Cooper at work on the March Budget
Chief Secretary to the Treasury, Yvette Cooper, has been touring the studios all day (eg here) telling us that the government guarantees given to Northern Rock "have not been called upon, so they've not actually created any cost for the taxpayer".
So let's get it straight- we've guaranteed large chunks of the Crock's liabilities (see here), but because we haven't had to pay out yet, it's been costless.
Wonder why insurance companies bother to go through all that tedious reserving stuff when they take on risk? I mean, unless and until they have to pay out, their business must be money for nothing. And what about those monoline bond insurers? Until the late unpleasantness with all that sub-prime debt they were creaming in premiums and not having to part with a cent. It was a costless business... well, costless until the claims arrived, anyway.
Does Yvette actually believe this stuff? She's meant to be fiendishly bright so you'd have to guess she doesn't believe it herself but knows that the BBC's financially illiterate interviewers will never pick her up on it.
But OTOH, she's in the team that's so far managed to dig us in for a hundred bill, so it's quite possible she's just repeating the groupthink. As long as they keep the guarantees in place then they will never be called on and will never give rise to any costs. Simple.
It reminds me of all those fearfully clever international bankers who used to tell themselves modern states couldn't go bust, and therefore Latin American countries would always repay their debt, no matter how monstrous.
Wonder what happened to them? After Mexico went bust in '82 they sort of went a bit quiet.