In an interview on the BBC Radio’s File on Four, King said backing Lloyd’s buy out of Northern Rock with a £30 billion loan was not a matter for a central bank.
King stated that in a conversation with the Chancellor, he told him that central banks did not normally finance takeover bids of one company to another, ‘let alone to the tune of £30 billion’ and it was a matter for government.
However, he warned Darling that if this went ahead, the facility would have to be made available to all other bidders, so making the arrangement public.
King said: “I don’t think it took the Chancellor very long to recognise that not only was this something which central banks don’t do, it’s also something that governments don’t do.”
He added he had made it clear to the Chancellor that his opinion was that the only way to prevent a run on Northern Rock was to provide a government guarantee.
Ray Boulger, senior technical manager for John Charcol, said: “That fact that King is publically prepared to criticise his boss on matters that are usually private says a lot about the tension that has built up over the situation.”
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