Pestomania: Is Rt. Hon. John McFall out of his gourd?

It seems that former Tory leader Michael Howard’s call for an investigation into stories published by the BBC’s Robert Peston will culminate in a Treasury select committee investigation into. . .

“the role of the media in financial stability and whether financial journalists should operate under any form of reporting restrictions during banking crises”.

D Notices in the Square Mile? In the context of 24-hour news cycle and t’interweb?

Bonkers.

But should we take this to mean that John McFall, the Labour chairman of the Treasury select committee, has taken leave of his gourd?

Perhaps not. As McFall surely knows, the real issue here isn’t the BBC’s business editor, or unworkable reporting restrictions. Neither is it Peston’s work on Northern Rock, which seems to have been sound.

It’s the possibility that HM Government broke the law on the morning of 17 September by priming Peston with a story about the HBOS-Lloyds merger ahead of its formal announcement.

This is the story that really upset the Square Mile.

Of course, the chances of the select committee getting to the bottom of this bit of intrigue are less than zero. And that’s probably a good thing.

This is because Peston’s story had a positive outcome: it stopped the short-sellers from completely trashing HBOS. Whatever the motivation, his source happened to be acting in the best interests of both the economy and taxpayers.

Bending the rules to breaking point during a banking collapse isn’t without precedent. Once upon a time, the Bank of England specialised in solving such crises by cutting highly pragmatic deals in smoke-filled rooms.

No doubt Michael Howard would have been horrifed by some of them.

Those days are long gone. But if Peston’s story represented a slight return to the tactics of yesteryear, we’re none the worse for it.

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