King planned bailout fund six months before banking crisis

THE governor of the Bank of England was so concerned about the global economy that he suggested the UK, US, Switzerland and Japan create an international bailout fund six months before the economic crisis hit its peak, a confidential US diplomatic cable released by Wikileaks revealed yesterday.

The cable dated 17 March 2008 details discussions over lunch between US ambassador Robert Tuttle, US Treasury deputy secretary Robert Kimmitt and Mervyn King, in which the Bank governor said the group of four countries must find a way to keep the banks from collapsing and that a coordinated effort to recapitalise the global banking system could become necessary. He suggested the creation of the group could be temporary but was necessary given the “almost dysfunctional” nature of the G7 in relation to economic issues.

It said King’s proposals were “not casual ideas” adding King’s “principal objective in the meeting” was to outline his thinking for Kimmit.

Six months later Royal Bank of Scotland, Lloyds Bank and Halifax Bank of Scotland had been rescued by the government.