Downing Street Says » Northern Rock

Asked if it was the Government’s position in principle, that it was right to try and see whether or not a covert rescue operation for Northern Rock could have been launched, after the Governor of the Bank of England had told the Select Committee he had lobbied strongly for such an operation, the PMS said that the evidence session in front of the Select Committee was still ongoing and that he did not want to comment on anything that the Governor was supposed to have said without having seen it directly.

Asked what the Government’s stance was on the principal of a covert operation, the PMS said that the Government’s stance was that all these issues were discussed as part of the tripartite Commission; the Governor had expressed his views that morning and that for any further response it was best to go to the Treasury once the Governor’s evidence session had concluded.

Put that Alistair Darling had, three days after the failed rescue attempt, been quoted in the Guardian suggesting market intervention was not appropriate, whilst knowing of a secret attempt to launch a rescue operation, the PMS said that it was best to talk to the Treasury about such matters. Such issues were discussed in a proper way as part of the tripartite discussions and they were the right procedures to go through.

Asked if the Prime Minister still thought that the tripartite way of doing things was the best way forward, when it looked like different people knew different parts of the problem but were not communicating properly, the PMS said there would be plenty of time to consider the issues, but that the important issue for now was to focus on restoring stability in the financial system and that was why the tripartite authorities had acted in the way they had.

Asked if the Prime Minister had at any time overruled the Chancellor and the Governor of the Bank of England or if the Prime Minister and the Chancellor had ever overruled the Governor, the PMS replied that the Governor and the Bank of England had answered that question and they had made it clear that there was no political pressure. As the Governor had said, the operation carried out was designed in the Bank.

Put that the Governor of the Bank of England said he would be happy to see any exchange of letters between himself and the Chancellor, or the Prime Minister released and asked if they were to be released, the PMS said the Treasury expected the letters to be published, but people would have to check with them exactly when that would be.

Asked if there was any ongoing review of how everything worked, the PMS said that the issue for now was to focus on restored stability in the financial system and that was what the relevant authorities were devoting their time and attention to.

Asked if there was to be a review in the future, the PMS repeated that the issue for now was focusing on restoring stability.

Asked if the Chairman of the Financial Services Authority (FSA) had said a few days ago that the system of deposits and insurance was going to be looked at, the PMS concurred and said that the Chairman had said that specific scheme would be looked at.

Put that there was a tripartite discussion about Northern Rock being in trouble on 14th August 2007 and that the Government were slow in reacting to what was an increasingly menacing situation, the PMS said that the Governor of the Bank of England was being asked those questions as he spoke and since the Bank, along with the Treasury and the FSA, were the key players in this, it was best to let them explain the actions taken and the rationale for them. As soon as it became apparent that action needed to be taken to stop the run on Northern Rock, decisive action was taken on Monday evening, and that quite clearly had the desired effect.

Asked if the Prime Minister had had full confidence in the Governor of the Bank of England when he was against putting a lot of money into the market and whether the Prime Minister still had confidence in the Governor, the PMS said that the Prime Minister had full confidence in the Governor of the Bank of England and had always had full confidence in him.

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» Thursday, September 20, 2007

Northern Rock

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