The former deputy Governor of the Bank of England said he was “astounded” that the US government did not step in to halt the collapse of Lehman Brothers.
Sir John Gieve said he had expected government money to be pumped in to rescue the stricken bank, which collapsed one year ago.
But that rescue never came, resulting in the Wall Street giant collapsing in the space of a few frantic hours this time last year. Speaking to Sky News he said the US government's reluctance to help out the floundering bank had led to financial markets questioning whether the authorities had a grip on the situation.
He said he expected Lehman Brothers to be supported in a similar fashion to giant global investment bank Bear Stearns after it collapsed in March 2008.
Asked if he was surprised that the US government hadn't stepped in, he replied: “I was astounded. I thought from the start that they would do what they had done with Bear Stearns which was to put government money in to ensure that a rescue happened.
“And by doing that they'd created a presumption, not just in the UK but right across financial markets, that the safety net had now been widened and now stood behind the big investment banks as well as the commercial banks.
“So having created that presumption, dashing it to pieces was devastating.”