November 5, 2007
Northern Rock Fallout
The Bank of England had to make an emergency loan of over 23billion pounds to Northern Rock to save the bank. The loan stopped the run on the bank by depositors who had withdrawn somewhere close to 60% of the banks deposits. Now the Bank has attracted vulture buyers, some foreign. The government is angry and looking to cast blame. So far the Financial Services Authority, that audits banks, the bank's chief executive, who has admitted a lack of financial training, the bank's chairman, a scientist and journalist and son of a previous chair, and bank's risk committee chair, and the bank's board are all under scrutiny. Only the chair has resigned; the board has offered to resign. Law makers will look, in the end for a procedural solution: Can we fix corporate governance to make banks more cautious? This usually means more independent directors and more board subcommittees of independent directors. It will not help, of course. The bank took a gamble and lost: It lent long and borrowed short. When the short term borrowing costs skyrocketed the bank could not fund its long-term lending. The banks risk testing had not run sensitivity tests on any assumptions of an extreme short-term borrowing liquidity crunch. There is no perfect procedure that will stop poor business judgments. And more procedural complexity does have costs as it may stop good business judgments (they get lost in a wave of individual veto power). In the end, good people make the better judgments.
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Furnivall was always an enthusiastic oarsman , and till the end kept up his interest in rowing; with John Beesley in 1845 he introduced the new type of narrow sculling boat, and in 1886 started races on the Thames for sculling fours and sculling eights. In 1896 Furnivall founded the Hammersmith Sculling Club (now called Furnivall Sculling Club ), initially for working- class girls, and he "entered into its activities with his usual boyish enthusiasm, for it brought together two of his favourite activities:
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