What kind of ‘war games’ is George Osborne playing in Washington?
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Version 0 of 1. Name: War Games Age: The latest one just got under way. Appearance: Simulated. You mean like a computer game? Like Call of Duty: Black Ops II? Sort of. Or is it more like a zombie survival thing? No, you’re getting colder. What is it, then? It’s a multiplayer simulation of a transatlantic bank crisis. That sounds insanely boring. Who would want to play a game like that? George Osborne, US treasury secretary Jack Lew, the head of the Federal Reserve, the governor of the Bank of England and several other economic authorities. OK. Can I please not be on George’s team? You’re not invited, and there aren’t really teams. The idea is to simulate the collapse of a large financial institution and then execute the procedures in place to deal with the impending crisis, and see if they work or not. And will they? We won’t know until the results are published, but Osborne thinks they’ve found a way to avoid a repeat of 2008, when the banks had to be bailed out by the taxpayer. “We are going to make sure we can handle an institution previously regarded as too big to fail,” he said. Do financial war games serve any preventive purpose? A simulation run by the Bank of England in 2004 eerily presaged the failure of Northern Rock and its catastrophic knock-on effects. So, no. Well, it would have, if recommended new measures had been put in place in time. But financial simulations are quite a common practice. Earlier this year the Bank of England launched a war game to test the banking system’s cyber-attack defences, called Waking Shark II. I would definitely play something called Waking Shark II. What’s the name of this new war game? It doesn’t appear to have one, sadly. Where is this thing happening? Do they all dress up as wizards? At the offices of the Federal Deposit Insurance Corporation in Washington. And maybe. And why now? Should I be worried about impending global financial collapse? The situation is incredibly complicated, but basically: yes. Do say: “I’ve managed the losses of creditors, and informed the relevant regulatory authorities. Your move.” Don’t say: “Game over? What happened? Where did all the money go?” |