Saturday, February 14, 2015
Labour's role in the banking crisis
Labour activists are fond of blaming the bank for the economic mess they bequeathed to the current government. And of course they are now advocating punishing their bête noir even more for their sins against the economy and ordinary people.
I am not opposed to a further levy on banking profits but I do recoil at the sort of hypocrisy and spin being deployed by Labour in this campaign. That is because their culpability in this crisis was clear at the time.
Despite all their denials Labour's failure to regulate the banks properly and their mismanagement of the economy put the country in the position whereby even their own Chancellor of the Exchequer said in March 2010 that if Labour is re-elected public spending cuts will be "tougher and deeper" than those implemented by Margaret Thatcher.
Those who deny that Labour had any role in deregulating the banks will be interested in this article in today's Telegraph. They have published a video in which Ed Balls is seen boasting of over-ruling the Bank of England as Gordon Brown stripped it of the power to regulate the City.
They say that this is the act that some economic experts argue contributed to the financial crisis:
Gordon Brown’s economic adviser is seen telling a senior journalist that the Bank strongly objected to the plan to hive off regulation of the finance industry to a new watchdog – but they had no “choice” over the decision.
The then-30 year old is later seen jubilant after the BBC’s John Sergeant gave positive coverage of the move to create the Financial Services Authority, telling Mr Brown: “Sergeant bought the whole bloody lot.”
They add that the apparent pride Mr Balls and Charlie Whelan, Gordon Brown’s spokesman, took in disregarding the advice of the Bank and the Treasury's most senior civil servant risks embarrassing the shadow chancellor as his suitability to run the economy becomes a focus of the election campaign.
A decade later, Parliamentary reports into the financial crisis concluded Mr Brown's watchdog had failed to sound the alarm over the brewing crisis at Northern Rock, and should have blocked the catastrophic takeover of ABN Amro by the Royal Bank of Scotland.
Sir Martin Jacomb, a former Bank of England director, has claimed that the "disastrous" decision to create the FSA was driven by jealousy within the Treasury and a desire to rein in the central bank's power. The body was scrapped by George Osborne, and regulation of the City handed back to the Bank of England Governor.
This is one crisis the Labour Party cannot wriggle out of.
I am not opposed to a further levy on banking profits but I do recoil at the sort of hypocrisy and spin being deployed by Labour in this campaign. That is because their culpability in this crisis was clear at the time.
Despite all their denials Labour's failure to regulate the banks properly and their mismanagement of the economy put the country in the position whereby even their own Chancellor of the Exchequer said in March 2010 that if Labour is re-elected public spending cuts will be "tougher and deeper" than those implemented by Margaret Thatcher.
Those who deny that Labour had any role in deregulating the banks will be interested in this article in today's Telegraph. They have published a video in which Ed Balls is seen boasting of over-ruling the Bank of England as Gordon Brown stripped it of the power to regulate the City.
They say that this is the act that some economic experts argue contributed to the financial crisis:
Gordon Brown’s economic adviser is seen telling a senior journalist that the Bank strongly objected to the plan to hive off regulation of the finance industry to a new watchdog – but they had no “choice” over the decision.
The then-30 year old is later seen jubilant after the BBC’s John Sergeant gave positive coverage of the move to create the Financial Services Authority, telling Mr Brown: “Sergeant bought the whole bloody lot.”
They add that the apparent pride Mr Balls and Charlie Whelan, Gordon Brown’s spokesman, took in disregarding the advice of the Bank and the Treasury's most senior civil servant risks embarrassing the shadow chancellor as his suitability to run the economy becomes a focus of the election campaign.
A decade later, Parliamentary reports into the financial crisis concluded Mr Brown's watchdog had failed to sound the alarm over the brewing crisis at Northern Rock, and should have blocked the catastrophic takeover of ABN Amro by the Royal Bank of Scotland.
Sir Martin Jacomb, a former Bank of England director, has claimed that the "disastrous" decision to create the FSA was driven by jealousy within the Treasury and a desire to rein in the central bank's power. The body was scrapped by George Osborne, and regulation of the City handed back to the Bank of England Governor.
This is one crisis the Labour Party cannot wriggle out of.
