Comments on: The Northern Rock Bank Run http://www.rasmusen.org/x/2007/09/19/the-northern-rock-bank-run/ Mon, 06 Oct 2008 22:28:06 +0000 http://wordpress.org/?v=2.2.2 By: Graeme http://www.rasmusen.org/x/2007/09/19/the-northern-rock-bank-run/#comment-224088 Graeme Wed, 19 Sep 2007 18:43:23 +0000 http://www.rasmusen.org/x/2007/09/19/the-northern-rock-bank-run/#comment-224088 I think they will find it difficult to avoid bailing out any banks in trouble for the next few years, because that is what the public will expect. Tax and employees do get priority in the UK. AFAIK other creditors are all treated equally. Have you read, and do you have an opinion on <a href="http://maverecon.blogspot.com/" rel="nofollow">Willem Buiter and Ann Siebert's</a> comments on this? I think they will find it difficult to avoid bailing out any banks in trouble for the next few years, because that is what the public will expect.

Tax and employees do get priority in the UK. AFAIK other creditors are all treated equally.

Have you read, and do you have an opinion on Willem Buiter and Ann Siebert’s comments on this?

]]> By: Eric Rasmusen http://www.rasmusen.org/x/2007/09/19/the-northern-rock-bank-run/#comment-224077 Eric Rasmusen Wed, 19 Sep 2007 12:10:10 +0000 http://www.rasmusen.org/x/2007/09/19/the-northern-rock-bank-run/#comment-224077 You are right about Northern Rock. It does have the guarantee now. For the moment, so do other banks. But I would not expect the government to make this permanent, and after the immediate crisis, they will probably end the unlimited guarantee because of the moral hazard Mervyn King (B of E boss) has warned of. Another reform might be in bankruptcy law. I don't know what current law is eitherin the UK or the US, but I suppose all unsecured creditors are treated equally (perhaps with employees at the head of the queue? and taxes definitely). Small depositors should be right at the top of the queue. They can't monitor as well as bondholders and big lenders, whether they are at the top or the bottom. You are right about Northern Rock. It does have the guarantee now. For the moment, so do other banks. But I would not expect the government to make this permanent, and after the immediate crisis, they will probably end the unlimited guarantee because of the moral hazard Mervyn King (B of E boss) has warned of.

Another reform might be in bankruptcy law. I don’t know what current law is eitherin the UK or the US, but I suppose all unsecured creditors are treated equally (perhaps with employees at the head of the queue? and taxes definitely). Small depositors should be right at the top of the queue. They can’t monitor as well as bondholders and big lenders, whether they are at the top or the bottom.

]]> By: Graeme http://www.rasmusen.org/x/2007/09/19/the-northern-rock-bank-run/#comment-224075 Graeme Wed, 19 Sep 2007 11:33:47 +0000 http://www.rasmusen.org/x/2007/09/19/the-northern-rock-bank-run/#comment-224075 I agree wholeheartedly with your points 1 and 2. I disagree about taking money out of savings accounts. Northern Rock, in particular, now has a government guarantee and is offering a very good rate given it is (at least for the moment) risk free. Surely we can also infer an implicit government guarantee for other banks, given that Northern Rock is not even large deposit taker? I agree wholeheartedly with your points 1 and 2.

I disagree about taking money out of savings accounts. Northern Rock, in particular, now has a government guarantee and is offering a very good rate given it is (at least for the moment) risk free.

Surely we can also infer an implicit government guarantee for other banks, given that Northern Rock is not even large deposit taker?

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