Brown in 'we fucked up' admission
Gordon Brown has admitted he made a "big mistake" on financial regulation before the banking crisis that plunged Britain into recession.
The former prime minister said the regulatory framework he put in place as chancellor failed to address the "entanglements" of different institutions and "how global things were".
Speaking at a conference in the US, Mr Brown said he accepted his responsibility for the mistakes, but added that he was not alone in making them.
His comments will be seized on by the Conservatives and Liberal Democrats as the coalition Government prepares to shake up the banking system and remodel financial regulation.
Shadow Chancellor Ed Balls, speaking during a Scottish election campaign in East Kilbride, near Glasgow, said: "Every government got it wrong around the world, every central bank, every regulator, and Gordon Brown's right to say that the UK got that wrong. It was also the case you had massive irresponsibility within individual banks and investment banks."
At an event organised by the Institute for New Economic Thinking in Bretton Woods, New Hampshire, Mr Brown said that in the 1990s and the years up to 2007, when he was chancellor, he was under "relentless pressure" from the City not to over-regulate.
"We know in retrospect what we missed. We set up the Financial Services Authority believing that the problem would come from the failure of an individual institution," he said.
Mr Brown said the economic problem had been seen in terms of inflation rather than financial stability. He went on: "So we created a monitoring system which was looking at individual institutions. That was the big mistake.
"We didn't understand how risk was spread across the system, we didn't understand the entanglements of different institutions with the other and we didn't understand even though we talked about it just how global things were, including a shadow banking system as well as a banking system.
"That was our mistake but I'm afraid it was a mistake made by just about everybody who was in the regulatory business."
4 comments:
Yes, just read the news on this...very surprised until I realised it was still the 'excuse' apology, too much of the "I'm sorry...BUT...it wasn't really me/they did it too/it was all of us/they made me do it"
(delete as appropriate)
The question is "Would any other British government have got it right?" Given that lots of other governments seemed to make the same mistake then it looks like we'd still be in trouble no matter who was in at the time.
Indeed Span.
Shy I actually believe, and I have written as much many times, that the whole concept of the FSA was deeply flawed. I also believe that those at top of the banks didn't understand what was happening so couldn't spot when something was wrong.
Politicians rely on advisors and I think that nobody at Westminster (apart from a few with actual hands on business experience)understood the problem.
The weird thing with the banks is that everybody I know who is either an accountant or has banking experience all knew about liquidity ratios and could see that the banks were in trouble because the wrong questions were being asked.
Yesterday we were told that the new tough regulations would fix liquidity ratios at 10% yet for more than a hundred years it was 12.5% although would you believe that leading up to the crash of Northern Rock 3% was considered to be good! Liquidity ratio is the value of items that can be converted to cash as a percentage of a businesses assets.
Also there is the amount of bank's debt that was covered i.e HSBC good, NR shite.
(oh, that's what you meant!)
:-)
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