Labour banged to rights by Newsnight's Economics Editor.
Discussion
This has to be read to be believed! It was well hidden -as in unpublicised - not like Robert Peston's blogs on BBC.co.uk.
Hopefully the BBC will start to get some teeth now. Follow the link for full text and blog responses
http://www.bbc.co.uk/blogs/newsnight/paulmason/
Article text here:
.....................
An Orwellian episode
Paul Mason Thu 22 Jan 09, 05:14 PM
Shortly after Labour's 2005 election win I was summoned to a speech by Tony Blair, hosted by the IPPR. It was entitled Risk and the State and naturally induced as much anticipation as a crown green bowling telethon.
However, halfway through I realised Blair had said something that sounded calculatedly outrageous: that the Financial Services Authority was "seen as hugely inhibiting of efficient business by perfectly respectable companies that have never defrauded anyone".
The implication was that finance was over-regulated, the FSA over-heavy, and that it should be essentially a policeman dealing with criminality, not a surveillance body dealing with systemic risk.
This is the same FSA that has, implicitly, been drubbed by its new boss, Adair Turner, for its failure to adequately monitor the financial system as it careered out of control in the first half of this decade.
At the time, the then boss of the FSA wrote a furious letter to Blair, accusing him of undermining the FSA's role. Had not the FSA been at the forefront of the drive for light-touch regulation in Europe, McCarthy complained, and now it was being dissed as heavy handed.
We don't know how the spat ended because Tony Blair's reply to this letter has been suppressed under the Freedom of Information laws. What we do know is that the FSA was under political pressure from the Labour government to be even more hands-off than it already was.
If this sounds a bit Orwellian then the whole current episode has the air of that famous moment in Nineteen Eighty Four where the enemy suddenly switches from Eastasia to Eurasia, without anybody daring to comment.
Let me quote extensively from Lord Turner's lecture (which I recommend you to read in full as its analysis is trenchant and heavily influenced by those economists who locate the savings glut in the malformed structure of the global economy):
"The FSA has been more open than I think any institution involved in this crisis in admitting that it made mistakes in the institution specific supervision of Northern Rock. But I think the best judgement is that better institution specific supervision of Northern Rock, would have made only a very small difference to the shape and impact of this global crisis.
"The far bigger failure - shared by bankers, regulators, central banks, finance ministers and academics across the world - was the failure to identify that the whole system was fraught with market wide, systemic risk. The key problem was not that the supervision of Northern Rock was insufficient, but that we failed to piece together the jigsaw puzzle of a large UK current account deficit, rapid credit extension and house price rises, the purchase of UK mortgage backed securities by institutions in the U.S. performing a new form of maturity transformation, and the potential for irrational exuberance in the market price of credit. We failed to realize that there was an increase in total system risk to which financial regulators overall - authorities, and central banks and in fiscal authorities - needed to respond."
Now, who is "we" in this "wea culpa"? Clearly Lord Turner's predecessors at the FSA, Calum McCarthy and John Tiner. In addition, Mervyn King the governor of the Bank of England. Also the people who designed the tri-partite regulatory system: Gordon Brown, Ed Balls and Gus O'Donnell. Once you put names to this "we" it reads as a very strong criticism of the Labour government and its chosen regulators.
Both the Bank of England and the FSA have the statutory responsibility to maintain financial stability. They failed. The statutory responsibility was conferred on them by the Treasury. It, by implication failed.
There is a legitimate question: why? I will answer it with another question. Is it because the whole world of banking regulation and supervision is in fact a closed club populated by former bankers? Is it because the politicians were too starry eyed about the bankers? After all the rise of global finance delivered seemingly endless growth, and lots of tax revenue to plough back into the lower reaches of society in the form of tax credits and benefits. Was this apparently win-win situation allowed to cloud the judgement of the politicians and regulators?
If, now we are in sackcloth and ashes phase, you came across a politician who made a speech saying the banking system was at the beginning of a "golden age", just months before the collapse, you would want that politician to answer some questions raised by Lord Turner's lecture. Not just for the sake of drawing a balance sheet but to make sure they had got the message that the whole deregulationist philosophy is over. The "golden age" epithet was, of course, uttered by Gordon Brown in his 2007 Mansion House speech.
I will leave you with the quote in full.
"So I congratulate you Lord Mayor and the City of London on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London....And I believe it will be said of this age, the first decades of the 21st century, that out of the greatest restructuring of the global economy, perhaps even greater than the industrial revolution, a new world order was created."
And another question: the government has just been hammered in the courts over the Equitable Life case, on the technicality that, for a few short months, it was the regulator (during the transition to the FSA). In the case of our financial meltdown, if it is now "official" that the regulatory authorities failed in their duties, both in detail over Northern Rock and systemically, does anybody who lost money have a legal redress?
Just a thought.
..............
here's my thought: f
k me!!!!
Mark
Hopefully the BBC will start to get some teeth now. Follow the link for full text and blog responses
http://www.bbc.co.uk/blogs/newsnight/paulmason/
Article text here:
.....................
An Orwellian episode
Paul Mason Thu 22 Jan 09, 05:14 PM
Shortly after Labour's 2005 election win I was summoned to a speech by Tony Blair, hosted by the IPPR. It was entitled Risk and the State and naturally induced as much anticipation as a crown green bowling telethon.
However, halfway through I realised Blair had said something that sounded calculatedly outrageous: that the Financial Services Authority was "seen as hugely inhibiting of efficient business by perfectly respectable companies that have never defrauded anyone".
The implication was that finance was over-regulated, the FSA over-heavy, and that it should be essentially a policeman dealing with criminality, not a surveillance body dealing with systemic risk.
This is the same FSA that has, implicitly, been drubbed by its new boss, Adair Turner, for its failure to adequately monitor the financial system as it careered out of control in the first half of this decade.
At the time, the then boss of the FSA wrote a furious letter to Blair, accusing him of undermining the FSA's role. Had not the FSA been at the forefront of the drive for light-touch regulation in Europe, McCarthy complained, and now it was being dissed as heavy handed.
We don't know how the spat ended because Tony Blair's reply to this letter has been suppressed under the Freedom of Information laws. What we do know is that the FSA was under political pressure from the Labour government to be even more hands-off than it already was.
If this sounds a bit Orwellian then the whole current episode has the air of that famous moment in Nineteen Eighty Four where the enemy suddenly switches from Eastasia to Eurasia, without anybody daring to comment.
Let me quote extensively from Lord Turner's lecture (which I recommend you to read in full as its analysis is trenchant and heavily influenced by those economists who locate the savings glut in the malformed structure of the global economy):
"The FSA has been more open than I think any institution involved in this crisis in admitting that it made mistakes in the institution specific supervision of Northern Rock. But I think the best judgement is that better institution specific supervision of Northern Rock, would have made only a very small difference to the shape and impact of this global crisis.
"The far bigger failure - shared by bankers, regulators, central banks, finance ministers and academics across the world - was the failure to identify that the whole system was fraught with market wide, systemic risk. The key problem was not that the supervision of Northern Rock was insufficient, but that we failed to piece together the jigsaw puzzle of a large UK current account deficit, rapid credit extension and house price rises, the purchase of UK mortgage backed securities by institutions in the U.S. performing a new form of maturity transformation, and the potential for irrational exuberance in the market price of credit. We failed to realize that there was an increase in total system risk to which financial regulators overall - authorities, and central banks and in fiscal authorities - needed to respond."
Now, who is "we" in this "wea culpa"? Clearly Lord Turner's predecessors at the FSA, Calum McCarthy and John Tiner. In addition, Mervyn King the governor of the Bank of England. Also the people who designed the tri-partite regulatory system: Gordon Brown, Ed Balls and Gus O'Donnell. Once you put names to this "we" it reads as a very strong criticism of the Labour government and its chosen regulators.
Both the Bank of England and the FSA have the statutory responsibility to maintain financial stability. They failed. The statutory responsibility was conferred on them by the Treasury. It, by implication failed.
There is a legitimate question: why? I will answer it with another question. Is it because the whole world of banking regulation and supervision is in fact a closed club populated by former bankers? Is it because the politicians were too starry eyed about the bankers? After all the rise of global finance delivered seemingly endless growth, and lots of tax revenue to plough back into the lower reaches of society in the form of tax credits and benefits. Was this apparently win-win situation allowed to cloud the judgement of the politicians and regulators?
If, now we are in sackcloth and ashes phase, you came across a politician who made a speech saying the banking system was at the beginning of a "golden age", just months before the collapse, you would want that politician to answer some questions raised by Lord Turner's lecture. Not just for the sake of drawing a balance sheet but to make sure they had got the message that the whole deregulationist philosophy is over. The "golden age" epithet was, of course, uttered by Gordon Brown in his 2007 Mansion House speech.
I will leave you with the quote in full.
"So I congratulate you Lord Mayor and the City of London on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London....And I believe it will be said of this age, the first decades of the 21st century, that out of the greatest restructuring of the global economy, perhaps even greater than the industrial revolution, a new world order was created."
And another question: the government has just been hammered in the courts over the Equitable Life case, on the technicality that, for a few short months, it was the regulator (during the transition to the FSA). In the case of our financial meltdown, if it is now "official" that the regulatory authorities failed in their duties, both in detail over Northern Rock and systemically, does anybody who lost money have a legal redress?
Just a thought.
..............
here's my thought: f
k me!!!!Mark
The problem was very much due to poor regulation. But i'm not sure the FSA were 'a light touch' rather their method of regulation is one of box ticking, rather than the more informal approach, but perhaps more effective, that the bank of england persued.
Edited by JagLover on Friday 23 January 16:41
JagLover said:
The problem was very much due to poor regulation. But i'm not sure the FSA were 'a light touch' rather there method of regulation is one of box ticking, rather than the moor informal approach, but perhaps more effective, that the bank of england persued.
THe FSA failed to understand the products (especially the structured stuff) that the banks were coming up with. Therefore they couldn't at any point have realisitcally rated the risk these products posed. So they took the banks' word for it that everything was fine, and everything would continue to be fine. And yet no one at the FSA has had to fall on their sword.........
scotal said:
And yet no one at the FSA has had to fall on their sword.........
Or a slightly different view...- The Chanceller replaces the BoE's responsibility for regulation (which just about worked through scandals such as Johnson Matthey) with a tripartate arrangement including BoE, FSA and the Exchequer.
- Same Chancellor fails to define the responsibilities of thsi new arrangement. You end up with a situation where the BoE are warning Northern Rock that their debt/asset ratios are extreme at the same moment the FSA are telling them they could go further.
- Said Chancellor then fails to fund the new responsibilities of the FSA, one of the Departments in his own ministry. Unable to fund the investigations they need to perform, morale dives. Staff turnover rises to 33%, 70% amongst senior staff. Said staff are poached by the banks, who then run rings around the well-meaning by (relatively) inexperienced staff.
I think the world is blaming the wrong people.
We need to hunt down the useless bankers and fat cats that led to this mess. The governments are just their puppets to a certain degree. These fkers can't be expected to keep their jobs and fk us over again in 20 years.
Also the man on the street that lied to get mortgages he couldn't afford needs a good slapping.
We need to hunt down the useless bankers and fat cats that led to this mess. The governments are just their puppets to a certain degree. These f
kers can't be expected to keep their jobs and fk us over again in 20 years. Also the man on the street that lied to get mortgages he couldn't afford needs a good slapping.
ALawson said:
Brown getting all uncomfortable. What an amusing sight that must have been. 
alfabadass said:
I think the world is blaming the wrong people.
We need to hunt down the useless bankers and fat cats that led to this mess. The governments are just their puppets to a certain degree. These fkers can't be expected to keep their jobs and fk us over again in 20 years.
Also the man on the street that lied to get mortgages he couldn't afford needs a good slapping.
If anyone wants to see how clever this misguided person is, here's a couple of Mr Clever Cloggs posts.We need to hunt down the useless bankers and fat cats that led to this mess. The governments are just their puppets to a certain degree. These f
kers can't be expected to keep their jobs and fk us over again in 20 years. Also the man on the street that lied to get mortgages he couldn't afford needs a good slapping.
alfabadass Thursday 20th November 2008 said:
On the other hand, now is the time to invest.
I really need to learn about to how to buy and sell shares. I'm sure I'd make a killing, sometimes it's like people don't really understand how it's supposed to work... if you buy high, there's only one way the shares can really go isn't there?
In 2-3 years we'll be back to normal.
I really need to learn about to how to buy and sell shares. I'm sure I'd make a killing, sometimes it's like people don't really understand how it's supposed to work... if you buy high, there's only one way the shares can really go isn't there?
In 2-3 years we'll be back to normal.
alfabadass Gordon Brown - RIP thread said:
IMO he's a nice straight forward guy.
Who would you rather have? Cameron? Don't make me laugh. He was one of the tory advisors the last time st went tits up,
No idea whatsoever and certainly incapable of understanding Masons Blog; an ideal New Labour Apologist.Who would you rather have? Cameron? Don't make me laugh. He was one of the tory advisors the last time s
t went tits up,Guybrush said:
ALawson said:
Brown getting all uncomfortable. What an amusing sight that must have been. Mr Davis said: "You must regret the emphasis, or almost the hubris in the way you spoke about 'ending boom and bust'?"
The Prime Minister said: "We were dealing with an inflation problem."
Well that's one way of looking at it i suppose ..
anonymous said:
[redacted]
Read the article and some of the readers comments and you'll understand more. Essentially B&B saw the city as the cash cow. How do you make the cow drop more cash - deregulate it. The Govt. sets the framework and rules ie how much greed the city is allowed to exert. The blame is with Blair and Brown not the scapegoats.anonymous said:
[redacted]
Oh I agree, the same in the US. But Gordon has put us in a position where per capita we are significantley more screwed than the US are. Did you see Will Hutton the Guardian journalist on "This Week" a couple of nights ago? He talked about Britain defaulting on Debt and the IMF not being a big institution to bail us out. I suggest you have a look on iPlayer and read this:http://www.guardian.co.uk/commentisfree/2009/jan/2...
I dont agree with all his comments
They knew what they were doing and are culpable. Darling gave a warning in August 2008 and the reaction from Number 10 was STFU. "The economic times we are facing... are arguably the worst they've been in 60 years. And I think it's going to be more profound and long-lasting than people thought." The reason for this was when the history is written please ensure that Gordy has the blame and not me.
What is perhaps most incredible, is that there are people / new Labour supporters who will ignore what Labour have done in power and because they can't stomach anyone but Labour in power they will pick anything to prove it wasn't them. They are the power crazed lowest of the low in my eyes.
Gassing Station | The Pie & Piston Archive | Top of Page | What's New | My Stuff