Saturday’s Daily Mail puts it succinctly:
The head of the financial watchdog criticised for not acting sooner to prevent the Northern Rock scandal tried to gag a senior MP who warned the bank was heading for disaster, it was claimed.
Financial Services Authority chairman Sir Callum McCarthy telephoned Lib Dem deputy leader Vince Cable in September and accused him of “scaremongering.”
He told Mr Cable Northern Rock was not caught up in the sub-prime mortgage fiasco in the US.
Hours later the bank admitted it had been hit by the cheap mortgage collapse there.
The rest of the story is here.
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I find it amusing and depressing in equal measure that the people in charge of our economy talk of the need for greater transparency in order to prevent future economic crises, in the same breath as they us that certain things (such as emergency loans to bail out failing banks) need to be kept quiet in order to prevent ‘scaremongering’ and loss of faith in the banking system. If a bank is failing so badly that it needs government assistance, then surely that information should be put in the public domain. Otherwise, what incentive is there for financial institutions to take a more sensible approach to risk?