Monday, November 05, 2007

Hutton is not the King

Will Hutton is such a shoddy thinker. His latest piece is little more than blanket assertion about what the best thing to do "obviously" is:

"What should have happened, of course, is that when the Bank of England found that it could not find a secret buyer for Northern Rock in the summer, it should have done what it did in the 1974 secondary banking crisis. It should have taken Northern Rock into the Bank of England's ownership."

He then does nothing to establish quite why this is so obvious. Having the Bank of England take control of a bank and then sell it is a bloody big deal with plenty of transaction costs and a huge signal to the market of weaknesses in the system. He discusses none of the potential problems with his little scheme.

He also doesn't even mention Mervyn King's (someone not only more expert on this matter but also more influential - there's no excuse) alternate explanation of why intervention was so costly. Mike Denham gives some details of King's account and a more conventional view of what went wrong with Northern Rock. For Hutton to write his article without even mentioning this is the height of rhetorical laziness.

No comments: