Banks backed in ‘panic’: Darling
He also said that he first heard of Ireland’s bank guarantee, which was enacted in September 2008, on BBC radio.
In his memoirs, Mr Darling spoke of his fears that British savers would move their money to the British branches of Irish banks.
He said he told former finance minister Brian Lenihan that Britain had been put in an impossible position and would take action if it became clear funds were being moved.
Mr Darling did, however, say he had a good working relationship with Mr Lenihan who he said worked tirelessly for his country after being diagnosed with cancer.
Mr Darling also said the Bank of England (BoE), led by Mervyn King, was slow to grasp the nature of the financial crisis in 2007, so much so that he wanted to force it to take action.
Unlike King’s counterparts at other central banks, the BoE governor was at first reluctant to respond when markets seized up in August 2007. Some critics blamed the delay for the run on Northern Rock, Britain’s first in more than a century, which led to the lender’s nationalisation.
Mr Darling says he wanted the BoE to pump more money into markets to unfreeze lending between banks but King disagreed, arguing that such an intervention would let the banks off the hook for their failure to hold enough capital and so create a “moral hazard”.
“I was so desperate that I asked the Treasury to advise me as to whether we could order the Bank to take action,” Mr Darling wrote. “[But] a public row between myself and Mervyn would have been disastrous.”
In the book, called Back from the Brink: 1,000 Days at Number 11, Mr Darling also wrote that former prime minister Gordon Brown appointed him as chancellor with a view to eventually replacing him with Ed Balls, who was instead put in charge of education.
Mr Darling said part of him was happy to go by June 2009, but part of him wanted to fight on. In the end, “a larger part did not want to be forced out at this stage and in this way”.
Mr Darling refused to be moved to another position in the Cabinet and would have been too costly to sack politically because of his enhanced reputation during the banking crisis.
The former chancellor said he failed to take the same attitude to his then-boss during the string of failed coups and ministerial resignations that would plague Mr Brown during his last year in office.
