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Brown wants UK controls

Mark Mardell | 17:10 UK time, Thursday, 18 June 2009

Does the British government's argument about "no liability without responsibility" hold water on financial regulation?

I've been musing on this after Gordon Brown's news conference, where the prime minister told me off for asking two questions. It's the curse of these things: there's the question the newsdesk want asked on the story of the day (MPs' expenses) and the one dull types like me want to ask, on the summit itself.

Mr Brown said that while cross-border supervision was needed when "our money" was involved in bailing out a bank the decision had to be taken by a national regulator, as the cash comes from a national government (and taxpayers of course).

Sounds like common sense. But what's the implication? If it is more than not trusting foreigners to make sensible decisions, doesn't it imply that he wants national regulators who can be guided, leant on, persuaded to the view of ministers?

And would what Mr Brown wants really make any difference? In his scenario the new EU institution makes a judgment that a bank is in serious trouble, but it is up to the national regulator to make a decision about what happens. But wouldn't any judgment by the EU, unless kept secret, force a chain of events anyway that would put pressure on the bank and force the government to step in?


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  • 1. At 5:53pm on 18 Jun 2009, euroscot wrote:

    he wants national regulators who can be guided, leant on, persuaded to the view of ministers

    But weaknesses in national regulation were the main reasons for the global financial collapse, said the G20. And at the start of this month the Chancellor of Germany told us that local politics were still interfering in global finance. Moreover in a report on Angela Merkel's comments the WSJ approvingly headed its article: 'Merkel for the Fed'.

    Support for less political interference in finance is also coming from the future stars of the global economy - Brazil, Russia, India and China. Their concerns are also shared by Goldman Sachs - the bank that called them the BRIC countries in 2001.

    However, in fairness, many countries are not immune from playing politics in finance. For example, government-run national oil companies control 79% of oil reserves today.

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  • 2. At 5:57pm on 18 Jun 2009, iongauge wrote:

    "But wouldn't any judgment by the EU, unless kept secret, force a chain of events anyway that would put pressure on the bank and force the government to step in?"

    Who watches the watchdog? How can you ensure that it is not used as a political weapon by the usual suspects that are always jockeying trying to get more influence in the EU?

    In this context we are always talking of more oversight. But, will this regulator also judge in the other way? Can it tell a country to reduce its interventionism in a bank? (What would France or Germany say to that?)

    Is is consistent for the UK to opt out from the Euro, but at the same time accept a european watchdog with the power of influencing UK's government decisions?

    Is this really something, or is it just talk, talk, talk?

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  • 3. At 6:30pm on 18 Jun 2009, Freeborn John wrote:

    Gordon Brown is right when he says 'no liability without responsibility'. It should never be accepted than an international institution can impose spending decisions on a nation-state that its government and voters oppose, because this takes the vital 'guns versus butter' spending decisions out of the hands of those that we elect.

    A key question here is what is the purpose of the proposed EU financial regulation? There is a strong sense that Germany and France would like to do to the London financial industry what they have done to the London art market, i.e. impose the high-cost regulatory regime on London which has held back Paris and Frankfurt as financial centers, and to do it quickly before a Conservative government comes to power.

    The aim of the British government over the last year or so has only been to preserve investor confidence in the banking industry, and especially to prevent a run on banks as seemed likely for a while at Northern Rock. The British government did not act to save the management of these banks nor the capital of their shareholders, nor to impose regulatory burdens on the banking industry of other countries, nor to satisfy the urge of international institutions for ever more power, but only to protect savers deposits as a means towards preserving confidence in the banking system. There is some concern that these banks are so big and so numerous that no national government could bail out all those that operate in a major financial centre like London, but it is crazy to say that because a bank has one office in London that the British taxpayer would be expected to bail out that whole bank should it over-extend itself globally. All we need is that each national government guarantees the deposits (up to some maximum amount) of ITS CITIZENS ONLY at all banks wherever they are in the world, providing that the bank maintains a sufficiently good credit rating with an approved ratings agency. If all governments did likewise then there would be a balance between the risks that that government would be taking on board (guaranteeing the savings of its own citizens) and the resources it could bring to bear (the revenue of its own taxpayers). In this way we could preserve confidence of savers everywhere in the global banking system without the risk of one nations taxpayers being overwhelmed and without self-aggrandizing bureaucrats in Brussels being giving an important role that they are likely to be found asleep at the wheel at when needed.

    The ratings agencies like Moodys and Standard and Poor have been a weak link in the past, competing with one another to attract business from the very institutions they are rating, who naturally have an interest in being rated by whatever agency will give them the best credit rating! We need better private sector rating agencies rather than more power for Brussels and all governments being prepared to guarantee the savings of their citizens only (wherever they are deposited) using the taxes of those same citizens.

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  • 4. At 6:42pm on 18 Jun 2009, PlanetEnglish wrote:

    The economic fallout of transferring control over our financial affairs to Brussels is nothing short of catastrophe. The perfect analogy is Latin American control of USA economic affairs from Cuba. We cannot allow Latin European control of UK economic affairs from Brussels. Without any iota of doubt, UK will be levelled down to Czech, Polish, Hungarian, Bulgarian per capita incomes. Look at how Spain's per capita income crossed UK's within 20 years due to the EU. And the EU will always stop short of supporting UK, push came to shove; logic being there are many more poorer countries within EU that need to be supported ahead of UK.We will remain net contributors until all others incomes are ahead of us. Delighted to see GB finally stand up for GB - if we allowed the EU to decimate our Financial Services Industry, we will be 'well done' for the foreseeable future.

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  • 5. At 7:11pm on 18 Jun 2009, frenchderek wrote:

    This is nothing to do with not trusting Johnny Foreigner. It has everything to do with who should take the decision as to whether a particular failing bank should be bailed out by state finances. The UK and other EU governments decided to nationalise failing banks where necessary and to support where necessary: but always on terms that the those governments chose (for some banks there were inter-governmental agreements as to the share of the cost). What's wrong with that.

    The tradition in the EU used to be that they did not, generally, pass regulations that interfered with national fiscal or budgetary responsibility. This proposal - like some other recent decisions - throws that tradition to the winds. Just who is it, Mark, who is searching for more and more centralisation of economic power in the EU? I don't think it could be Trichet at the BCE; it sounds like Sarkozy?

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  • 6. At 7:38pm on 18 Jun 2009, karolina001 wrote:

    Mark, you should tell the truth to the european public that EU or even ECB cannot do much about the economic crisis they put themselves in..
    there is no democracy in EU, since we have same people looking over european people all time.. there is an institutionalized corrupt system of power for elites running the show with no change.. the system is rotten to the core.

    BRIC countries will not trade anything with any system such as the EU which is broken to the core, and where EU financial value is not worth the paper it is printed on.

    EU elites have created a consumer society which depends on the willingness of the producers to give credit to EU for buying their products.

    If a producer want, he can sell a product-service to a consumer who has nothing but a paper who he says is worth something, this is debt. for how long?

    Trade is product with product.. money just facilitates it.. therfore ECB or the political elites cannot play or manipulate the financial system, becuase it is because of so many years that simple working and producer people have allowed these elites to manipulate the financial system and devalue a producer product or work so that these elites can make a lavish living and justify their existence as EU elites.

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  • 7. At 7:45pm on 18 Jun 2009, karolina001 wrote:

    a failed system cannot bail out itself.
    otherwise it would not be failed.

    if they will do that, then BRIC countries will have to react or it will come to hunt them as well later, if they are not on the hook from now..

    who will want to trade with a bailed out system from thin air or from credit which is not even there, but invented.. its a fraud..

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  • 8. At 7:57pm on 18 Jun 2009, ikamaskeip wrote:

    Here's a really simple solution to the issue of UK and EU Banking policy:

    Withdraw from the EU - - No need to consider any EU 'powers'/'authority' then.

    In fact here's a really, really simple solution to the issues of UK and the EU policies on Judiciary, Policing, Social/Welfare services, Finance, Employment law, Military, Foreign affairs, Immigration etc. - - Quit the EU!

    I wonder why no one has thought of it before!?

    The Government of the UK/England writes to Pres Barroso or whoever and says, "Formal notice - - 2 years - - The British Isles are withdrawing: thanks, but no more interference in the lives of 60,000,000 Britons. However, if the Scots, Welsh or N.Irish choose to stay in that is upto them, but, subject to a Referendum of each of the 4 UK Nations, the English etc. have had enough: UK/England will continue to be your friendly, welcoming, positive Trade/Tariff, Transport and Travel partner, but as for the rest - - thanks, but no thanks.

    Not possible, you say! EU has no such powers, you claim!

    Then why has the EU met today to offer firm political-constitutional guarantees to Eire ahead of the October Referendum (2nd one as EU did not like the first result)?
    Surely an EU that does not possess complete power/authority over National Government would not have the temerity to interfere in a National Voting process and offer guarantees about how the EU Commission, Directives, ECJ, MEPs etc. will or will not affect a sovereign nation?

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  • 9. At 10:39pm on 18 Jun 2009, MarcusAureliusII wrote:

    Taxation without representation has a familiar ring to it Mr. Mardell. It's beem 233 years in coming but now the UK is finally getting a taste of its own medicine.

    What't the Matter Mr. Prime Minister, you'r OK with Brussels telling every Brit how to live their lives from cradle to grave but when it comes to areas you feel the Chancellor of the Eschequeur should have control over and not ceded to Brussels you become defensive? You should have thought of that when you supported all of those treaties. You didn't imagine the EUSSR would stop at the vault door and ignore the UK's piggy bank really did you? Too late. The UK is a slave of the EUSSR. The only way out is to leave the EU entirely. Love it or leave it, there are no halfway measures. The Irish EU rep will find that out too, and if Ireland finally votes to accept Lisbon after the EU agress to the kind of red line opt outs the UK obtained, eventually they will also find out that the opt outs aren't really opt outs at all, just postponements at best with limitless punishment for failure to comply fully after a date certain. I read it and when you parse the meanings and filter the legalese it's all there. Anyone for a referendum?

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  • 10. At 4:59pm on 19 Jun 2009, murdub wrote:

    how great that mr brown achieved his aims at the european meeting. His positive outcome is is down to the fact that he proposed blocking the Irish request for its lisbon treaty gurantees and not to his skills or statesmanship.
    The agreement to grant the IRISH GOVERNMENT their request worries me on two counts.
    1. During the first referendum in Ireland we were told that this was the best deal and their could be no changes. now????????
    2. Our political leaders were obviously blindly leading the Irish electorate into a new europe with little local control. The government of the day admitted they had not properly read the agreement and one senior minister in europe even admitted that the treaty was nearly impossible TO READ never mind to understand.
    One has to question why inept governments allover europe were prepared to cave in to Irish demands to further this flawed agenda .
    The future of europe may well lie in British hands as the bullying campaign from europe is well underway in the Ireland for a positive outcome.

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  • 11. At 7:04pm on 21 Jun 2009, Cookla wrote:

    Why don't you let Brown try and do what he want's to do every other Prime Minster has done the same and made mistakes all these MP's have got away with a fraud and yet not been prosecuted only to say sorry and pay the money back they make enough wage a normal hard working man would go to prison for these same offences not rite for people in high places but differnt for people in poor places maybe Brown will have enough brain's to change all this who know's he might mess up like Blair did and listen to another face of power from another Country we need a PM with enough sense to understand the poor people of Briton who struggle every day to put food on the table.

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  • 12. At 9:34pm on 01 Jul 2009, keith overton wrote:

    We should not lose sight of the fact the whole banking crisis was mainly a result of the ridiculous financial exploits of the US and UK financial sector with its hedge funds and other outrageous financial exploits with excessive borrowing.The Germans were warning some time ago about the dangers of these activities and it is a bit rich of our goverment to lecture other European countries about the superiority of the UK regulatory system!

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  • 13. At 1:58pm on 13 Jul 2009, lacerniagigante wrote:

    Sad as it may be for me (I'm a non-British EU-an working and paying taxes in the UK) I think the EU should take the hint stay out of the murky waters of "Anglo-Saxon" capitalism. It takes time to learn how to cooperate, but for the UK it takes twice as much, if it ever learns. The EU has saved the UK from financial downfall many times (1973, 1993), but this time they should let hubris take its toll first.

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  • 14. At 07:49am on 18 Jul 2009, Maltesecitizen wrote:

    There is no need to give a formal 2-year notice to withdraw from the eu dictatorship. First of all the people are sovereign and as they had decided to become members so they can decide to withdraw without any notice whatsoever. Secondly, the 2-year notice is only referred to in the lisbon treaty which I hope and pray God the Irish will again reject to send the message to the eu petty dictators that NO means NO.

    It was always held by many well-known professors of International Law that the clausula rebus sic stantibus was always written in a treaty even if it was not expressly written down. That means that if there was a change in circumstance the treaty could be repudiated.

    Now is there anyone who can deny that since membership changes have been ongoing in the eu dictatorship which have changed the position when countries became members? And what were these changes? Mostly the obtaining of ever greater power taken from the member countries and their citizens through stealth by the eu petty dictators in brussels at the expense of the citizens and governments of the member countries.

    As an example of the UNLAWFUL aims of the eu petty dictators and their federalist ideas of establishing the EUSSR is the imposition of eu citizenship upon the citizens of the member countries.

    It is only a State that can grant or impose its citizenship. So the imposition of the eu citizenship on the citizens of the member countries is another subtle UNLAWFUL EXERCISE and IMPOSITION and an attempt by the eu petty dictators wrapped up in pretty paper in the form of not requiring passports when going through other member countries and another step in the process to create the EUSSR.

    So yes, people yearning to get back their own and their country's future in their own hands and not let it be decided by the brussels eu petty dictators then every decent, honest, patriotic citizen in every eu member country should do his utmost to get out of the eu and destroy the eu and its brussels petty dictators from the face of the earth.

    Let's pray God that the Irish see through all the smokescreen set up by the eu petty dictators and their own QUISLINGS who are being paid handsomely by the eu petty dictators and again vote NO to show them that NO means NO and save the European people from the EUSSR which the eu petty dictators want to implement.

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  • 15. At 02:23am on 21 Jul 2009, fspeirs wrote:

    Euroscot (1) - I thought the blame for the global financial collapse was all to do with offshore financial centres. Don't tell me we've been lied to all this time and it was really the greed of places like London and New York which were really responsible.!

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  • 16. At 12:51pm on 21 Jul 2009, Jim Currie wrote:

    I'm just a simple sailor and do not understand very much.

    The facts are that an enormous number of obscenely rewarded business men and politicians have failed miserably in their chosen vocation and sent the world spiralling downward into a frightening void of uncertainty.
    Both these groups vie for the control of wealth or power. These comodities have equal value and are unaffected by geographic location.
    They both require the same 'generating fuel' - people.

    It follows that people are the single, most influencial factor in this problem. As history has demonstrated ad nauseum - ignoring the people is a fatal flaw in every operation. Gordon Brown, while not my favourite person, makes the right noises but has failed, as many other politicians have done, to guage the mood of those of us who have to pick up the debris of failure and supply the 'glue' to put it all back together again.

    As the old song asked: 'When will they ever learn"

    Of all the professions in this world - politics and the 'other one' are the two oldest. They are also the two which have barely changed in all the intervening time. Is that why most other professions are called 'practices'?

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