National governments have been forced to use an extraordinary amount of public resources and techniques to contain the global financial crisis ("the crisis"). This Article analyzes the role of the U.K. Tripartite Authorities in dealing with the crisis--both the "ordinary" measures it used, such as the Bank of England's role as Lender of Last Resort, and the "extraordinary" measures it used, such as blanket guarantees, recapitalization, and asset purchase schemes. It evaluates the U.K. response and the challenges of this period of containment by comparing issues that arose from past financial crises. This Article concludes that the containment of a financial crisis of systemic proportions requires both an overarching and a case-by-case approach to deal with banks experiencing insolvency rather than liquidity problems.
Containing the recent financial crisis that has beset global financial markets has required a complex, multifaceted response. The crisis arose when banks, the principal vehicle for providing credit in the economy, ceased to function and provide credit on the kind of scale to which the economy had become accustomed. When the banks and the financial system lost confidence in one another, governments intervened. In light of the international financial crisis, this Article analyzes how the U.K. Tripartite Authorities ("U.K. Authorities"), namely H.M. Treasury, Bank of England ("the Bank"), and the Financial Services Authority ("FSA"), worked together to contain the financial crisis in the United Kingdom. This Article primarily analyzes, in light of international experience, some of the techniques the U.K. Authorities used to contain the financial crisis.
Part II of the Article explores the causes and consequences of the financial crisis, both in the United States and more thoroughly in the United Kingdom. It primarily explores the crisis in two broad periods--2007 and late 2008--namely, before and after the collapse of Lehman Brothers ("Lehman"). It provides context for the Article by highlighting that what occurred in the international financial markets, after the collapse of Lehman, were unforeseen events, which required unprecedented government intervention. While the crisis in confidence in the financial markets reached a turning point in mid-2007, the economists working in the markets expected this to be short lived and containable. But the collapse of confidence into a panic in later 2008 was not foreseeable, and it resulted in...