|
BankruptcyNews
Junior Member
358 Posts |
 Posted - 18 September 2007 : 09:46:46
|
Guarantee for Northern Rock cash
After a day of criticism of the government's handling of the Northern Rock crisis, the chancellor has said he will guarantee all deposits with the institution.
In a statement, Alistair Darling said he was acting to maintain public confidence in the banking system.
"I want to put the matter beyond doubt," he said.
"In the current market circumstances, and because of the importance I place on maintaining a stable banking system and public confidence in it, I can announce today that following discussions with the governor [of the Bank of England] and the chairman of the [Financial Services Authority], should it be necessary, we, with the Bank of England, would put in place arrangements that would guarantee all the existing deposits in Northern Rock during the current instability in the financial markets."
Earlier, Liberal Democrat Treasury spokesman Vince Cable said the government has been complicit in the "near collapse" of Northern Rock.
And Conservative leader David Cameron said the chancellor should make a full statement on the government's position.
But Darling defended Labour's economic record, adding that Northern Rock customers would be able to get full access to their accounts.
Attack
Speaking as customers continued to withdraw money from the beleaguered bank, Cable said the crisis highlighted the problems of growing debt.
He told delegates at the Lib Dem conference in Brighton that personal debt had more than doubled to more than £1 trillion in the past 10 years.
In this time, households set aside more than 20 per cent of income for debt service compared the 13 per cent in 1997, he added.
"How sustainable is the Brown economic miracle?" Cable said.
"This current boom does not depend on long-term investment or on exports or on the cultivation of a more educated, skilled, labour force.
"It is powered by debt finance consumer spending, some reckless lending and the optimism generated by a house price boom.
"Household savings have virtually collapsed in the rush to spend."
Warning that the economy could become Gordon Brown's "Achilles' heel", he accused the government of failing to act.
"I have been warning of this for over three years," Cable said. "But repeatedly, and complacently, Gordon Brown denied that there was a problem.
"Now, those who are over-borrowed, or suffer loss of income, job, illness or relationship breakdown, are increasingly unable to pay.
"Everyday nearly 300 people face insolvency and 75 family homes are repossessed; Gordon Brown must take personal responsibility."
He added: "The water is now pouring through the defences after the near collapse of Northern Rock: the product of greed and reckless gambling by overpaid executives; lax, indulgent bank regulations and a complacent government."
Statement
In a City speech on Monday, Cameron said the Conservatives "fully support what the Bank of England and the Financial Services Authority have done in respect of Northern Rock".
"The immediate priority must be to reassure people about the situation and the safety of their deposits," he said.
"In a period of financial turbulence, it is vital that we establish the facts and avoid speculation."
The Tory leader said it would be "quite wrong" for Parliament to be recalled for Darling to make a statement as the move would "only add to a sense of alarm".
"But it is incumbent on the chancellor to make such a statement and set out the government's view on these matters and I hope that he will take the opportunity to do so this week," he added.
On the wider issues, Cameron said: "The past week has shown us clearly that entrenching our economic stability means not just monetary and fiscal stability, but reducing the risks to the economy from financial instability.
"Reducing those risks will not be a quick or easy task. But if we are to build an economy that can both capture rising global prosperity, and remain stable in turbulent times as well as calm, then we must begin that task today."
Reassurance
Darling has sought to reassure Northern Rock customers and insisted the British economy remains strong despite the "real problem" at the bank.
He told BBC Radio 4's Today programme that the strong economy, low interest rates and low inflation were "encouraging" and "stand us in good stead" to deal with the repercussions of the collapsed sub-prime mortgage market in the US.
"We have had shocks to the system in the recent past with the collapse of the Asian markets in the late 1990s, with the collapse of the American stock market earlier in this decade," he added.
"Both of those instances we dealt with, our economy carried on growing when others faltered.
"So that strong economy is absolutely crucial."
Darling added: "If people want to get their money out of Northern Rock bank, they can do it. The money is there and it is backed by the Bank of England so they can get it."
The problem was "not that there isn't money in the system", he stressed, adding: "It is the fact that they have been reluctant to lend to each other whilst they work out what the extent of their risk is following on the difficulties in the American market."
Source: epolitix.com
See my Blogs:
http://bankruptcynews.blogs.bankruptcyhelp.org.uk |
|
Guarantee for Northern Rock cash
