So now we know a bit more about what had happened back in 2007/08, when Britain was rocked by a devastating financial crash. According to the published minutes of the meetings of the so-called Court of the Bank of England, which is actually a fancy name for the board of directors of the BoE, the people running Britain's central bank were blissfully unaware a month, yes, a month before the crash that it was coming.
In July 2007, according to these papers, released under pressure from British parliament and the public, the top guns at the BoE were mostly concerned with the low liquidity of the markets, even though all the signs were already pointing to a crash that nearly brought down the British banking industry and, even more importantly, caused a devastating economic crisis that is still rocking the British economy. Not to mention saddled Britain with an astronomical national debt that it will be repaying for the next couple of centuries at least.
But I digress. The minutes of the meetings of the BoE board of directors show that total confusion was reigning supreme at Threadneedle Street in the summer of 2007 and no practical steps were discussed to avert the disaster that was approaching. What's more, as the documents show, the BoE directors were actually more concerned with such vital matters as their pensions, organising open days at the bank and selecting new members of the Monetary Policy Committee that takes decisions on the level of interest rates and whether quantitative easing might be a good idea, amongst other things. That was just weeks before the financial crash had broken out, with the French giant BNP-Paribas coming clean with its huge loses and later a run staged by thousands on the troubled Northern Rock bank taking place in Britain itself. The irony of the situation was that at the time the BoE was working, wait for it, on a new mechanism to detect possible risks to the financial system.
Other exciting details of the tense times that ensued included BoE directors giving code-names to banks that were tittering on the brink of collapse, probably keen to avoid panic spreading beyond the walls of their headquarters at Threadneedle Street. We now know that The Royal Bank of Scotland, that had to be 80 per cent nationalised in 2008, was called ‘Phoenix' and that Lloyds TSB, forced by the government to bail out HBOS, went by the poetic name of ‘Lark', with HBOS codenamed the ‘Fox'. We also now know that Alliance & Leicester, which was taken over by the British division of the Spanish giant Santander, was dubbed ‘Tiger', which was a bit odd considering that it was sinking like the Titanic.
If that is not exciting then I don't know what is.
The funniest thing of all that it has emerged that the BoE directors had been congratulating themselves on how well they have been regulating the banking system, along with the Treasury and the Financial Services Authority, although by then it was pretty clear that the banking sector was about to go down.
Other things have now come to light as well, thanks to all the latest revelations, but one thing looks mighty suspicious, if you ask me. And that is that the BoE supposedly did not know about the storm that was about to hit the City of London, even though alarm bells were ringing as early as 2004, when word spread in the City and among business hacks that banks were running up huge toxic debts and that some bankers were even moving their personal assets to Switzerland and other more exotic locations, anticipating a crash and possible retribution. I personally spoke to several City bankers who told me in 2005 that the situation in the British banking sector was getting desperate and that it was bound to crash any time soon.
What I am hinting at here, ladies and gents, is that I have a sneaky feeling that the minutes of the sittings of the Court of the BoE do not reveal the full picture and that we have a case when certain people are trying to confuse us all. It sure looks like the BoE, the regulators and the then government had adopted an Ostrich position on the British banking sector, hoping it will work out somehow in the end, while banks and other financial institutions packaging and repackaging toxic debts and selling them to each other and their clients. And as for the credit rating agencies, they at the time kept the ratings of all key players, including the ones that were about to go down, on the triple A level and close to it, which just goes to prove that these agencies should be treated with a serious dose of scepticism.
The weirdest thing of all is that no one still really knows how much taxpayers' money has been injected into the British banking system, to save it from collapse. Some say it is £200 billion, some say it's £300 billion and the braver ones are talking about half a trillion smackers and even more. I still recall how during the crash the then Chancellor Alistair Darling confessed to injecting a quick £60 billion into the markets in soft loans, to boost liquidity, without telling anyone. So what I'm saying here is that we might not know the full picture of what really happened in 2007/08 for a while yet.
