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Britain central bank won’t do bail-out

Stephen Beard Sep 13, 2007
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Britain central bank won’t do bail-out

Stephen Beard Sep 13, 2007
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TEXT OF STORY

Doug Krizner: The head of Britain’s central bank is criticizing the way other central banks, including the Fed, are dealing with the credit crunch. The governor of the Bank of England, Mervyn King, says pumping billions into the banking system could sow the seeds of a future crisis. From London, Stephen Beard reports.


Stephen Beard: In a letter to the British parliament, Mervyn King has defended his own austere response to the crisis.

It’s been very different from that of the Fed and the European Central Bank. King has not poured billions into the money market at attractive rates of interest. Cash-strapped commercial banks have had to borrow at penalty rates.

In his letter, Mervyn King says to let the commercial banks off the hook would encourage excessive risk-taking and create the conditions for the next crisis.

Analyst David Buik:

David Buik: He is not going to add his name to any bail-out operation, due to what he would regard as reckless lending. If banks have got themselves into a financial hole by being irresponsible, best they dig themselves out of it.

But King has also hinted in his letter that he might cut the Bank’s main interest rate if the present squeeze continues and the British economy starts to suffer.

In London, this is Stephen Beard for Marketplace.

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