Don’t bank on it

With Alistair Darling coming under increasing pressure after the loss of the personal data of twenty-five million people by Her Majesty’s Revenue and Customs, Martin Vander Weyer reviews how Darling and Gordon Brown have also moved into the firing line in the whole Northern Rock debacle. They along with its employees and shareholders now have the most to fear from the crisis.

No one seriously argued, ab initio, that the Northern Rock fiasco was the government’s fault. Not even Gordon Brown’s worst enemy (a title more hotly contested than Strictly Come Dancing) tried to claim he was the evil mastermind behind US sub-prime mortgages, or the vast growth in the securitised debt market which Northern Rock relied upon for funding, or any other aspect of Northern Rock’s over-sophisticated business strategy. Nor did anyone suggest it was dull-dog Alistair Darling who taught hedge fund managers how to make fast bucks by short-selling bank shares on the back of mischievous rumours. When David Cameron, in his lame-duck pre-party-conference phase, tried to suggest that the culture of debt encouraged by Brown was the root cause of the whole crisis, he was mocked and ignored.

But so profound has been the swing of the political pendulum since then, and so intractable and multi-faceted has the Northern Rock problem turned out to be, that the government has somehow managed to manoeuvre itself squarely into the spotlight of blame. It was the three-way division of regulatory authority between the Bank of England, the FSA and the Treasury – devised by Brown in Treasury control-freak mode in 1997, with Darling as his junior – which allowed Northern Rock to pursue its high-risk course for a crucial few weeks too long without a safety net. It was Darling’s vacillating public statements on the day that made the queues outside branches longer and more anxious.