Tony Curzon Price (London, oD): Anatole Kaletsky is just the latest to criticise the Rock's nationalisation mainly on the grounds that it distorts competition for banks that do not benefit from state guarantees. George Osborne was the first to make that the main plank of the Conservatives' objections.
Fine. I'm pretty much in favour of taking state aid away from banks, given where the finance industry has got us today. But note that every retail bank, and by contagion every significant financial institution, has a de facto guarantee of its deposits. That is what "lender of last resort" and "protector against systemic risk" implies from a central bank today.
The depositors at Northern Rock are in exactly the same position as at any other bank: guaranteed, ultimately, by the State. So if we go with the Osborne/Kaletsky line - and I see the attractions - we should take that guarantee away. Let banks survive by the prudence of those who capitalise them. See the finance industry as we know it disappear, and watch a very different kind of economy emerge. But don't under-estimate the radicalism of the suggestion.
