Crucial to Calm Fevered Rock and Keep Cash Flowing
Evening Standard - London › September 14, 2007
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Summary
DOWN the Bank of England's stony corridors walks the ghost of Walter Bagehot. A century and a quarter ago, he drafted what is still the standard prescription for a banking crisis. Now the dose has been administered to Northern Rock, and the Bank is left to hope that the disease isn't catching.
A panic in the money markets is a kind of fever, and, so Bagehot said, must not be starved. The holder of the cash reserves (that is, the Bank) must be ready to lend with both hands. That does not mean lending more cheaply. At such times banks will be ready to pay any price for money so long as the money is there.See the full content of this document
Extract
Crucial to Calm Fevered Rock and Keep Cash Flowing
On the face of it, Northern Rock is a perfectly suitable case for the Bagehot treatment. Its mo...
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