Bloody kamikaze Gordon Brown came under fire today when it emerged that he failed to act on a warning about a gaping hole in emergency planning to cope with a banking crisis.
In 2004, the Tripartite Authorities – HM Treasury, the Bank of England and the Financial Services Authority - had identified gaps in their capability for dealing with a failing financial institution, but although work was taken forward it was not judged a priority in the circumstances at the time.
At the time of the initial run on deposits at Northern Rock, the Treasury put in place guarantee arrangements for retail depositors and wholesale creditors. The immediate risk of instability in the financial system was stemmed. But the Treasury could have been more engaged with the actions being taken in the early stages by Northern Rock. As a condition of public support, mortgage lending was reduced but the company still went on writing high-risk loans up to 125 per cent of a property’s value. Mortgages of this type have a higher default rate.
This bombshell official report by the NAO revealed that the Treasury realised in 2004 that it did not have proper plan to deal with a bank that ran out of ready cash and put the financial system under threat.
But at the height of the boom, it was decided that the threat was not important enough.
Just two years later the credit crunch brought Northern Rock to its knees and began a banking meltdown that has driven the country into recession.
The BBC must be changed to stop its Liebour pro bias.
Any toxic loans over 100% made after bail-out should be reviewed and the managers all responsible should be fired from Northern Rock as they were contemptibly irresponsible for more debt.
The actions of Northern Rock's board of directors and managers borders, it would seem, criminal negligence and they should be pursued in the courts for redress on behalf of the U.K. taxpayer.