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Who saw it coming? The UK’s great financial crisis

Published online by Cambridge University Press:  21 February 2014

Andrew Hindmoor  and
Allan McConnell
Andrew Hindmoor
Affiliation:
Department of Politics, University of Sheffield, UK, E-mail: [email protected]
Allan McConnell
Affiliation:
Department of Government and International Relations, University of Sydney, Australia, E-mail: [email protected]
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Abstract

Who foresaw the UK banking crisis? This paper addresses this issue through detailed empirical work on the content of the Chancellor of the Exchequer’s speeches, Bank of England Financial Stability Reports, Financial Service Authority reports and speeches by Bank of England officials, editorials in the Times and Financial Times, bank annual reports and financial statements, credit rating reports, share price movements, Parliamentary questions, Treasury select committee reports and the output of academic economists. We find that few people inside or outside government recognised the existence of significant financial vulnerabilities in the financial system in the years prior to the collapse of Northern Rock in September 2007. We use the conceptual lenses of individual, institutional and paradigmatic pathologies to provide explanations for this failure to detect looming crisis conditions. We argue ultimately that regulators and commentators were blinded by faith in market forces and the risk-tempering properties of securitisation.

Keywords

financial crisisNorthern RockUKwarnings
Type
Research Article
Information
Journal of Public Policy , Volume 35 , Issue 1 , April 2015 , pp. 63 - 96
Copyright
Copyright © Cambridge University Press, 2014 

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