CITY AND SUBURBAN
The Bank of Cocaine and Colombia adds a new terror to recession
CHRISTOPHER FILDES
Commerce International, (Lord Cal- laghan? Sheik Zayid? Manuel Noriega?) It was the world's most bizarre bank, its two middle initials were said to stand for Cocaine and Colombia, and its collapse is more shocking than surprising — but is just what the economy does not need. I warned six months ago that the credit squeeze and freeze would serve to dry up the ordinary flows of cash through the economy. The casualties of drought, I said, would follow. So they have — businesses are dying for want of payments. Now comes our biggest bank failure for many years, and thousands of sole traders and small businesses, and some not so small, have had their cheque books frozen — along with £250 million of their money. Savings and their managers sometimes melt away, the 'fringe banks' of 20 years ago disappeared in a puff of malodorous smoke, but we are not used to seeing bank doors close on the working capital of ordinary businesses. The failure of a bank, and for that matter the exposure of a fraud, are classic symptoms of the contraction of credit. They make it worse, as the BCCI affair shows. It is not all the fault of some unnamed group of kite-flyers and book-fiddlers. It is part and parcel of a financially-driven recession, compounded by the Treasury, which did not understand what would happen when companies and People and (finally) banks ran out of money.
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