Did you know that I used to work in the financial sector? I have sold insurance schemes, insurance policies, dealt with life and general claims and even done futures trading. And I bet you thought that I only knew about transport or religion or sport!!
For the last few days I have been feeling sorry for the people who saved with the Northern Rock Bank. They have been plagued by rumours that the end was nigh and that their hard earned savings were about to disappear. There was no real worry to concern them, the whole thing could have been damped down very quickly.
The problem is that they were being reassured by politicians and company executives. Neither of these can be called trustworthy or reliable. I mean they either lie for a living or are in the company of those who have been the cause of numerous financial problems in the past.
Does anyone remember Enron, Worldcom, endowment policy and pensions misselling? So can we blame people for panicking and queuing for hours to move their savings elsewhere?
No matter what “experts”, government officials or regulators said, the queues would go on growing, the websites would be choked beyond coping point and the post from postal account holders would keep on mounting.
Things are so bad that it has jammed up the transfer system between banks. Northern Rock can only transfer so much electronically in any one day. They may take £35 from you to pay for a transfer but its not guaranteed to go through if the system is inundated with similar requests.
The panic was caused by them having to turn to the Bank of England, our central bank, for a loan facility in case it was needed. Those who do not understand the way the system works, and this includes many “experts” and journalists, therefore took this to mean that they could not meet their commitments and were in danger of imminent financial meltdown.
No matter what anyone said, Pandora’s Box was believed to be open and the world would now enter a period of finacial collapse and the end of covilisation as we know it. Very few commentators actually took the time to explain how the system works in a way that people could understand. Because of that panic set in.
Unfortunately for Northern Rock this has severly damaged its reputation. We could see it disappear from our High Streets in the next few weeks as someone else swallows it up. This will be seen as an act of mercy and not, in reality, the absorbtion of a profitable instituation that was damaged by media reporting and inefficient government and regulatory action.
To give you an example of media reporting. This was Radio5Live’s discussion yesterday:
Caller: The media has to bear a responsibility because of its reporting of the situation
Presenter: No it doesn’t. The media have just reported the facts. We haven’t been at fault for causing this crisis.
Yet it’s the use of words like “crisis” that cause the panic. However, they can’t see that can they?