No chance of Gordon running the IMF

I’ve listened to David Cameron’s interview with Evan Davis of the BBC Radio 4’s Today programme. Evan Davis persistently interrupted Cameron, making the interview uncomfortable to listen to. But, I guess that’s the penalty we probably must accept when interviewers quiz politicians who are immensely well practised in answering questions. Never the less it was tiresome to listen to.

One question where Cameron was allowed a reasonably uninterrupted flow was when Evan Davis asked Cameron about “Gordon Brown emerging as favourite as the next managing director of the International Monetary Fund director …. “. Cameron’s replied

“I haven’t spent a huge amount of time thinking about this. But it does seem to me that if you have someone who didn’t think we had a debt problem in the UK when we self-evidently do have a debt problem, then they might not be the most appropriate person to work out whether other countries around the world have debt and deficit problems”.

…. it must be someone [to run the IMF] who understands the dangers of excessive debt, excessive deficit, and it really must be someone who gets that, rather than someone who doesn’t see a problem.

So that’s a big NO then. Thank goodness. Here’s a fuller review on what Cameron said about the IMF leadership.

UPDATE: Seems I’m in agreement with the heavyweight’s in our media over this morning’s interview between Davis and Cameron. David Hughes in the Daily Telegraph says Cameron gets a word in edgeways.

Banking Commission notes 2: More Gordon mistakes

I’m still ploughing through the Independent Commission on Banking’s interim report. But I admit to a tinge of surprise that the Commission was so critical of government the merger of Lloyds TSB with HBOS. This was very much a Gordon Brown initiative.

The Interim Report looks at effects of reversing the merger to improve competitiveness in the UK retail banking market, and concludes that the merger is to far gone to unravel. Here are the parts of their report reviewing the original decisions:

5.33 The acquisition of HBOS by Lloyds TSB was facilitated by a decision on 31 October 2008 by the Secretary of State for Business not to refer the merger to the Competition Commission. Normally merger reference decisions are for the OFT to determine. The OFT’s view was that there was a realistic prospect that the merger might result in a substantial lessening of competition in PCAs, banking services to SMEs and mortgages such that further inquiry by the CC was warranted. Thus the merger would have been referred to the CC but for the Government intervention.

5.34 Although the acquisition by Lloyds TSB gave temporary respite to HBOS, it jeopardised Lloyds TSB. Large sums of public money had to be injected into the merged entity, which was renamed LBG, with the result that the Government now owns 41% of the group.

5.37 There is cause for regret that the Government in 2008 amended competition law to facilitate the Lloyds TSB/HBOS merger, …

So, there you have it. Gordon Brown’s decision jeopardised a good bank in Lloyds TSB, reduced competition, and left the taxpayer to stump up vast sums of money.

Banking Commission notes 1: Gordon Brown’s mistakes

The Independent Commission on Banking produced its interim report on 11th April. Solving the problems with the banking system remains one of the most important issues facing our nation. Rather than providing an over-long blog post on the report, I’ve decided to break my thoughts into smaller blog posts.

But, before I do that, it’s worth reminding ourselves of one of the architects of the banking crisis – one Gordon Brown. Last Saturday Gordon was speaking at an event organised by the Institute for New Economic Thinking in Bretton Woods, New Hampshire – you can watch his speech HERE. I don’t recommend it, as it will bring about a shoe throwing at your computer.

In his talk Gordon admitted, finally, mistakes in regulating the banks, neatly forgetting that it was he who removed banking regulation from the Bank of England, and handed it to a bunch of inexperienced regulators in the Financial Services Agency. See earlier comments HERE. Here’s the Press Association report on what Gordon said,

Mr Brown said that in the 1990s and the years up to 2007, when he was chancellor, he was under “relentless pressure” from the City not to over-regulate.

“We know in retrospect what we missed. We set up the Financial Services Authority believing that the problem would come from the failure of an individual institution,” he said.

Mr Brown said the economic problem had been seen in terms of inflation rather than financial stability. He went on: “So we created a monitoring system which was looking at individual institutions. That was the big mistake.

“We didn’t understand how risk was spread across the system, we didn’t understand the entanglements of different institutions with the other and we didn’t understand even though we talked about it just how global things were, including a shadow banking system as well as a banking system.

“That was our mistake but I’m afraid it was a mistake made by just about everybody who was in the regulatory business.”

Yeah, right Gordon. We remember when you said that the UK, and specifically you, led the world in solving the financial crisis. But now everyone else is to blame.

What banking regulators must consider

First an admission. I like Gillian Tett assistant editor of the Financial Times. Her economic analysis is especially good when the news is gloomy. Shame that much of her work sits behind the FT’s paywall. But, I guess that’s what you pay for. Occasionally, snippets are available in the FT’s Alphaville blog, which has prompted this post.

It’s my contention that the economic problems of 2007 to today stem from, to a larger extent than is discussed, regulatory failure. That’s the failure of legislators of banking and financial services to recognise the incipient causes of our economic woes.

Here in the UK, Gordon Brown’s policies were the primary cause of regulatory failure. Which both he an Ed Balls have now acknowledged [See in Iain Dale’s quote of the day by Gordon Brown, and here in the Guardian.

Gordon Brown’s much vaunted decision, by him at least, of changing banking regulation in 1997, by moving it from the Bank of England to the Financial Services Agency was one of the main causes of the banking problems we now face. It allowed control of the burgeoning complexity of banking to pass from expert to inexpert hands.

A wonderful, if complex, staff report by the New York Federal Reserve Bank’s on Shadow Banking, says of the 2007-9 banking crisis,

“Ultimately, the underestimation of correlation by regulators, credit rating agencies, risk managers, and investors permitted financial institutions to hold too little capital against the credit and liquidity puts that underpinned the stability of the shadow banking system, which made these puts unduly cheap to sell.”

Dense language I know. But their conclusion about the banking crisis is that of a failure of regulation. There’s a fantastic chart in this report, on the Shadow Banking System which is too big to show here. They recommend it is printed at 36″ x 48″. Heck, that’s 3 feet by 4 feet. Enormous.

Anyway, the point to note about this chart is that the ‘traditional banking system’ is one line across the top of the chart. The rest is a maze of interconnections of between a myriad of parties, other than banks, to the world of credit formation, and the bewildering number’s of credit instruments.

Sure, it’s arcane and often impenetrable. But, it’s worth a delve into as it presents a picture of the financial world that the authors say came briefly out into the open in 2007, and is now hidden again. This is what we want regulators to understand, and to control.

Is Gordon Brown the new Ted Heath?

Ted Heath’s attitude to Margaret Thatcher was famously called ‘the great sulk’.

Gordon Brown looks like emulating Ted Heath, as his veiled swipe at Tony Blair evidences. 

In giving evidence today to the International Development Select Committee meeting, when asked about the failure of African leaders to restrict themselves to two terms in office, he said,

“People make it clear, as I have, to some of these leaders that if they say something and then are not in a position to deliver it then their authority is affected by that,” he said.

“But I think it is very difficult for us to impose a rule on African countries that we do not apply ourselves,”

“It is difficult for us to say, when sometimes in our countries people serve long terms, that there should be a limit on the terms. The real issue is keeping promises.”

Not veiled at all. A fairly obvious dig at Tony Blair.

Gordon appears

At 10.30pm last night, a crowded House of Commons listened to an adjournment debate on the options for maintenance of the new Queen Elizabeth class aircraft carriers. I listened too. Must say that Labour MP Thomas Docherty should be applauded for both getting the debate and making his case strongly. The reason for a full’ish House was that one Gordon Brown – ex prime minister – was down to speak in support of Thomas Docherty.

Three things struck me as Gordon Brown spoke. Firstly that he’s an almighty grump. Given that he had an opportunity for a little levity amongst the serious point, none was forthcoming. Then I pondered why he chose to speak, to defend his decision on the aircraft carriers, which he did. Or was it to bolster his own local electoral support, having only attended Parliament once before in this session. No, I couldn’t believe that.

Finally, a thought about a cynical ploy popped into my mind. Was it all a put up job by Thomas Docherty to allow GB a chance to speak in the house as though he were a good constituency MP, supporting jobs in his patch, and making his re-entry into Westminster politics.

Oh, heck I don’t know. All I know is that he’s the same humourless and brooding presence that he’s always been.