Skip to main content Accessibility help
Hostname: page-component-55597f9d44-rn2sj Total loading time: 0.643 Render date: 2022-08-16T08:17:24.955Z Has data issue: true Feature Flags: { "shouldUseShareProductTool": true, "shouldUseHypothesis": true, "isUnsiloEnabled": true, "useRatesEcommerce": false, "useNewApi": true } hasContentIssue true

Who saw it coming? The UK’s great financial crisis

Published online by Cambridge University Press:  21 February 2014

Andrew Hindmoor
Department of Politics, University of Sheffield, UK, E-mail:
Allan McConnell
Department of Government and International Relations, University of Sydney, Australia, E-mail:


Who foresaw the UK banking crisis? This paper addresses this issue through detailed empirical work on the content of the Chancellor of the Exchequer’s speeches, Bank of England Financial Stability Reports, Financial Service Authority reports and speeches by Bank of England officials, editorials in the Times and Financial Times, bank annual reports and financial statements, credit rating reports, share price movements, Parliamentary questions, Treasury select committee reports and the output of academic economists. We find that few people inside or outside government recognised the existence of significant financial vulnerabilities in the financial system in the years prior to the collapse of Northern Rock in September 2007. We use the conceptual lenses of individual, institutional and paradigmatic pathologies to provide explanations for this failure to detect looming crisis conditions. We argue ultimately that regulators and commentators were blinded by faith in market forces and the risk-tempering properties of securitisation.

Research Article
Copyright © Cambridge University Press, 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)


Acharya, V., Cooley, T., Richardson, M. and Walter, I. (2009) Manufacturing Tail Risk: A Perspective on the Financial Crisis of 2007–9. Foundations and Trends in Finance 4: 247325.CrossRefGoogle Scholar
Aldrick, P. (2012) The HBOS Horror Story is a Grim Read. Daily Telegraph. 9 March.Google Scholar
Augar, P. (2010) Reckless. London: Vintage.Google Scholar
Bank of England. (2006) Financial Stability Report. London: Bank of England.Google Scholar
Bank of England. (2007) Financial Stability Report. London: Bank of England.Google Scholar
Banks, E. (2011) See No Evil: Uncovering the Truth Behind the Financial Crisis. Basingstoke: Palgrave Macmillan.CrossRefGoogle Scholar
Baumgartner, F. and Jones, B. (2005) The Politics of Attention: How Government Prioritizes Problems. Chicago, IL: University of Chicago Press.Google Scholar
Bell, S. and Hindmoor, A. (2009) Rethinking Governance: The Centrality of the State in Modern Society. Melbourne: Cambridge University Press.CrossRefGoogle Scholar
Bennington, J. and Moore, M. H. (eds.) (2010) Public Value: Theory and Practice. Basingstoke: Palgrave Macmillan.Google Scholar
Bezemer, D. (2009) No One Saw This Coming. Understanding Financial Crisis Through Accounting Models [research report], No. 09002, University of Groningen, Research Institute SOM.Google Scholar
Boin, A., ’t Hart, P., Stern, E. and Sundelius, B. (2005) The Politics of Crisis Management: Public Leadership Under Pressure. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Boin, A., McConnell, A. and ’t Hart, P. (eds.) (2008) Governing After Crisis: The Politics of Investigation, Accountability and Learning. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Boin, A. and Fischbacher-Smith, D. (2011) The Importance of Failure Theories in Assessing Crisis Management: The Columbia Space Shuttle Disaster Revisited. Policy and Society 30(2): 7787.CrossRefGoogle Scholar
Bovens, M., ’t Hart, P. and Kuipers, S. (2006) The Politics of Policy Evaluation. In Moran M., Rein M. and Goodin R. E. (eds.) The Oxford Handbook of Public Policy. Oxford: Oxford University Press, 319335.Google Scholar
Brake, T. (2007) Hansard, 18 October, Column 952.Google Scholar
Brändström, A. and Kuipers, S. (2003) From “Normal Incidents” to Political Crises: Understanding the Selective Politicization of Policy Failures. Government and Opposition 38(3): 279305.CrossRefGoogle Scholar
Brändström, A., Bynander, F. and ’t Hart, P. (2004) Governing by Looking Back: Historical Analogies and Crisis Management. Public Administration 81(1): 191210.CrossRefGoogle Scholar
British Academy. (2009) Letter to Queen Elizabeth, (accessed January 2014).Google Scholar
Brown, G. (2004) Speech by the Chancellor at the Mansion House, 16 June.Google Scholar
Brown, G. (2005a) Speech to the Institute of Directors, 24 November.Google Scholar
Brown, G. (2005b) Speech by the Chancellor at the Advancing Enterprise Conference in London, 2 December.Google Scholar
Brown, G. (2005c) Speech by the Chancellor at the Mansion House, 22 June.Google Scholar
Brown, G. (2006a) Speech by the Chancellor at the Mansion House, 21 June.Google Scholar
Brown, G. (2006b) Speech to the CBI, 28 November.Google Scholar
Brown, G. (2006c) Speech to the CBI President’s Dinner, 6 June.Google Scholar
Brown, G. (2007a) Speech by the Chancellor at the Mansion House, 20 June.Google Scholar
Brown, G. (2007b) Speech by the Chancellor at the CBI Annual Dinner, 15 May.Google Scholar
Brown, G. (2010) Beyond the Crash: Overcoming the First Crisis of Globalization. New York, NY: Free Press.Google Scholar
Cable, V. (2007a) Hansard, 12 March, Column 1050.Google Scholar
Cable, V. (2007b) Hansard, 11 October, Column 468.Google Scholar
CityUK. (2007) Economic Contribution of UK Financial Services 2008. London: The CityUK.Google Scholar
Cohan, W. (2011) Money and Power: How Goldman Sachs Came to Rule the World. New York, NY: Doubleday.Google Scholar
Cohen, H. (2006) Hansard, 26 October, Column 1656.Google Scholar
Corbyn, J. (2007) Hansard, 19 November, Column 973.Google Scholar
Cotis, J.-P. (2007) Editorial: Achieving further Rebalancing. OECD Economic Outlook 81: 710.Google Scholar
Darling, A. (2007a) Speech on Financial Stability and the Challenges of Globalisation for the UK, 1 October.Google Scholar
Darling, A. (2007b) Speech at the Andrew Williamson Memorial Lecture, The University of Stirling, 8 November.Google Scholar
Darling, A. (2007c) Speech to the CBI, 27 November.Google Scholar
Darling, A. (2008a) Speech to the Royal Society for the Encouragement of Arts, Manufactures and Commerce, 15 January.Google Scholar
Darling, A. (2008b) Speech to the Worshipful Society of International Bankers, 4 February.Google Scholar
Darling, A. (2011) Back from the Brink. London: Atlantic Books.Google Scholar
Dekker, S. (2006) The Field Guide to Understanding Human Error. Farnham: Ashgate.Google Scholar
Dixon, N. F. (1994) On the Psychology of Military Incompetence. London: Pimlico.Google Scholar
Dowding, K., Faulkner, N., Hindmoor, A. and Martin, A. (2012) Change and Continuity in the Ideology of the Australian Prime Ministers: The Governor General’s Speeches (1946–2010). Australian Journal of Political Science 47(3): 455472.CrossRefGoogle Scholar
Drennan, L. T. and McConnell, A. (2007) Risk and Crisis Management in the Public Sector. London: Routledge.Google Scholar
Dunne, P. (2008) Hansard, 10 March, Column 76.Google Scholar
Erturk, I. and Solari, S. (2007) Banks as Continuous Reinvention. New Political Economy 12(3): 369388.CrossRefGoogle Scholar
Farrell, G. (2010) Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch and the Near-Collapse of Bank of America. New York, NY: Crown Business.Google Scholar
Financial Services Authority. (2005a) Financial Risk Outlook 2005. London: FSA.Google ScholarPubMed
Financial Services Authority. (2005b) FSA Publishes its Financial Risk Outlook. Press Release, FSA/PN/005/2005. London: FSA.Google Scholar
Financial Services Authority. (2006) Financial Risk Outlook 2006. London: FSA.Google ScholarPubMed
Financial Services Authority. (2007) Financial Risk Outlook 2007. London: FSA.Google ScholarPubMed
Financial Stability Forum. (2008) Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience. Basel: Financial Stability Forum.Google Scholar
Financial Services Authority. (2011) The Failure of the Royal Bank of Scotland: Financial Services Authority Board Report. London: FSA.Google Scholar
Financial Times . (2007a) Dangerous Liaisons, 17 May.Google Scholar
Financial Times . (2007b) Lots of Unknowns, 26 June.Google Scholar
Financial Times (2007c) The IMF Reports on a Wonderful World, 12 April.Google Scholar
Financial Times (2007d) Global Credit Woes, 28 June.Google Scholar
Financial Times (2007e) Do Not Cut Rates, 21 August.Google Scholar
Financial Times (2007f) Jump-Starting the Debt Markets, 9 October.Google Scholar
Financial Times (2007g) Cleaning-Up After Credit Innovation, 15 October.Google Scholar
Financial Times (2007h) Securitised Stability, 27 April.Google Scholar
Friedman, M. (2002) Capitalism and Freedom, Revised edition. Chicago, IL: University of Chicago Press.CrossRefGoogle Scholar
Gieve, J. (2006a) Financial System Risks in the UK – Issues and Challenges, Speech at the Centre for the Study of Financial Innovation Roundtable, 25 June.Google Scholar
Gieve, J. (2006b) Pricing for Perfection. Speech at the Bank of England, 14 December.Google Scholar
Gieve, J. and Provost, C. (2012) Ideas and Coordination in Policymaking: The Financial Crisis of 2007–9. Governance 25: 6177.CrossRefGoogle Scholar
Giles, C. (2012) The Court of King Mervyn. The Financial Times, May 5.Google Scholar
Gilpin, D. R. and Murphy, P. J. (2008) Crisis Management in a Complex World. New York, NY: Oxford University Press.CrossRefGoogle Scholar
Gowan, P. (2009) Crisis in the Heartland. New Left Review 55: 529.Google Scholar
Greenspan, A. (2005) Risk Transfer and Financial Stability. Speech to the Federal Reserve Bank of Chicago’s Forty-First Annual Conference on Bank Structure, 5 May.Google Scholar
Haldane, A. (2010) The $100bn Question. Remarks at the Institute of Regulation and Risk, Hong Kong, 30 March.Google Scholar
Haldane, A., Brennan, S. and Madouros, V. (2010) What is the Contribution of the Financial Sector: Miracle or Mirage? The Future of Finance: The LSE Report.Google Scholar
Hay, C. (2002) Political Analysis. Basingstoke: Palgrave Macmillan.CrossRefGoogle Scholar
Hayes, A. and Krippendorff, K. (2007) Answering the Call for a Standard Reliability Measure for Coding Data. Communication Methods and Measures 1(1): 7789.CrossRefGoogle Scholar
HBOS. (2006) Annual Report and Accounts.Google Scholar
HBOS. (2007) Pre-Close Trading Statement. 12 June. (accessed January 2014).Google Scholar
HBOS. (2008) Trading Update. 19 June. (accessed January 2014).Google Scholar
Head, B. W. (2008) Three Lenses of Evidence-based Policy. Australian Journal of Public Administration 67(1): 111.CrossRefGoogle Scholar
Hellwig, T. and Coffey, E. (2011) Public Opinion, Party Messages, and Responsibility for the Financial Crisis in Britain. Electoral Studies 30: 417426.CrossRefGoogle Scholar
Hindmoor, A. and McConnell, A. (2013) Why Didn't They See it Coming? Warning Signs, Acceptable Risks and the Global Financial Crisis. Political Studies 61(3): 543560.CrossRefGoogle Scholar
Hindmoor, A. and Larkin, P. (2009) Assessing the Influence of Select Committees: The Education and Skills Committee 1997–2005. Journal of Legislative Studies 15: 7189.CrossRefGoogle Scholar
Hood, C. (1998) The Art of the State: Culture, Rhetoric, and Public Management. Oxford: Clarendon Press.Google Scholar
Janis, I. L. and Mann, L. (1977) Decision-Making: A Psychological Analysis of Conflict, Choice and Commitment. New York, NY: The Free Press.Google Scholar
Jenkinson, N. (2006) Risks to the Commercial Property Market and Financial Stability. Speech to the IPD/IPF Property Investment Conference, 30 November.Google Scholar
Jenkinson, N. (2007) Promoting Financial System Resilience in Modern Global Capital Markets: Some Issues. Speech at the conference Law and Economics of Systemic Risk in Finance, University of St Gallen, Switzerland, 29 June.Google Scholar
Jennings, W., Bevan, S. and John, P. (2011) The Agenda of British Government: The Speech from the Throne. Political Studies 59(1): 7498.CrossRefGoogle Scholar
John, P. and Bevan, S. (2012) What are Policy Punctuations? Large Changes in the Legislative Agenda of the UK Government, 1911–2008. Policy Studies Journal 40(1): 89107.CrossRefGoogle Scholar
Johnson, S. and Kwak, J. (2010) 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. New York, NY: Pantheon Books.Google Scholar
Kaletsky, A. (2007) Is Global Finance Out of Control? Robert Wade vs Anatole Kaletsky. Prospect, December 2007: 2024.Google Scholar
King, M. (2012) Speech by the Governor at the 2012 BBC Today Program Lecture, London, 2 May. (accessed January 2014).Google Scholar
Klein, N. (2007) The Shock Doctrine: The Rise of Disaster Capitalism. New York, NY: Metropolitan Books and Henry Holt.Google Scholar
Krugman, P. (2009) The Return of Depression Economics. New York, NY: W.W. Norton.Google Scholar
Kynaston, D. (2011) City of London: The History. London: Chatto & Windus.Google Scholar
Large, A. (2003) Maintaining Financial Stability in a Complex World. Speech at the National Liberal Club, 17 November.Google Scholar
Large, A. (2004) Financial Stability Oversight, Past and Present. Lecture at the London School of Economics, 22 January.Google Scholar
Large, A. (2005) A Framework for Financial Stability. Speech at the Istanbul International Conference on Financial System Stability and Implications of Basel II, 18 May.Google Scholar
Lewis, M. (2010) The Big Short: Inside the Doomsday Machine. London: Allen and Lane.Google Scholar
Lloyds (2007) Annual Report and Accounts.Google Scholar
Lucas, R. (2003) Macroeconomic Priorities. American Economic Review 93: 114.CrossRefGoogle Scholar
McConnell, A. (2010a) Understanding Policy Success: Rethinking Public Policy. Basingstoke: Palgrave Macmillan.CrossRefGoogle Scholar
McConnell, A. (2010b) Policy Success, Policy Failure and Grey Areas In-Between. Journal of Public Policy 30(3): 345362.CrossRefGoogle Scholar
McLean, B. and Nocera, J. (2010) All the Devils are Here: The Hidden History of the Financial Crisis. New York, NY: Penguin.Google Scholar
March, J. G. and Olsen, J. P. (2006) Elaborating the “New Institutionalism”. In Rhodes R. A. W., Binder S. A. and Rockman B. A. (eds.) The Oxford Handbook of Political Institutions. Oxford: Oxford University Press, 320.Google Scholar
Mikhaylov, S., Laver, M. and Benoit, K. (2010) Coder Reliability and Misclassification in the Human Coding of Party Manifestos. (accessed January 2014).Google Scholar
Monaghan, M. (2011) Evidence Versus Politics: Exploiting Research in UK Drug Policy Making. Bristol: The Policy Press.Google Scholar
National Audit Office. (2009) The Nationalisation of Northern Rock. London: NAO.Google Scholar
Osborne, D. and Gaebler, T. (1992) Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector. Reading, MA: Addison-Wesley.Google Scholar
Pawson, R. (2006) Evidence-Based Policy: A Realist Perspective. London: Sage.CrossRefGoogle Scholar
Peters, B. G. (2011) Institutional Theory in Political Science: The ‘New Institutionalism’, 3rd ed. London: Continuum.Google Scholar
Pettit, P. (1995) The Virtual Reality of Homo Economicus. The Monist 78: 308329.CrossRefGoogle Scholar
Pierce, A. (2008) The Queen Asks Why No One Saw the Credit Crunch Coming, Daily Telegraph, 5 November.Google Scholar
Post, J. M. (2005) Leaders and their Followers in a Dangerous world: The Psychology of Political Behavior. Ithaca, NY: Cornell University Press.Google Scholar
Reason, J. (1990) Human Error. New York, NY: Cambridge University Press.CrossRefGoogle ScholarPubMed
Redwood, J. (2007) Hansard, 11 October, Column 476.Google Scholar
Reinhart, C. and Rogoff, K. (2009) This Time is Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton University Press.Google Scholar
Richardson, M. and White, L. (2009) The Rating Agencies: Is Regulation the Answer? In Acharya V. and Richardson M. (eds.) Restoring Financial Stability: How to Repair a Failed System. New Jersey: John Wiley & Co.Google Scholar
Roubini, N. and Mihm, S. (2010) Crisis Economics: A Crash Course in the Future of Finance. New York, NY: Penguin.Google Scholar
Royal Bank of Scotland. (2006) Annual Reports and Accounts.Google Scholar
Royal Bank of Scotland. (2007a) Interim Results Presentation. (accessed January 2014).Google Scholar
Royal Bank of Scotland. (2007b) Pre-Close Trading Update. (accessed January 2014).Google Scholar
Stiglitz, J. (2009) The Anatomy of a Murder: Who Killed America’s Economy? Critical Review 21(3): 329339.CrossRefGoogle Scholar
Times . (2007a) Wavering Not Drowning, 5 July.Google Scholar
Times . (2007b) Panic or Picnic?, 11 August.Google Scholar
Times . (2007c) A (Northern) Rock and a Hard Place, 15 September.Google Scholar
Times . (2007d) Northern Crock, 20 November.Google Scholar
Times . (2007e) First Step, 1 October.Google Scholar
Times . (2007f) Northern Exposure, 18 September.Google Scholar
Treasury. (2009) UK Asset Protection Scheme. (accessed January 2014).Google Scholar
Treasury Committee. (2001) Banking Consumers and Small Business, HC-818.Google Scholar
Treasury Committee. (2002) Split Capital Investment Trusts, HC-651.Google Scholar
Treasury Committee. (2003) Restoring Confidence in Long-Term Savings, HC-71.Google Scholar
Treasury Committee. (2005a) Banking and the Unbanked: Banking Services, the Post Office Card Account and Financial Inclusion, HC-1717.Google Scholar
Treasury Committee. (2005b) Financial Inclusion: Credit, Savings Advice and Insurance, HC-848.Google Scholar
Treasury Committee. (2005c) European Financial Services Regulation, HC-778.Google Scholar
Treasury Committee. (2007a) Private Equity, HC567-1.Google Scholar
Treasury Committee.(2007b) The Monetary Policy Committee of the Bank of England: Ten Years On, HC 299-1, evidence 104.Google Scholar
Treasury Committee. (2008) The Run on the Rock, HC 56-1.Google Scholar
Treasury Committee. (2009) Dealing with the Failure of the UK Banks, HC-402.Google Scholar
Treasury Committee. (2012) The FSA’s Report into the Failure of RBS, HC-640.Google Scholar
Tuchman, B. W. (1995) The March of Folly: From Troy to Vietnam. Toronto: Random House.Google Scholar
Turner, A. (2009) The Turner Review: A Regulatory Response to the Global Banking Crisis. London: FSA.Google Scholar
Wade, R. (2012) Economist’s Contribution to the Second Great Depression. Paper delivered to the Sheffield Political Economy Research Institute Conference on the British Growth Model, 16–18 July, Sheffield.Google Scholar
Weick, K. E. (2001) Sensemaking in Organization. Oxford: Blackwell.Google Scholar
Woods, D. D., Dekker, S., Cook, R., Johannesen, L. and Sarter, N. (2010) Behind Human Error, 2nd ed. Farnham: Ashgate.Google Scholar
Cited by

Save article to Kindle

To save this article to your Kindle, first ensure is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the or variations. ‘’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Who saw it coming? The UK’s great financial crisis
Available formats

Save article to Dropbox

To save this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you used this feature, you will be asked to authorise Cambridge Core to connect with your Dropbox account. Find out more about saving content to Dropbox.

Who saw it coming? The UK’s great financial crisis
Available formats

Save article to Google Drive

To save this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you used this feature, you will be asked to authorise Cambridge Core to connect with your Google Drive account. Find out more about saving content to Google Drive.

Who saw it coming? The UK’s great financial crisis
Available formats

Reply to: Submit a response

Please enter your response.

Your details

Please enter a valid email address.

Conflicting interests

Do you have any conflicting interests? *