John Jackson (London, Charter 88): There is something in our natures which draws us to look for someone to blame if things go wrong or to attribute the worst possible motives whether things go wrong or right.Take Northern Rock. The Will Huttons of this world seek political or governmental miscreants to put on trial. Tony Curzon Price accuses Gordon Brown of political expediency. I am uneasy about Will Hutton's accusatory approach (what motivates him?) and think that Tony Curzon Price is plain wrong. Because of the "better safe than sorry" factor there was a real risk that the "run" on Northern Rock would spread and that our screens would have filled with ugly images of nervous depositors fleeing from anything that smelled like a bank clutching their savings and lifting the floorboards under their beds. Action to avert this was plain common sense, not political expediency, and I am glad Gordon Brown and Alistair Darling took it.
Underlying these events is an inescapable fact. In a capitalist world money will and should be attracted to where the financial risk/reward ratio looks good. That involves judgement and if those making the judgement are wrong there will be consequences for them and those directly or indirectly tied to them. Sometimes, as in the Northern Rock case, that can mean most of us. That is why the interrogation of Mervyn King by MPs was important. Given that in a free democratic world we cannot, and should not, stop those judgements being made, who watches over the interests of "most of us"?
There were three questions those MPs could have asked. Who knew about the exposure of UK banks to the US sub-prime market and asked the "what if" question? And what could/should they have done if they did not like the answer? As a separate but related matter, should depositors in our modern global world be more completely informed about the affairs of those with whom they are placing their money? The difficulty flowing from that question is that meaningful information would raise the problems of commercial confidentiality and of telling would be depositors more, and more frequently, than is presently told to deposit takers' shareholders. The banks would not like this. If, as they probably would, Treasury Ministers and the Bank of England agreed with them, depositors would, if the matter stayed there, be left hanging in the wind. That is why it would be right for Alistair Darling to put a significant level of guarantee under the position of depositors. Again common sense and not political expediency.