Opening of a Guardian Leader:
Northern Rock\’s big blunder was to borrow short and lend long.
That\’s it? That\’s the secret?
Err, does anyone at The Guardian actually know how banks work? All of them, every single one of them, borrows short and lends long. It is, in fact, the essence of banking. When you stick your money into an account that is a deposit that you can withdraw on demand. The bank then lends it out as, say, a mortgage. That mortgage might last 25 years. From the bank\’s point of view this is borrowing short and lending long.
Northern Rock may well have made blunders. Perhaps relying upon wholesale markets rather than retail deposits, perhaps not having enough equity, perhaps too fine a pricing on their loans. All of those are possible reasons for the troubles, but borrowing short and lending long simply ain\’t the point.
Tell me, are Guardian leaders written by the sociology graduates or something?