Monday, September 17, 2007

The Bank of Toyland

American bankers from the 1929 era would have felt right at home in the offices of Northern Rock last week. The absence of many tall buildings from which they could jump might have inhibited them, of course, but, other than that, the surroundings would have been familiar.
As was the government's predictable advice. “We have nothing to fear but fear itself” was the message, hoping to instil the spirit of FDR into the hearts and minds of the British clients who had placed their savings in what was now, quite clearly, the bank of toyland.
Unsurprisingly, the public, no doubt mindful of the specious way in which the government had deluded them in the past into going to war against Iraq, refused to believe them and prudently elected to get while the going was, if not good, faintly accessible.
And who can blame them?
The Bank of England, whom, in a past and distant era, might have had some credibility, is now no more than a compliant mouthpiece of government. The relaxing of the controls formerly placed upon banking institutions was a political manoeuvre of dubious economic worth.
For Northern Rock was not a bank in the traditional sense of the word. It was a business based solely upon the projected increase in property values and funded largely by loans, not deposits, a sort of real estate perpetual motion that should have been rubbished by any competent monetary authority.
And the gall and disrespect shown by the principals to their clients by voting themselves substantial bonuses (on top of their already substantial salaries) when they were well aware that the ship was heading toward a substantial northern rock, is unbelievable.
It seems that most of the board of Northern Rock will escape the debacle with substantial financial benefit.
It's a strange world where fiscal imprudence and bad management is so rewarded.
I note that many of those queuing to withdraw their funds are of an age when they can perhaps remember the last time the government assured them of the integrity of a bank.
It was called BCCI.


Post a Comment

<< Home