Letter in the FT – June 4 2009

Anticipating when the music would grind to a halt

Published: June 4 2009 03:00 | Last updated: June 4 2009 03:00
From Ms Clare Lynch.

Sir, The revelation that the Financial Services Authority and the Bank of England were aware of risks posed by Northern Rock’s business model as far back as 2004 is not, as the FT suggests, at odds with Hector Sants’ 2007 statement that: “I do not think any reasonable professional would have anticipated that set of circumstances” (“War game saw run on Rock”, May 30).

The significant word here is “anticipated”. Although “anticipate” has become widely used as a synonym for “expect”, there is an important distinction between the two words. To “expect” something is to believe that it is likely to happen; to “anticipate” it is not merely to regard it as probable, but also to prepare for it.

So while the FSA may have “expected” Northern Rock to fail, it is still correct to say that it didn’t “anticipate” the collapse.

Furthermore, Mr Sants is perhaps right in his observation that at the height of a bubble no reasonable professional anticipates the subsequent bust – even if they are expecting it.

Indeed, you might recall what Citigroup’s then CEO, Chuck Prince, told the FT in 2007: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” Mr Sants, like Mr Prince, was a reasonable professional who expected the crisis, even if he didn’t anticipate it.

Clare Lynch,
London SE1, UK

Copyright The Financial Times Limited 2009