Gordon In Denial About Regulation Failures

Gordon In Denial About Regulation Failures

Iain Dale 10:42 AM

Patrick Wintour writes in the Guardian that the media missed a big financial story this week, when former Treasury Permanent Secretary Lord Burns gave evidence to a Lord Committee, in which he talked about the failure of regulation.

Burns, the former Treasury permanent secretary, criticised the banking regulation that he had - reluctantly - helped to introduce when Labour came to power in 1997.

Burns said the tripartite structure covering the Bank of England, the Treasury and the Financial Services Authority, had not properly overlapped - with the result that failed business models in British banking were not spotted. He also said the system was insufficiently transparent and in the initial stages of the crisis led to uncertainty of responsibility.

He said the tighter system of bank regulation in Spain had been far more effective in controlling dangerous expansion and regulating off balance sheet securities, the source of the much of the British banking crisis. His remarks to a Lords economic affairs committee will add to the pressure on the prime minister as he dodges to avoid being made culpable for the banking crisis.

The failures will not go away - and they were highlighted again this week by what happened at HBOS. There lack of communication between the FSA and the Treasury over repeated warnings concerning the bank.

At one point, he sounded wistful of the arrangements that had been in place before. " I look back to the world when it was just the Treasury and the Bank of England. It had been working for a very long time.

"At every level of the two organisations, people met on a very regular basis and if there were differences of opinion, a sense of accommodation was reached usually relatively quickly. Having a third member into this seems, if anything, to have slowed down the process in the early stages of cooperation."

He also criticised the lack of transparency in the new system, saying the process was obscure and adding that it would help if the minutes of the senior tripartite committee were published. He also doubted if the committee often met.

The decision to take the issue of City regulation away from the Bank, he said, meant it was hard to staff up two institutions to have the skills and the background waiting for when a crisis started to build.

Burns is neither an oracle, or a totally neutral observer. But it will be No 10's concern that as the recession unwinds, and two select committee inquiries complete their reports into British banking supervision, the issues he raised will gain ever wider currency.

If Brown could only admit some role in the emergence of the crisis, he would be in a stronger political position. But so long as he suggests a perfect regulatory system was struck down purely by a US contagion, the criticisms of authoritative figures such as Burns will ring ever louder come election time.

And who was Chancellor during that period? Yup, do-nothing Gordon. Is he in denial about his own culpability, or does he really believe he did nothing wrong?

Friday, February 13, 2009

Why Is Robert Peston Spinning for Downing Street?

Iain Dale 11:28 PM

Last September, Gordon Brown rang the chairman of Lloyds Bank and ordered convinced him to take over HBOS. At the time I wrote of blogpost titled LLOYDS/HBOS - WHY I FEAR THE JINX OF GORDON. Well, I wasn't wrong, was I? And yet the Downing Street spin today is that this was entirely a matter for Lloyds Bank and the Prime Minister had nothing to do with it.

Robert Peston, for it is he, seems to be perfectly happy to propogate this myth. On today's Six O'Clock news he was saying that the merger between HBOS and Lloyds was really nothing to do with Gordon Brown. Which is strange, because on the BBC website he said this on 17th September last year.

Our business editor said there was a real concern that any run on HBOS shares would create enough fear among the bank's financiers - providers of wholesale credit who give the bank its money - for there to be a withdrawal of credit for HBOS. "Clearly the watchdog and Treasury will welcome a deal as it will put the bank on a sounder footing," he said. "The last thing they want is a fully fledged crisis." He added that the deal was negotiated at a very high level, with Prime Minister Gordon Brown telling Lloyds TSB chairman Sir Victor Blank that it would helpful if Lloyds could end the uncertainty surrounding HBOS by buying it.

So, clearly, the whole thing had Gordon Brown's fingerprints all over it, yet Peston is now promulgating a myth that he didn't. Perhaps Mr Peston would like to clear up this apparent inconsistency.