The US Government has, of late, been winning plaudits for all the steps it is taking to prevent a banking crisis. It has saved Fannie Mae and Freddie Mac – the businesses that underpin the US mortgage market – seen the orderly takeover of Bear Stearns & Merrill Lynch; bailed out the World’s biggest insurance company, AIG and deliberately not bailed out Lehman Brothers. Another action they have taken is to stop short investing on banks. Pretty 'hands-on, roll your sleeves up' type stuff. Action this side of the pond has been somewhat lighter and apparently our Chancellor of the Exchequer apparently asked investors not to target HBoS! That must have been the absolute ‘green light’ for investors to pile-in and give ‘em a good kicking.
You’d reckon by now that politicians would have twigged that ‘a vote of confidence’ has the opposite effect to that intended. Talk about Goldfish and bowl!
Sadly the truth is that no bank – no matter how well run – could service all its depositors if they all wanted to take their money out at the same time. This is why the media need to be careful when reporting this whole credit crunch business. As soon as they start naming banks there becomes a severe risk that investors will get jumpy and want to withdraw their money. Once the exodus starts it is virtually impossible to stop. The night before last I was pretty frustrated watching Robert Peston the Business Editor on BBC news (surely the journalistic equivalent of Inspector Clouseau) merrily clomping around in his size 9’s talking away about the problems faced by HBoS. How many Halifax investors were watching that thinking I need to get my money out pronto? Don’t get me wrong, I am not blaming the media but I think at times more caution could have been applied. Sadly today I am reading the press and seeing another bank being speculated about. This is depressing. When will it end?