Crisis or opportunity?

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19 - 09 - 2007

Jon Bright (London, OK): Did Brown make the right decision in bailing out Northern Rock? (No-one really thinks it was Alistair Darling's call). Tony Curzon Price has an article over on openDemocracy saying it was wrong, on two counts. Firstly, it undermines the independence of the Bank of England, widely regarded as one of Brown's biggest achievements (as it seems Mervyn King was dead against the move). Northern Rock was saved for political reasons - perhaps to keep an October election on the table.

Secondly, and more importantly, it sends the wrong signals to the banks: they can take as much risk as they like, and always be kept afloat in the last resort. If Northern Rock had been allowed to sink, only the shareholders and managers (and staff) would be punished - depositors still compensated by government guarantee (Tony doesn't think it would have created a system wide meltdown).

Every crisis, then, is an opportunity - and this was a chance to restore a bit of responsibility to Britain's lenders. Should Brown have taken it?

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