So it was all Brown\’s fault then?

“From the start of the crisis, central banks provided emergency loans but these amounted to little more than holding a sheet in front of the emperor to conceal the nakedness of the banks. They didn’t solve the underlying problem – banks needed not loans but injections of shareholders’ capital in order to be able to absorb losses from the risky investments they had made. From the beginning of 2008, we at the Bank of England began to argue that UK banks needed extra capital – a lot of extra capital, possibly £100?billion or more. It wasn’t a popular message.”

Sir Mervyn said the “bold action” to largely nationalise RBS and Lloyds Banking Group took another nine months.

“That bold action in October 2008 could have happened sooner,” he said. “Bailing out the banks came too late to prevent the financial crisis from spilling over into the world economy. The realisation of the true state of the banking system led to a collapse of confidence around the world and a deep global recession. Over 25?million jobs disappeared worldwide. And unemployment in Britain rose by over a million.”

Politicians: even when doing the right thing they manage to do it at the wrong time.

And stopping the banking system from falling over was indeed the right thing. Maybe more shareholders should have lost their money as well, but doing it 9 months late isn\’t very good, is it?

7 thoughts on “So it was all Brown\’s fault then?”

  1. Have always thought it extraordinary that despite his other failings Brown has been lauded for acting quickly in the banking crisis and that the rest of the world copied the UK in bailing out banks.

    The chronology is pretty clear. The US was first to bail out its banks, insurers and mortgage providers in early Sept. other European countries followed suit. Whereas the semi-nationalisation of RBS and Lloyds came afterwards in mid October.

  2. the great redacto

    No, not all Brown’s fault. The people who helped themselves to 125pc mortgages from Northern Rock etc and splurged on credit, mistaking it for actual prosperity, were also to blame. Brown was merely guilty of the same idiocy on an industrial scale.

  3. I’ve always thought it extraordinary that Gordon got any credit for bodging a situation which was largely of his own making From devising a lunatic regulatory system, through not slowing down an overheating economy, to flailing around like a drowning man when the debt tsunami hit. gordon got it wrong each time.

  4. Shinsei67 said: “The chronology is pretty clear. The US was first to bail out its banks, insurers and mortgage providers in early Sept. other European countries followed suit. Whereas the semi-nationalisation of RBS and Lloyds came afterwards in mid October.”

    Your chronology supports a claim Christine Lagarde made on the BBC at the time – that Brown’s bailout plans came from Brussels.

    Grumpy Old Man said: “From devising a lunatic regulatory system, through not slowing down an overheating economy, to flailing around like a drowning man when the debt tsunami hit. gordon got it wrong each time.”

    Brown’s hubris was to believe that he could take credit for rules drawn up by international bodies like the Basel committee. His mistake was wanting to enact the rules to the max without casting a critical eye over them and picking only those that made sense.

  5. “the great redacto // May 3, 2012 at 8:45 am

    No, not all Brown’s fault. The people who helped themselves to 125pc mortgages from Northern Rock etc and splurged on credit, mistaking it for actual prosperity, were also to blame. Brown was merely guilty of the same idiocy on an industrial scale”

    While it might have been foolish to borrow 125% of a property’s value, and foolish to lend it to them too, it was not the size fo individual mortgages which was the problem, but the banks inability to borrow enough short termmoney to cover their long term loans. This is entirely different. Having been bailed out, the “bad bank” part of Northern Rock actually made a profit last year.

    Gordon Brown was definitely responsible for the house price boom, and inappropriate banking rules.

  6. and if Brown actually had the massive intellect he thinks he has, he would have widened the BoE’s remit to cover asset inflation as well as CPI inflation. But maybe he would have had to grow an additional brain-cell. And the horrific consequence is that Balls would have had to grow another head to cope with the load of carrying a single brain-cell.

    AAAAAAGHGGHHH! Despair

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