It will be but a footnote towards the end of the history of New Labour, in a chapter entitled Decline & Fall “Collapse”. But let’s write it right now:
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The post-Crunch panic reached a decisive stage in early October, 2008, when the BBC’s business editor, Robert Peston, reported that Britain’s major banks had asked Gordon Brown and Alistair Darling at the Treasury to put up billions in capital to underpin their balance sheets. Working from an old script (ie the practice followed by their boss, John Kingman), junior treasury officials had briefed Peston thus following a meeting between the heads of the banks and Prime Minister Brown at No10.
In fact, while the possibility of a direct government bailout had been discussed at the meeting, there had been no formal request for funds and, on seeing their share prices crushed in the morning, the bank chiefs had no hesitation in issuing formal denials of the BBC report.
In any case, the financial markets had already laid bare the Treasury’s ignorance of how markets operate: while Kingman’s people might have hoped their briefings would smack of strong government, what took a real beating was Royal Bank of Scotland, since the prospect of cheaper stock becoming available made the existing shares look vastly overpriced.
Television coverage of the debacle triggered a run on the bank the next day and the RBS quickly became Royal by statute as well as by name.
Related links:
Banks ask chancellor for capital - Peston’s Picks
The Royal Bank run - FT Alphaville
