Darling's rocky guarantee
12:19am
The government’s unprecedented decision to guarantee every bank deposit in the country should be enough to stop the queues outside Northern Rock branches and any further meltdown in the financial system. However, no one has covered themselves in glory during this episode. Adam Applegarth, the chief executive of Northern Rock, has delivered a master class in how not to handle a crisis, The Bank of England and the Financial Services Authority have between them dropped the ball and the government has looked far from sure of itself. Indeed it is noticeable how despite Alistair Darling’s shaky performances, Gordon Brown has still kept away.
One of the many questions that remains to be resolved, as Daniel Finkelstein notes, is when will this government guarantee be formally lifted? To do so anytime soon would risk reigniting the panic but for it to carry on indefinitely would be to effectively nationalise the risk of a bank default.
Politically, this episode has damaged Labour’s reputation for economic competence. It is not a Black Wednesday moment but if Labour were to roll out its self-congratulatory economic posters at the next election they would now be met with hollow laughter.
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bymasson
September 18th, 2007 11:34am Report this commentI wonder if Labour are going to start underwriting all investments for everyone? If I invest my money in a company that goes broke, will Mr Darling give me my money back? Whilst I have some sympathy for the customers of Northern Rock, they did choose to put their money there. Darling's only other option was to say "Labour messed up and you all lost your money - too bad." so I can see why they did this. Not that it makes me any happier about the use of taxes.
Richard Barnes
September 18th, 2007 2:58pm Report this commentRos Altmann has made an interesting comparison between the circumstances of Northern Rock depositors and members of failed final salary pension schemes. The former now receive a guarantee underwritten by the taxpayer, while this government have said that the taxpayer cannot be expected to compensate the latter. Perhaps someone from the goverment could explain why this is?
Dr. Bhaskar Dasgupta
September 18th, 2007 4:37pm Report this commentI agree, it was lies to cover incompetence. See my take on this http://dailysalty.blogspot.com/2007/09/so-government-is-going-to-guarantee-all.html
David Lindsay
September 18th, 2007 6:29pm Report this commentThings would be so much better if that reassuring, naturally respect-commanding George Osborne were at the Treasury. Don't you reckon...?
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