By Mike King
Those Web2.0 affectionados who proclaim the demise of mainstream media might want to reconsider this view in the light of the Northern Rock fiasco. Because for me, the main lesson from the last week hasn’t been how dodgy the financial system is, but just how powerful the mainstream media remains.
Turmoil in the financial markets (caused in part by lending in the US to home buyers with poor credit histories) meant Northern Rock found it difficult to borrow cash from other banks to run its day-to-day operations. So, it turned to the Bank of England. Is that a big deal? Outside of the financial world, most people wouldn’t have given this a second thought until the mainstream media got hold of the story and went for Northern Rock with all guns blazing.
Interestingly, Barclays did a very similar thing a few weeks earlier. In fact, Barclays asked for and received support from the Bank of England twice during August. Its actions got some coverage - but nothing like the media feeding frenzy that plagued Northern Rock.
Indeed, it seems that Northern Rock had decent assets and wasn’t in any real danger. Of course, that all changed when customer confidence was dramatically dented thanks to blanket coverage in the national media that verged on outright scaremongering.
When the Barclays story happened, I heard one expert commenting that banks borrow money from each other all the time, and the fact that Barclays had borrowed from the Bank of England rather than another bank was simply a reflection of current market conditions and was no big deal.
A couple of weeks later, and for some reason, the same actions by Northern Rock weren’t seen in quite the same light. Oh, the power of the media…
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