A bit unfair, Robert
Robert Peston is in a bad mood this morning. He claims that the National Audit Office's report on Northern Rock shows that Brown and Darling "didn't make adequate preparations for the possible collapse of banks", "didn't expect a recession" and "had a hopelessly naive view" about the Rock's 100% loans.
It makes a nice story. The problem is, it isn't really true. I've read the NAO's summary of the report. Here's a notable phrase from it:
This report does not consider:
- the causes of Northern Rock’s problems
Indeed, all that the report does consider is the response of the Treasury to the problems that arose in late 2007, and whether it made the right choices and managed things in the right way.
And on those counts, it mostly gives its seal of approval. Some exceptions are:
- The Treasury's worst case scenario planning was not quite bad enough. Instead of a base case loss of £270 million, Northern Rock lost £585 million last year (although the Treasury did also allow for a "recession case" loss which was closer to the real figure, so they were not that far out).
- After the bank went into public ownership, a further £1.8 billion of high loan-to-value ratio mortgages were issued - though £1 billion of these had already been committed before the problems, so the issue is over just £800 million of loans.
There is nothing in the report about political supervision or the government's understanding of economic risks, despite what Peston says. And even if there were - he can hardly blame Brown and Darling for not anticipating the 2008 crisis in 2004 when the rest of us didn't see it either. Yes, you can tell me about Nouriel Roubini again - but if you cry wolf long enough, sooner or later one will show up.
The risks run by individual property investors were reasonably clear for the last few years, but it was not at all apparent that this would lead to systemic problems. Politicians don't have any more crystal balls than anyone else, and it's rather unfair to blame them for this. Especially when the "evidence" of the NAO report provides no support for the assertion.