We saw the ‘crazy’ mortgages but failed to spot dangers of debt: Bank chief’s startling admission on financial crisis

Becky Barrow
UK Daily Mail
Monday, December 22, 2008

The Bank of England admitted tonight it knew homeowners were taking out ‘crazy’ mortgages and house prices were spiralling out of control.

The deputy governor said the central bank had failed to grasp the full extent of the financial tsunami before it hit Britain.

Sir John Gieve also raised fears taxpayers will be short-changed by the nationalisation of Northern Rock and Bradford & Bingley.

He admitted there is a risk that billions of pounds of taxpayers’ money will be lost by the two embattled banks.

In a third warning, he said interest rates are a ‘blunt instrument’, and new tools are needed to help the Bank steer Britain through the crisis.

New ‘policy instruments’ are being discussed, which would ‘make it expensive for banks to expand rapidly in the upswing’, he said.

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