There was a quite extraordinary exchange about Northern Rock and the tripartite system of regulation for the sector in the House of Lords yesterday.
Lord Renton of Mount Harry had asked the Government "Whether they are proposing any changes in the relationship between the Bank of England, the Financial Services Authority and HM Treasury." In response Lord Davies of Oldham offered these (specious) crumbs of comfort (my emphasis): "... he will recognise that the Chancellor of the Exchequer was explicit about the way in which the tripartite system works. It has been tried and tested on a number of occasions ... Of course, evaluation is going on on the operation of the system, but it should be recognised that it has stood this country and its economy in good stead. It should also be recognised that it is much admired elsewhere in the world and others are eager to follow a similar strategy to tackle what we all recognise is a very difficult situation."
Which planet is he living on? As Baroness Noakes subsequently asked: "... how can the Minister stand there and say that this system has been tried and tested? At its first trial, it failed dismally ... It is clear that the Government have to take some action." And of course the Government have already acceded to the latter point as legislation in this area was trailed in the Queen's Speech.
Could it be that, in the face of Northern Rock, the HMRC debacle, the worsening economy, &c, an utterly delusional bunker mentality is developing and deepening amongst Treasury ministers?
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