Monday, 17 March 2008
Bear Stearns vs Northern Rock
One of the fascinating aspects of the Bear Stearns rescue over the weekend is the way it contrasts with the dithering over Northern Rock in the U.K. Both banks were clearly running out of cash. But the Federal Reserve acted decisively, and forced Bear into a takeover, even through it meant making massive loans to JP Morgan. In Britain, that is what should have happened to Northern Rock. A takeover by Llloyds TSB should have been arranged over the weekend, even though the government would have had to guarantee its loan book. It would have been far better than six months of indecision followed by nationalisation.