Governing law
LEIGH-PEMBERTON'S law is a bright coinage in a glum week. The Governor produced it to a group of American bank- ers, one of whom was good enough to pass it to me. It is a law of credit: 'The more you argue about how credit is to be allocated, the less credit there is to share.' That will do for the ludicrous quarrel which followed the rescue of the British Petroleum share issue. Last week's quarrel between the stuffers and the pullers — to pull or withdraw the issue, or to stuff it down the underwriters' throats — was at least a quarrel of substance. The pullers argued that what mattered most in such times as these was the stability of the financial system; that when credit and liquidity were contracted the classic remedy was to put more in, not to take billions of pounds out. The rescue met their point. The Bank of England, by appearing as buyer of last resort for the new BP shares, effectively turned them into liquid assets — as good for money as a 70p note from the Bank's Issue Department. A neat trick — but whose? The Chancellor borrowed Bernard Ingham, the megaphone of No. 10, to cry down the Bank's part and boom up his own. That does not help the trick to work.
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