Is it just me or was there something nauseating about watching a gang of smug, know-nothing MPs with their jackets over their chairs and their hands behind their heads grilling Northern Rock executives about a shocking practice (selling money market-backed mortgages) that they’d almost certainly never heard of six weeks ago?
If I’d been one of those executives I’d have been sorely tempted to ask the committee some questions myself. Like “if selling mortgages backed by wholesale debt is such a bad thing why have you never examined it before in the history of your committee?” or “when was the last time any one of you asked a question in parliament about money market-backed mortgages?” or even “since when has buying cheap, selling dear and pocketing the difference been a crime?”
Northern Rock’s ‘crime’ was to acquire debt cheaply on the International money markets and resell it at a profit to home buyers in Britain: a perfectly sound business practice and the logical outcome of the deregulation and globalisation of financial markets. The FSA obviously thought this an acceptable way of funding mortgage lending. Likewise the Bank. Neither had ever (as far as I can tell) run any kind of investigation of the practice and neither rang any alarm bells in the run up to the credit crunch.
Were Northern Rock’s management complacent? Even incompetent? Possibly. Should they carry the can for the damage to British banking’s credibility? Do they warrant a kicking from clueless point-scoring legislators? No.