At last! An Economic War Cabinet! A new way of governing! Britain's safety has finally been lifted out of the realm of partisan politics and placed in the hands of our Top Economic Experts.
And what extraordinary men they are:
- Lord Mandy... one of the world's foremost authorities on dodgy self-cert mortgage financing
- Lord Drayson... a man well known to BOM readers for his keen understanding of markets, and the price of everything
- Lord Myners... a man who is fully versed in the dark arts of short selling British bank stocks and who has produced a veritable shedload of official reports
- Lord Helpus... a man who has always fancied a peerage
OMG. Mandy, two of those notorious Labour donors, and Lord Helpus. It's a re-run of the National Economic Development Council, an entirely useless talking shop finally abolished by John Major in 1992.
When does the last boat leave?
So WTF is the government's position on bank deposit guarantees? According to Darling this afternoon, the FSA is increasing the formal guarantee to £50K from next week. But how does that stack up against the unlimited guarantee already given during the Crock run in September 2007?
As you will recall (see this blog), following Darling's emergency statement guaranteeing all Crock deposits, Treasury officials briefed journalists that "the same guarantee would extend to any other bank in a situation similar to Northern Rock, which asked the Bank of England for help after experiencing cash flow problems following the worldwide squeeze on credit."
So how does that work? Why do we have two contradictory guarantees? Or is that informal Treasury briefing not actually a guarantee?
Today Darling was asked to clarify the situation, but all he would say was that the two guarantees are "not mutually exclusive". Which is as clear as mud.
So what to do? If you happen to have more than £50k deposited with a single bank (as various plutocrats of Tyler's acquaintance have), should you switch? Even though it's a pain in the backside, and you will likely be withdrawing funds from a major High Street name?
Probably. But to compensate for all the admin hassle, you'll want to exploit the FSA £50k guarantee to the max. Since it applies to all deposit-takers, you might as well go for broke. May we suggest the tottering highly leveraged Icelandic banks currently paying 7.2% and above?
You know it makes sense.