Crisis a many-headed monster: Wellink

The economic crisis was born in the US and grew up into a many-headed monster, central bank president Nout Wellink told a government commission looking into the cause and effect of the credit meltdown on Monday.

The monster was made up of citizens who stopped saving and started building up debt, US banks which were too quick to give loans and rating agencies which did not do their work properly, Wellink said.
‘Subprime [mortgages] became the trigger for the crisis, helped by a generous monetary policy,’ news agency ANP quoted Wellink as saying.
ABN Amro bank, now nationalised, was one of the victims of the financial institutions which took irresponsibly large risks, made enormous profits and were able to buy up the rest of the world, he said.
Warnings
Wellink said the central bank had warned ministers in time that there were problems on the way and that the central bank had reacted well to the situation facing the banks.
And he called on the government to reduce central bank’s liability for potential damage. The current system ‘is a problem’, Wellink said. Last week finance minister Wouter Bos rejected calls by MPs for limits to the central bank’s liability.
The situation in the Netherlands should be brought into line with other countries, ANP reported him as saying. After all, if a claim against the central bank succeeds, taxpayers will have to pick up the bill, he said.
As examples, Wellink mentioned potential claims in connection with the collapse of internet bank Icesave and the break-up of the ABN Amro group. The central bank has been accused of not doing its job properly to prevent savers and investors losing millions of euros.
Welling spent two hours with the commission, led by Socialist MP Jan de Wit, and will appear again on Thursday.