March 26, 2008

The recent experience with exotic subprime securities demonstrates that central bankers’ attitude towards any emerging financial crisis varies across regions. For example, the swift reaction by the Fed regarding the sale of Bear Stearns to J P Morgan Chase stands in contrast to the U.K. central bank reaction to the Northern Rock debacle. While it is true that the U.S. had the benefit of the U.K. mishaps, it is also apparent that, at least initially, the U.K. central bank had a different approach to the problem, one based on no bailout.

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