"The Bank of England is a paper tiger" over Northern Rock – former MPC member Willem Buiter

Former MPC member Willem Buiter has laid into the bail out of Northern Rock by the Bank of England, just a couple of days after it talked tough about the importance of not supporting lenders who made risky decisions.

“Following the bail out of Northern Rock, I can only conclude that the Bank of England is a paper tiger. It talks the ‘no bail out’ talk, but it does not walk the talk. It does not matter whether the decision to bail out Northern Rock was initiated and/or actively supported by the Bank, or whether the Bank was bullied into it by the Treasury and the FSA. Moral hazard has received a boost in the UK banking sector and in the UK financial system as a whole. We will all pay the price in the years to come, when the next wave of reckless lending washes over us.”

You can read his full (lengthy and technical) comments here on his blog. Thanks to Citywire for initially highlighting them.

The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.

Jim Leaviss

Job Title: CIO Public Fixed Income

Specialist Subjects: Macro economics and fixed interest asset allocation

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