Finally, after a decade of waiting, a politician at the very heart of the financial crisis has found the courage to hit back hard at the greedy bankers who wreaked havoc on the economy.
The former Labour chancellor’s declaration of war on the fat cat, lying and irresponsible bankers at Royal Bank of Scotland, Northern Rock, HBOS and Barclays is unprecedented, coming as it does from one of the major players before, during and after the meltdown that squeezed the living standards of almost every citizen in Britain.
And it should find great favour among the public, which has never forgiven the bankers for their rapacious behaviour.
Brown’s opinion has particular resonance because this was the prime minister who claimed before the Commons that he had ‘saved the world’ after launching a bailout of the British financial system, which at its peak put the taxpayer in hock for almost one trillion pounds, or around half the total output of the whole British economy.
‘Brown’s declaration of war on the fat cat, lying and irresponsible bankers at Royal Bank of Scotland, Northern Rock, HBOS and Barclays is unprecedented’
In his assault, Brown spares the blushes of no one, including his fellow Scot Fred Goodwin – whom he accuses of pursuing and pushing through a ‘catastrophic takeover’ of the near-bankrupt Dutch bank ABN Amro in 2007. He also says Goodwin failed to show ‘a shred of contrition’ when it all went wrong.
Brown’s stinging rage about the behaviour of the bankers – and the events which destroyed his reputation as the chancellor who ended ‘boom and bust’ – has clearly been building during his self-imposed exile at home with his family in Scotland. This brooding period of reflection has reinforced his belief that the trust he placed in free market capitalism and the City was betrayed and abused.
He argues now that the bankers and financiers he entertained in Downing Street months before the whole edifice collapsed were traitors who, like their counterparts in Spain and Iceland, should have been imprisoned for fraud.
This paper has always argued that it is inexplicable that in Britain there has been no dogged attempt by the financial regulators, the Serious Fraud Office, or the other judicial authorities to bring bankers at the highest level to justice.
It is one of the great paradoxes that the only top bankers to face fraud charges, still to be heard in the courts, are four former senior executives at Barclays.
‘In his assault, Brown spares the blushes of no one, including his fellow Scot Fred Goodwin’ (pictured)
Yet Barclays, unlike Royal Bank of Scotland and Lloyds-HBOS, refused to be part of the government bailout when Brown launched it on October 8, 2008.
Brown is as contemptuous of the way that Barclays behaved as he is of the other banks which enjoyed a direct taxpayer rescue.
He reveals that Barclays, after paying an undisclosed service fee of £300million to Qatar (as part of an operation to salvage the bank by Qatar and Abu Dhabi), continued to behave as if the crisis had never happened.
Barclays is understood to have explored buying the collapsing New York investment bank Lehman Brothers, and was only halted in its tracks by UK regulators.
It is hard not to support Brown’s mocking of the egotistical extravagances of Fred Goodwin at RBS, and his lambasting of the banks for paying excessive dividends to shareholders in the run-up to the crisis. But in lashing out at the alleged criminal behaviour of the bankers, Brown takes no responsibility for the explosion in credit that was made available between 1997 and 2007, which led to the run on Northern Rock, and exposed Britain to international ridicule as a banana republic.
Moreover, there is no hint of repentance over the calamitous private deal he hatched with Lloyds Bank chairman Sir Victor Blank and his board for the ‘Black Horse’ to come riding to the rescue of HBOS.
The role of Brown and the Government in signing off on the merger between Lloyds and HBOS is currently the subject of a High Court battle: a prominent group of shareholders are seeking redress for the fact that they were not informed of the terrible state of HBOS when it was merged with Lloyds.
So while it is easy to agree with much of Brown’s rhetoric, and to feel sympathy for the hard decisions he had to take in rescuing the crooked banks – he had even drawn up a letter of resignation over the bailout plan – he shows little self-awareness about his own role in the creation of the debt bubble at the banks.
At least part of the blame can be parked at the doors of Brown’s Treasury, and the steps taken by an over-confident New Labour government in 1997.
As chancellor, Brown was responsible, days after taking office, for granting the Bank of England independence in the setting of interest rates. But much to the chagrin of Eddie George, the late, great governor of the Bank, he also decided to take regulation of the major banks away from Threadneedle Street, and pass it to a new regulator, the Financial Services Authority.
‘Brown’s stinging rage about the behaviour of the bankers – and the events which destroyed his reputation as the chancellor who ended ‘boom and bust’ – has clearly been building during his self-imposed exile at home with his family in Scotland’
The FSA had no experience of policing big powerful banking institutions and none of the moral authority or market intelligence which rests with the Bank of England.
Banks were allowed to expand their balance sheets virtually unchecked and, as late as 2007 – as the major investment bank Bear Stearns in the US and Northern Rock in Britain were on the brink of collapse – the light-touch FSA nodded through the RBS takeover of ABN Amro of which Brown is now so fiercely critical.
Brown also conveniently forgets how New Labour benefited from the banks and financial sector. The City was the goose which laid the golden egg, contributing a large proportion of the nation’s tax revenues – which helped him embark on large-scale spending on the NHS, and his pet welfare schemes such as the working family tax credits.
Under Brown’s financial stewardship, the State expanded by leaps and bounds. But it could not have been done if he and the Treasury had not embraced the banks. He personally opened Lehman Brothers’ new headquarters in the City, and acknowledges he was a guest of honour at Fred Goodwin’s monument to extravagance, the RBS headquarters outside Edinburgh.
There is no doubt Gordon Brown was a big thinker who brought brave new ideas to economics, finance and the global trading system and who wisely, with the assistance of Ed Balls, kept Britain out of the euro.
But the City and the banking system was his Achilles heel, and he still cannot intellectually reconcile himself to the idea that he must bear some responsibility for the collapse.