A new Crazy Gordon is in Prospect following the shock tactic of Germany in joining those countries offering a full guarantee for savers of all savings without limit.
“Bottler” Brown has strongly resisted making such a guarantee for British savers who have savings in British banks. So far he has reluctantly raised the guarantee from £25,000 to £50,000. This modest increase exposes British taxpayers to billions of pounds in extra liability.
Ireland led the rush to restore confidence amongst savers by issuing a full guarantee of all savings in Irish Banks. This started a stampede of European savers to move their money to Irish banks. Greece also issued a similar guarantee.
So what happens if Bottler Brown executes yet another Crazy Gordon? We can already hear his propeller cavitating as he dithers over further action.
Guarantees of savers’ money is to an extent an academic concept. A British Government is unlikely to ever let a British bank crash with the loss of money in savings accounts. What is more likely is that bank stock holders will suffer from a crash with special arrangements being made to protect savers. We have already seen this in action recently. After much dithering, Bottler Brown allowed his Chancellor to nationalize the liabilities of Northern Rock after allowing profits to be privatized. HBOS was encouraged into a shotgun wedding with Lloyds TSB. Even more recently, the liabilities of Bradford and Bingley were nationalized while the profitable elements were sold off at a bargin basement price to a Spanish bank.
Then there is the prospect of self-protection. A British saver always has the option of opening a number of accounts with completely unconnected banks and paying money up to the current limit of £50,000 into each account. That would provide protection on savings for more than 90% of all citizens.
The main risk to the individual is where they are in the process of moving home and have just received a cheque for several hundred thousand pounds on the sale of their existing home. For a time, the whole sum will be potentially at risk until it is either paid over to buy the new home or is dispersed across several banks in lots of £50,000. Bottler Brown can already claim to have taken action to reduce this risk for Britons by making it extremely difficult to sell a house in Britain, dramatically reducing the number of citizens temporarily holding large sums of money.