabilities, as accurately as possible, specifying the likely effects of falling house prices
    – Reopen under the control of a government appointed administrator

    Had that been done, RBS shareholders would have lost their shirts, their depositors would have taken a hit and taxpayers would barely suffer at all. Which is EXACTLY as it should have been. The same should have been done with HBOS.

    The Spanish authorities are now making the same mistake as their UK and Irish counterparts – bailing out and buying out failed banks – with major consequences for Spain’s total government debt. Commentators reckon that this will cause Spain’s debt to soar from 70+% of GDP to 110% of GDP.

    It seems that, like the Bourbons, institutions of Government learn nothing and forget nothing. Yet the example of Iceland is there for all to see. The debts of private banks are private and they can be allowed to fail. Iceland had a terrible time for several years but I hear that things are OK there now.

    1. Sue Doughty
      May 29, 2012

      In the sure and certain knowledge that if you borrow from a bank what you may never be able to pay back the taxpayers will back you up why do we not all have extended sub prime mortgages?

    2. A Different Simon
      May 29, 2012

      What sort of “hit” would it have been acceptable for depositors in retail banks to take ? 100% , 50% , 10% ?

      We pay regulators and MP’s to stop this from happening .

      Instead they allow these banks to indulge in proprietary trading .

      I’m not disagreeing with you that they have to be allowed to fail .

      Lagarde , Merkel , Cable and Sarkozy were unfortunately right that Cameron defends the interests of the City of London even when they are against he interests of the man in the street .

    3. nicol sinclair
      May 29, 2012

      “When Freddie Goodwin walked into Gordon Brown’s office saying that he had ‘a little cash flow difficulty’, what he should have been told was:
      – Shut your doors and stop trading for a week
      – Conduct a fire sale of sellable assets”

      How can that be fair to those thousands of mortgage holders who had been faithfully paying their monthly payments? Put them on the streets to collect social security?

  17. Tony Baverstock
    May 29, 2012


    Before suggesting we allow banks which on a going concern basis where solvent, but unable to borrow sufficient to fund maturing deposits go bust you should consider that after 3 1/2 years of the Lehman’s administration very little has been returned to creditors. The administration of RBS would have taken just as long. Many large companies had deposits with RBS as did many of the other UK banks. I am confident that if RBS had gone into administration many large UK companies and some of the other UK banks would have had no choice but to follow it into administration. This would have made the position far worst.

  18. Tony Baverstock
    May 29, 2012

    Mr Redwood

    Can I raise some points which are rarely mentioned because they are technical but I think are much more important when you consider the failures of the FSA.

    1. The FSA was fully aware that the major driver of systematic risk in a banking crisis is lack of liquidity. The FSA was of the view that collateralised lending, repo, was the solution. This was cleanly not the case and repo funding disappeared as quickly as bank deposits. The repo market also meant if security markets where falling repo capacity diminishes and in periods of uncertainty the collateral lenders will accept may change rapidly.
    2. The UK market was increasingly dependant on securitisation. Norther Rock almost 100%. The SFA allowed assets to be securitied to be treated as short term assets. When the securitisation market, particularly for property backed assets closed this delivered a funding shock which the banks where not prepared for.
    3. Why did Lehman’s in the UK fail. It was a UK regulated entity and should not have been effected by its parents going into Chapter 11.

  19. Sue Doughty
    May 29, 2012

    It was wrong of the banks of the world to lend more money than there is money in the world, but who should have been counting? It used to be the Bank of England ….

    1. nicol sinclair
      May 29, 2012

      Bring back the independence of the BoE

    2. Tony Baverstock
      May 30, 2012


      I think you are confusing money as an economic term, and one which is very hard to define and money as an accounting measure.

  20. REPay
    May 29, 2012

    I recall middle ranking banker clients predicting what would happen…I recall sitting in a presentation in 2007 and listening to a prediction of what was going to happen with Freddie and Fannie by two DC lawyers…I remember colleagues explaining how some of the Special Investment Vehicles would collapse…

    I was not exactly at the heart of finance but I find it hard to believe that regulators and governments were really as dozy or stupid as they now claim or appear…

    End of boom and bust! Future generations will curse our wastrel governments and incompetent regulators…how easy and convenient to blame the bankers.

  21. David Langley
    June 1, 2012

    How useful are boards of directors in banks? Do they do their jobs properly, and guide and warn when balance sheets show stress and too much risk?
    Where is the evidence for this? Or do they take the money and hide when the bubble bursts? No wonder shareholders feel aggrieved.

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