in London to solve rhe world’s crisis in a single day. It’s
ridiculous to expect such an outcome but we live in a virtual
reality world where “spin” rules.
Gordon Brown is hosting this jamboree and can hardly stand proud and
show the way forward by his example. Iain Martin’s piece here pins a
major financial scandal to his door for Brown, almost single-
handedly, brought down a major bank to save his own skin. Financiers
end up in courts when they do things like that. Brown stays
comfortably in No:10.
xxxxxxxxxxx cs
========================
TELEGRAPH 12.3.09 (Leading Article)
1. G20 summit in London must tackle causes not symptoms
The planning for next month's G20 economic summit in London is
proving problematic. Sir Gus O'Donnell, the Cabinet Secretary, let
slip this week that the Government is finding it "extremely
difficult" to finalise the agenda because no one is answering the
telephones in the US Treasury. And, inevitably, the security involved
in coping with so many world leaders is proving to be a nightmare.
Yet these are mere noises off. The real concern we have about the G20
is that it cannot come up with the right solutions for the economic
crisis because it does not seem to be tackling the real problem.
Gordon Brown, the summit's host, talks of a "global new deal" and
makes much of a new architecture to regulate global finance.
Meanwhile, Larry Summers, President Obama's chief economic adviser,
insists the focus must be on pumping up demand so the world can spend
its way out of the slump. Both men give every impression of missing
the big picture completely. We are in this mess because enormous
global trading imbalances were allowed to build, by governments and
regulators who were asleep at the wheel.
Mr Brown continues to insist that the slump was caused by the sub-
prime mortgage crisis in the United States. That was simply a symptom
of a distorted world trading system which saw developed countries
racking up colossal debts as they rushed to buy an ever-swelling
torrent of cheap goods, many from China. The availability of cheap
credit was allowed to spill over into the property market. It has
suited governments everywhere to tar and feather the banks as the bad
guys in this drama and indeed, many were greedy and reckless. But
they simply got away with what they were allowed to by governments
and regulators desperate to keep the good times rolling. If there is
a villain in the piece, it is Alan Greenspan, the former head of the
US Federal Reserve, who in the early years of this decade kept
interest rates unfeasibly low to maintain growth. His acolytes –
including Mr Brown, when Chancellor – eagerly adopted the same
strategy. The inevitable result was a bubble of credit whose
puncturing has proved so lethal.
Unless the summiteers start to address the question of these global
imbalances, their deliberations will be of limited usefulness. To
seek to extricate themselves from this mess by embarking once again
on the course of action that got us into it – spending more – will
offer only temporary respite. It may reboot growth for a few years,
but as long as the imbalances continue, another credit bubble will
inflate. We need something more creative and more honest from the
London summit.
==========
2.This is how depression looked in the 1930s
Recession Britain: Like Herbert Hoover, today's politicians are
posing rather than acting, argues Edmund Conway.
No-business meetings, John Kenneth Galbraith called them. They sprout
in the wake of a crisis like weeds in scorched earth, nourished by
the overwhelming sense that Something Must Be Done. Men gather, they
sit in a room, they look pious; they are photographed, they talk to
the press, they go home.
Politicians summon these grand meetings, said Galbraith, "not because
there is business to be done but because it is necessary to create
the impression that business is being done. Such meetings are more
than a substitute for action. They are widely regarded as action."
They were what President Hoover kept himself busy with in the wake of
the Great Crash. We may blithely assume that the problem in the early
1930s was torpidity, as the US government allowed the economic system
slowly to disintegrate, but that wasn't how it felt at the time. The
White House was a hive of activity, the president meeting everyone
from politicians to industrialists and financiers. The problem was
that nothing useful came of it.
Things are different these days, you might argue. I agree: rather
than limiting themselves to meetings, politicians also invoke
inquiries, investigations and reports. But the result has been the
same. Historians will look back at the financial crisis that erupted
last year and conclude that rather than taking direct, comprehensive
action, politicians occupied themselves with no-business meetings, no-
business reports and no-business plans which hid the fact that they
had not a clue what they were doing.
With only a few weeks until the G20 meeting in London, there is
nothing to dispel the impression that this will be another no-
business meeting. The Americans and Europeans cannot agree on what to
set at the top of the agenda; the US wants a bigger injection into
the economy, the Europeans an overhaul of financial regulation, while
the Britons sit, awkwardly, somewhere in between. The US Treasury is
so beleaguered by domestic issues that it isn't even returning phone
calls, according to the head of the Civil Service, Sir Gus O'Donnell.
Grand treaties which change global policy are not magicked up
overnight. It took two years or so for officials to complete all the
groundwork that led to the Bretton Woods agreement, which overhauled
capital markets and currencies for most of the post-war era. So it is
hardly a surprise that Whitehall insiders have been dampening
speculation that either the finance ministers' summit this weekend or
the heads of government summit next month will provide an overarching
plan.
This is tragic, for a rethink of the way the financial system fits
together is what is needed. It was the malfunctioning of this machine
– the quirks which encouraged people in the West to over-borrow and
in the East to over-save – that caused the crash.
Instead, the items hogging the G20 agenda revolve around fiddly
little issues such as a crackdown on tax havens and excessive
bonuses, and reforms of the IMF and World Bank. Putting them at the
top of the agenda is rather like telephoning a man stranded in the
desert and asking him whether, if and when he escapes, he'd prefer
Perrier or Evian.
The first objective should be ensuring the economy survives. This
will involve, gulp, another big dose of government money. Much as it
may stick in their throats, the leaders must agree that their
economies need a little bit more spending to ensure they make it
through. Those with big stashes of surplus cash – Japan and Germany –
have resisted this.
Persuading them to come onboard ought not to be an invitation for
more unscrupulous leaders – such as Gordon Brown – to borrow more
(Britain's room for manoeuvre is limited, given the size of the
structural deficit). But the one thing that will seal a global
depression of unprecedented scale is if different blocs of nations
try to tackle the situation in radically different ways. It would
spark a further descent into protectionism and disrupt capital flows.
A new, clearer accord on how to deal with troubled banks is also
necessary. Most governments have taken quite similar steps in
supporting their banks – attempting to avoid outright
nationalisation, setting up insurance schemes for their dodgiest
assets. But they have done so following pragmatic, ad hoc principles
rather than an overarching set of guidelines. The result is that they
have turned the banks into zombie institutions which may never
recover their verve, and have left investors terrified.
There are other important ancillary issues, such as finding new cash
for the IMF so that it can bail out the worst hit, and considering a
more coherent approach to interest rates and monetary policy worldwide.
But securing a G20 deal on any of the above looks increasingly like
wishful thinking. It is going too far to say this is one of the final
opportunities to save the world economy from sliding over the brink.
The descent in the Thirties was far more gradual and intangible. But
at some point the politicians must do something to arrest the
economic collapse, or cave in to its inevitability. Instead what we
will get is another summit full of sound and fury; another no-
business meeting.
==========
3. Gordon Brown broke Lloyds, and it should break him
The disaster of Lloyds-HBOS could cost us £130 bn. So how come it
isn't a bigger deal, asks Iain Martin
Iain Martin
The catastrophe at Lloyds-HBOS is the ultimate New Labour scandal. It
has the lot: cronyism, back-scratching, destructive micromanaging by
Gordon Brown and an unimaginably large loss of public money.
Consider what has just happened. At the height of the financial
crisis in September, Sir Victor Blank, the chairman of a perfectly
healthy Lloyds, connived in buying a stricken rival bank with the
help of a desperate Prime Minister. The weight of toxic assets on
HBOS's books then sank Lloyds. As a result, the merged institution
has effectively been nationalised.
Brown was central to the original takeover deal in the autumn. He was
fighting to stay in Number 10 and faced a by-election in Glenrothes,
his own backyard. With many HBOS jobs at risk locally, he could not
afford the bank's collapse; it might have handed victory to the SNP
and heralded his removal as Labour leader. The "rescue" of HBOS saved
the PM last autumn, but at an extraordinary price to the rest of us.
In their haste to agree, Sir Victor and Eric Daniels, his chain-
smoking chief executive, did not have time to do due diligence. Call
me old-fashioned but, given the resulting losses of the merged bank,
which land with the taxpayer, shouldn't this pair be fired? This
being contemporary Britain, Sir Victor appears unsackable because the
majority shareholder who could dispense with him is the man who was
in on the original deal: Gordon Brown.
The final cost of all this to the taxpayer will be, on conservative
estimates, upwards of £80 billion – or more than double the annual
defence budget. It could easily be worse and hit £130 billion. This
must be added to a likely loss from RBS of almost £100 billion (£45.5
billion from the bail-outs, and an estimated loss of at least £50
billion on toxic assets). This, too, is judged a considerable
underestimate by some analysts. The combined total for the two banks
could be more than £250 billion, added straight to the ballooning
national debt.
In today's money, the Second World War cost Britain £663 billion
(according to an Office of National Statistics estimate). We are
heading for a scenario in which the bill for "rescuing" this pair is
at least a third and possibly close to half of the bill for seeing
off Adolf Hitler.
I have been waiting, in vain, for this scandal to catch fire. But
instead the story is fizzling out.
Why? Well, Britons are punch drunk after the past six months. And
perhaps the numbers involved are so large that they are difficult to
visualise. Fred the Shred's pension, involving sums more easily
grasped, was handily leaked by the Government as a distraction.
Yet the chain of responsibility is straightforward. Both Sir Victor
and Brown made catastrophic errors of judgment, thinking a great deal
of their own interests. The cost to the rest of us will be higher
national debt and higher taxes.
Bafflingly, the opposition party has failed to scream blue murder.
The Conservatives have issued statements that their spokesmen deem
robust. But where has been the anger, the forensic deconstruction,
the determination to get answers? Think what a young Gordon Brown or
Robin Cook would have done from the Opposition benches, had a
Conservative government been matchmaker to Lloyds-HBOS. They would
not have stopped until the story was dominating every front page; Sir
Victor Blank would wish he had never been born; the Tory prime
minister's defences would by now have been reduced to a smoking ruin.
That the survival of the Lloyds chairman is even countenanced
demonstrates how hypnotic the nationalisation of the banks and the
economy has become since last year, even for the Opposition.
Look at what Sir Victor did: he is responsible for one of the biggest
corporate wrong turns in history. His executives had run a sound
institution sensibly. Come the recent financial apocalypse, Lloyds
was in a position to survive. Through careful husbandry it had paid a
dividend to many pensioners and savers who had come to rely on it,
often for a significant chunk of their annual income. Sir Victor was
entitled to feel pretty pleased with himself.
At that point, in the City in September, at the most expensive
cocktail party in history, disaster intervened in the shape of the
PM. Brown was terribly anxious: several of the most exposed banks
were about to collapse. He and Sir Victor had previously discussed
the possibility of Lloyds buying HBOS, now he would waive the rules
to allow it. What should Sir Victor have said at that point? "No
thank you, but I will have another canapé." Instead, something made
him say "Yes, let's go for it."
Think about it: the PM was doling out lavish praise and pointing out
how much kudos would fall to the clever bank chairman who did this
deal. Imagine the personal legacy. Sir Victor probably rather liked
the sound of it all.
An announcement was then made and wonder was widespread in the City
and beyond. Hail the rise of Lloyds: all shall know the name of the
mighty Sir Victor.
Unfortunately, it was only at that point that his team at Lloyds got
a closer look at HBOS's books. Quickly, they discovered that their
boss had agreed to buy a house of horrors, loaded with even more debt
than imagined. Lloyds tried to negotiate a new price. No way, said
the PM. What did he then say to Sir Victor – who could still have
walked away – to make him press on?
Whatever it was, he did press on. Catastrophe followed quickly in the
shape of nationalisation. Sir Victor and his friend the PM broke the
bank.
Most of us would by now be thinking of resigning, consumed by shame.
But last night Sir Victor was still there – and Daniels, too – with
the backing of the PM.
To appreciate why, one has to comprehend the full horror of recent
developments. Corporatism is what happens when big government does
sweetheart deals with big business. It results in a conspiracy of
powerful elites against the interests of consumers, shareholders and
voters.
Traditionally, corporatists employ the language of public interest
("saving your banks", in this case) when they are actually acting in
their own interests and not those of the public. In this spirit, the
PM unilaterally suspended the competition laws to facilitate a bad
deal that was temporarily helpful to him politically. (After Lloyds,
surely we are reminded precisely why such laws exist?)
Brown wanted to avoid the collapse of HBOS because it could have
taken him down with it. And Sir Victor can only have wanted to be
helpful and become, in the process, a titan of finance. Protestations
about the public interest are hokum.
Now we are left holding a bill of £80 billion or more for their
selfishness and ineptitude. The term "national scandal" suffers from
overuse, but if this is not one worthy of the name, I do not know
what is.
Thursday, 12 March 2009
The man that broke the bank at - - struts the stage --Gordon Brown a menace to us all!
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