*** When net income won't cover gross habits As Northern Rock is bailed out, the notion that the dysfunctional financial market can regulate itself has been laid to rest. So what will the government do now?
Will Hutton Sunday September 16, 2007 The Observer
After hubris, nemesis. Last week, Northern Rock, Britain's fifth biggest mortgage lender and the former darling of the financial markets, was forced to turn to the Bank of England for cash because no City lender would support it for fear the company was about to go bust. When the announcement broke overnight on Thursday, ordinary savers followed the City's lead - jamming the company's switchboard and queuing outside branches to take as much as £1bn out in a day.
This is a full-blown run on a bank, something we have not seen on such a scale since the 19th century, and a measure of the depth of mismanagement, non-regulation and structural dysfunctionality of today's financial system.
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Proud finance has insisted it needs no regulation, that it can be trusted to deploy the nations' savings with care. The trust has been abused. We need a solid, social democratic government to reduce the risk of such recklessness in future, not tell us that finance should be left to finance while the taxpayer picks up the pieces. I hope Mr Brown is embarrassed. If he is not, so much the worse for all of us.