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Brown's cautious bank reforms

Robert Peston | 10:02 UK time, Sunday, 22 February 2009

"They are the servants now".

That's the nub of Gordon Brown's vision for our banks, as outlined in an article he's written for the Observer newspaper.

Which in a sense is a statement of the obvious, since almost no British bank would be alive today if it weren't for the support of British taxpayers in the form of loans, guarantees and investment from us.

But what's striking is that although he has extraordinary and perhaps unprecedented power over the banks, the prime minister's programme of change for the banking system is strikingly conservative (small "c").

And much of what he's suggesting will be seen as closing a stable door that was left wide open during his many years as chancellor.

Even his eye-catching reflection that perhaps "we should control new mortgages for more than 100 per cent of house value" isn't a formal pledge to outlaw those homeloans that have been shown to be particularly risky by the losses experienced on them by Northern Rock.

What's perhaps more significant is that the prime minister explicitly rules out a formal separation of retail deposit-taking and investment banking.

Under this prime minister, banks that look after the savings of households and businesses will not be banned from engaging in speculative trading in securities, even though such trading and investment has caused so much of the losses that have hobbled the banking system.

He is saying no to a British version of the 1933 Glass-Steagall Act, or the kind of sweeping reconstruction of the banking system that was prompted by America's Great Depression (arguably, an important contributor to our current woes was the abolition in 1999 of the prohibition on US commercial banks engaging in investment banking - which allowed the creation of the modern, horrifically loss-making Citigroup).

This is how Brown puts it: "We do not envisage, as some have advocated, a rigid divide in future between 'narrow banking' - retail and corporate deposit taking - and investment banking and trading conducted at an international level".

Much flows from this, including that we as taxpayers will continue to provide a guarantee to banks, even those engaged in what many would see as high-risk international speculation, that we won't let them collapse..

Why is the prime minister keen to maintain this pact between taxpayers and institutions that underwrite and sell equities and loans transformed into tradable securities? Well he remains persuaded that "global financial flows and liquid capital markets have brought massive benefits to our economy".

So Brown is keeping the faith with financial globalisation: "there is no room for parochialism or protectionism in our model of the future", he says.

But note that he says global banking can only be made safe if there is effective global regulation, not "a patchwork of national regulators."

So it's worth pointing out that there is a bit of a rupture here between the traditional notion that where taxpayers' money is at stake, decisions should be taken by national governments (that there should be no taxation without representation).

Or to put it another way, the sanitisation of financial globalisation explicitly requires us to be happy as taxpayers to underwrite global banks that call themselves British, even though we as taxpayers would have only modest influence on the rules constraining the behaviour of those British global banks.


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  • Comment number 1.

    In Browns first and second budgets he made massive points that boom and bust was offten driven by uncontrolled price house inflation and the his policies would explicity prevent a run on house prices.

    A few years later he was hailing the boom in buy to let and remortaging as the resion that the UK was beating downturns. In fact he was ridicalling other countries for not relaxing their banks lending rules.

    Even last year he was still boasting about how well we were doing and that house price inflaction was a refelection on his skills.

    Now its the USA's and the banks fault, and he had nothing to do with it and anyway it was the Tories in the early 90's that de-muturalized the building societies and relaxed all controll on lending that has cause the mess.

    So can I ask just one quiestion:

    Exactaly what did G.Brown do during the 11 years as chancoller to kerb a run on house prices thus preventing the boom and bust that one would cause he predicted in his 1997 budget?

  • Comment number 2.

    So essentially, the banks can behave pretty much as before but now they are underpinned by tax-payer guarantee, That doesn't seem right now, does it?

  • Comment number 3.

    I find it appalling the man who for years has said that British banking benefited from the light touch of regulation is still making decisions in this country....

    It is after all the light touch that has caused all this recession and if we dont stop him shortly we will have a full grown depression on our hands....

    All the correspondents are letting him away far too easily.

  • Comment number 4.

    Just a second thourt, does his descision that 100% mortages are a really bad thing and should be banned, mean that the goverment is going to lead by example and stop 100% mortaging ever expenditure capital project thru expensive PFI.

    After all the Goverment can borrow at 2-3% off the money markets but Mr Prudent insists that we borrow off book at 10-15% via PFI.

    Also if we inject X Million to help out a bank that is currently lending us Y Million under an expensive PFI debt it would of been prudent to insist that a large percentage of Y was paid off as a contition for the injection.

  • Comment number 5.

    The grand vision according to Brown

    Do we have to wait for the markets to decide on Monday what they think of this "blue sky thinking"?

    I think we need much further clarification of this, where is the detail.

    If you, Robert, are already sceptical of its effect then is that the same view as your "insider"

    Hope that you had a nice break,

  • Comment number 6.

    "we should control new mortgages for more than 100 per cent of house value"

    Really? Hmm now one would have thought the time to do that was when house prices were obviously running out of control. Say 5 years ago. Gordon may have noticed that number of 100% mortgage products currently available.

    1 from Coventry Building society for existing members in Negative Equity.

    10% mortgages allied to high salary multiples were the problem. Gordon's oft touted "affordability" arguments kind of relied on full employment didn't they? a 6 * Salary loan kind of becomes an issue if you haven't got a job a 3 * Salary loan is probably an issue too but obviously only half as big.

    In order for Gordon to achieve what he wants house prices will need to fall by another 25%. It's probably what is required but since people have assumed that house prices only ever go up and have planned their futures accordingly this correction will mean that Labour are unelectable for the next 25 years.

  • Comment number 7.

    I'm sure this interview will produce endless whining.

    The truth is that despite all the problems it causes, once the current period is done in a year or two there will be enormous money to be made again from financial speculation. Any bank that doesn't do will lose out to international competitors who do, and the names on the high street will reflect this as it does at the moment.

    We can bleat all we like about unfairness, risk and 'privatising the profit and nationalising the loss', but everyone here will put their savings where the interest rate is best, and take out mortgages at the lowest rate. If those come from an irresponsible bank, you'll not care, so a) stop pretending that you do, and b) hope that the bank in question is domiciled here or in Europe so you see some of the benefits of taxing its profits.

    This is about planning for recovery, where the business model is much the same as before, perhaps with a little tinkering to curb the lunatic fringe. It's not pretty, but it's realistic.

  • Comment number 8.

    All too little far too late. The horse has well and truly bolted. Gordon Brown's desperate attempt to corral what is now a runaway horse with no rider is destined to end in tears both for himself and the owner of the horse.

  • Comment number 9.

    "the PM explicitly rules out a formal separation of retail deposit-taking and investment banking ... we as taxpayers will continue to provide a guarantee to banks, even those engaged in what many would see as high-risk international speculation"

    And, presumably, we must continue to accept a cosy, easy-going relationship between the regulators and the regulated that Brown has perpetuated.

    Welcome back to the Smoke, Robert !

  • Comment number 10.

    I couldn't believe my eyes when I saw this suggestion. I was astonished at the honest and clear headedness from a government minister.

    For the first time he seems to have realised that too much leverage got us into this mess.

    For the first time he's not entirely blaming the banks for creating this mess. But almost blaming his lack of regulation.

    In many places in America we have seen house prices fall by over 50% over the past 2 years. If this can happen then it means anybody who took out a mortgage where they didn't save more than 50% of the cash themselves is taking advantage of the banks and the banking system. And since we now regularly bail out the banking system it means these people are taking advantage of their more thoughtful neighbours (through inflation or taxes).

    Society has known for over 75 years (since 1933) that if you borrow over 50% of the value of a speculative investment and if that speculative investment bursts then the banking system is left holding the bag.

    We need to place more blame on the feckless who took out any mortgage over 70% since these people are taking advantage of the banking system and the rest of us.

    Merely buying a(/many) property with somebody else's money and letting it out to young people is not contributing to society. It is creating a young generation of people who cannot afford their own homes and should not be rewarded.

  • Comment number 11.

    Gordon Brown seems at very long last to be taking on board the reforms that many commentators suggested to him a decade or so ago - some stable, some horse, some bolt!

    Be better late than never - If only these 'reforms' had been implemented a decade ago when I (in letters to the Treasury in 1999) amongst others pleaded for him to do so in the UK housing finance market!

    The Observer article, that appears under his name, also suggest a limiting to the maximum multiple of income for any advance.

    This whole set of reforms suggests a re-basing of interest rates upwards to levels more normal in the 70's and 80's - but not we hope to the extremes of the levels briefly enforced by Mr Lawson.

    I also think that the aims while in general to be welcomed do pose a problem - namely, how from here to we get there without destroying the UK economy? This has always been the problem ever since the crash of 2008. The measures taken by the Government and the Bank of England have been working directly in the opposite direction to those now outlined by the PM. The Bank of England is still desperately trying to re-inflate the burst bubble though insanely low interest rates whereas Gordon Brown speaks of of a policy direction that is trying to continue to continue to deflate the housing bubble.

    (I also wonder how he can say these things and still operate the financially illiterate PFI system and not even notice the dichotomy?)

  • Comment number 12.

    The horses have indeed bolted and the PM is closing the stable door. Unfortunately it is the wrong stable!

    The only thing that is keeping Gordon Brown in power is his Commons majority, acquired by Tony Blair. In previous governments he would have had to resign.

  • Comment number 13.

    Lessons have been learnt - not.

    It was the investment banking practices that brought down the whole banking system.

    I thought the clear lesson learnt from all this was the need to separate retail deposit banking from investment banking.

    In other words: protect Joe Public, but leave the gambling dens open for those who want to live and die playing the risk game.

  • Comment number 14.

    if i ruled the world i would....

    undo all the sophisticated (dodgy) financial instruments
    reverse the selling of the loans from debt buyers to the
    original credit providers who gave (dodgy) loans without any
    proper checks eg to unemployed housewives with no income
    the credit card and loan providers should buy these at the
    original (dodgy) price they sold it at when they were booming
    these loans will be paid back at reasonable interest rates or
    via free debt management companies paid by the industry
    or insolvency voluntary agreements also know as iva's
    apparently the industry including hmg deliberately make
    people bankrupt and lose more money eg to kpmg as they
    incorrectly deem some as not acting in the interest of the

    each big fraudulent mbs package is made up of several small loans
    which have been secured against properties as a means of theft

  • Comment number 15.

    There is a lot of talk of getting back to banking basics but this appears to be impossible at the moment.

    Simplisticly Sensible Bank borrows from it's customers at 5%, lends at 10% and keeps a liquid margin of 20% to cover withdrawals. Everyone is happy.

    But Sensible Bank can't do this any more as interest rates are virtually zero. So Sensible Bank can't borrow and therefore can't lend unless it gets its money from the international markets - impossible, or government.

    If banks were able to borrow and lend sensibly again, paying investors a reasonable rate of interest, wouldn't this provide urgently needed funding for industry as well as an income on pensioners savings?

  • Comment number 16.

    if there ever was a (proper) global system / economy
    without any holes backdoors or inconsistencies etc
    i would reinput all the data from y2k back to today say
    as a sanity check verification for fraud identification
    regarding movements of funny money from here there
    everywhere which disappeared up the current systems

  • Comment number 17.

    It looks that there some lights in economical fields so people can start their business again. However the shadow is still hanging and hope that this changes will take a good work immediately.

    [Unsuitable/Broken URL removed by Moderator]

  • Comment number 18.

    I don't think the nub of it is 'they are the servants now'.
    The message is rather 'We got it wrong for the last ten years. There is far too much debt in the UK, and we have to manage it down. Quantitative easing is a nice piece of wallpaper over this process to make you all think easy credit will return. But, in fact, we will be reducing it.

  • Comment number 19.

    So Brown is keeping the faith with financial globalisation: "there is no room for parochialism or protectionism in our model of the future", he says

    Oh that'll all be fine then!

    We have the UN effectively working to keep safe the population in areas such as Darfur, Palestine, Congo, Iraq, Bosnia, Rwanda, and all the other parts of our world...

    And now we are having what? Global Financial Regulation - well nothing to worry about.

    Pay your tax, and sorry it is the Global Taxman who spends it, and decides when you get your rebate... might take a few decades..

    Behave yourself Gordon! Please!
  • Comment number 20.

    Oh that's just great that is.
    First he's used tax money to prop up a failing investment market speculating on house prices and now he's going to stop anyone who doesn't already own a house in the South East from ever buying one.
    Let the market collapse, institute a 110% tax on house sale profits above inflation and voila! no more housing bubble.

  • Comment number 21.

    I think I might buy a copy of the Observer when I'm down the Supermarket later, and read it for myself...

    The one thing that concerns me in your account Robert, is the lack of separation between retail and investment banking.

    I'd have thought there was an excellent case for separation, after what's happened...

  • Comment number 22.

    Why is the prime minister keen to maintain this pact between taxpayers and institutions that underwrite and sell equities and loans transformed into tradable securities?

    He is pulling your leg Robert. There will not be enough taxpayers and those that do pay tax will be on minimum wage taking care of the elderly. Everyone else, just about will be unemployed - or part of an expontential growth in the black economy!
  • Comment number 23.


    We are entering Depression 2.0, and all our PM has to offer is a wishy-washy, neutered check list of unachievable objectives.

    Why do you go so easy on Gordon Brown, the unelected, certainly most underachieving PM we have ever had? Is it because highlighting his failures would throw us, as a nation, naked in front of the trembling Emperor?

    Why have you blether like an apologetic house wife trying to justify the mistakes and idiocy of the husband she wished she never married?

  • Comment number 24.

    Gordon the Great rewrites his history. Robert - have you heard of the charity "The National Fund" registered with the Charity Commission No 1046814. Why doesn't Gordon encourage the bankers and his cronies to donate their bonuses. Stanley Baldwin apparently donated a fifth of his wealth. Maybe one day the charity may be able to achieve its aims of paying off the national debt! And as for transparency do you know who the THE NORTHERN TRUST FIDUCIARY SERVICES (UK) LIMITED is. Apparently they are the trustees but the "veil of incorporation" starts there.

  • Comment number 25.

    Some good sense from Gordon at last.
    But following years of bank-funded property speculation, which has caused the collapse, we now have the possibility of international debt defaults.
    What a dopey lot we are in the west.
    We encourage countries like Ukraine to join our club, lend them a fortune to create a stable capitalist economy, and then trash their currency so they have no chance to repay.
    We have to RESPECT them and their currency, and not allow currency speculators to wreck the whole thing.
    We may need to fix exchange rates at a reasonable level...without this recovery by recapitalisation cannot work.
    Property speculation...currency speculation....another disaster.
    I have an unshakeable faith in the fact that governments everywhere can be amazingly dumb.

  • Comment number 26.

    The test as to whether Brown's approach is working is what happens to industry.

    If there are more manufacturing start-ups, our exports grow and we start building a presence in new tech areas as well as ones we'd previously abandoned then we could say he's succeeded.

    He won't of course.

  • Comment number 27.

    Brown's apparent late conversion to proper regulation should not deceive anyone. Indeed even in his words there is already equivocation. Blair and Brown are jointly responsible for the severity of the mess we are enduring and they are still wedded to the Americanisation of our society and economy.

    If the labour party wishes to avoid a dozen years as a political eunuch it must rid itself of Brown and so called 'new Labour' urgently. State regulation and planning of a mixed economy a la europe is the only credible alternative.

    Globalisation of finance is just another way of saying return to the last 12 years - fabulous wealth for a small elite, inherent instability and periodic impoverishment for millions. Globalisation of manufacturing is cheap goods, produced by low paid workers and cheap energy, that have to be trashed after a few years with unsustainable environmental consequences.

  • Comment number 28.

    The Lending system is broke and corrupted.
    The cash poor in society like families(ie the future of humanity) usally pay the highest interest rates and get the smallest houses, while the cash rich usally not families pay the lowest interest rates and get the biggest houses. The mortgage system needs taking over by a goverment to end the madness and move forward (note I said a goverment)

  • Comment number 29.

    Robert, it's shocking that Brown is still clinging to the old ideas and the old 'order'. These 'announcements' amount to nothing. He and his party are totally wedded to the old established way of doing things. New Labour have become corrupted by the financial system they helped establish. Ban 100% mortgages? The banks have effectively done that already. It's about time he got his head around the fact that we want 'real' regulation, not sound- bite speeches that amount to zero. What the hell is wrong with this party? What a shambles. It's sickening to see him parade around the place as some global financial 'fixer' when in fact he and his party are trying as hard as possible to massage events to make it look like they're actually doing something. People are losing their homes and jobs for God's sake and all he can do is make pointless no-content speeches.

  • Comment number 30.


    when will people realise that the government has not taken over the banks, the bankers have taken over the government.

    Just ask any of those who used to work for the banks what form of mortgage subsidy they got. Just ask them, if you dare.

  • Comment number 31.

    It was big % loans and ridiculously lax lending - i.e. self-cert, 'liar' loans, NINJA loans - that caused all this. The BBC even made documentaries about mortgage introducers lying on forms, yet still cheerleaded the whole grand farce along. This government, particularly Brown as chancellor, should be held to account for it. There not be headlines, as on the BBC, implying Brown is going to save us all from it. There are no 100% loans any more anyway.

  • Comment number 32.

    Soon we will be treated to another bit of grandstanding by Brown when he goes to
    meet Obama. He'll probably waffle on about "a special relationship". It's special alright. Especially our relationship with Citizens USA, a subsidiary of a British High Street Bank. Citizens' customers are already receiving substantial benefits in the form of advantageous loans and mortgages of a kind that are history in the UK.

    P.S Good to have you back. Keep safe and well.

  • Comment number 33.

    Does anyone here on the blog wonder why Robert won't post on Chantilly?

    Robert?? I'm all ears!

    Here we are, trying to chew the fat and hopefully come up with some suggestions to help get out of the merde, yet out CEO-in-Text won't at least acknowledge the existence of a stealthy elite who think they are going to call the shots?

    Chantilly is in the same state as Langley. Google it.

  • Comment number 34.

    PM: I baked a cake lets eat it!
    GB: Have you got insurance?

  • Comment number 35.

    global financial flows and liquid capital markets have brought massive benefits to our economy".

    What a load of tosh, just look around can anybody see any benefits? And now the pillock has given even more power to the banks to mess up faster than before.
    Are we forever going to be stuck with the monetriast and keynesian view of printing more money and over burden the population. is this a government for the people? NO and it never has been.

    "There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." - John Maynard Keynes
    Come on people even from the man himself, how can they follow this and expect it to work.
    All you economists are pathetic and limp wristed and obviously have no idea what you are doing. no wonder the BNP are rising in popularity.

    A totaly free market with sound money and limited government is the way forward surely... but alas this government has no guts to stand up and be strong against the euro elite. Death to the empire!!!!

  • Comment number 36.

    I wish someone would sit down and think these things through. OK no more 100% mortgages so that means banks will apply stringent 3x salary or 3 and a half joint salaries for home buyers. That means even in today's depressed market people must be earning in excess of £30,000. So will this aid the property market recovery - I think not. A far better suggestion is to introduce variable interest rates so that homes may be 3%, cars 5% etc. This way any sector can be regulated to avoid over heating, money is a commodity and it's no different from oil or gas.

  • Comment number 37.

    Banks have NEVER been anyones servants! About 2-3 years ago when our son, not at the time very well paid, was negotiating for a mortgage, and having no problems whatsoever, my husband reflected that at the age of 16 & going to work for a firm that paid salaries into bank accounts, he had to go, accompanied by his father, for an interview with the bank manager to see if he was suitable to become a customer!!

    That bank has long ceased to exist, as has it's successor, both have been swallowed by a "global" bank.

  • Comment number 38.

    Well done Gordon . Another amazing plan!!!

    If buyers are only to be loaned say 3x salary then prices will neeed to fall considerably before anyone will be able to afford on earnings alone.

    Add to fact that a meaty deposit will be required then the market will go into hibernation until these deposits can be saved.

    It is a pretty depressing thought for an already stagnent and falling market.

    And what about re-mortgaging???.

    Negative equity will prevent many people getting a remortgage at a more affordable ans better rate, never mind buying another property.

    So low interest rates. Who is getting the benefit. The banks who will roll out the SVR to all borrowiers at the earliest oppertunity and pay savers a pittence.

    And why save get a deposit of course.


    You couldn't make it up for a comedy sketch.

    Captain Mainwaring for chancellor, at least he had some old fashioned banking values.

  • Comment number 39.

    Brown is just a bank lackey. We're not going to see any reform significant enough to make a difference from him.

  • Comment number 40.

    When globalisation of markets in goods and services took hold in the latter decades of the 20th century, the UK suffered in terms of goods' manufacturing, because our labour costs are much higher than most other industrialised nations. Luckily financial services filled the gap. This was enabled by a liberal regulatory regime. The result was that at its peak, financial services represented 45% of the income of UK plc.

    As the PM wants to restrict our ability to compete in financial services on the global stage, I hope he has a bright idea to fill the gap. We can't go back to manufacturing, our climate and landscape isn't suitable to enable us to rely on agriculture, and neither tech/biotech nor biotech is large enough.

    Perhaps he envisages we'll be a nation of shopkeepers, civil servants and burger flippers?

  • Comment number 41.

    Haven't read the article yet, but on reading your blog I am left thinking 'so what'? What is he actually going to do the right the wrongs? It's like saying 'I know I need to lose lots of weight. I know how to do it' BUT I'm not actually going to take more exercise or eat healthily, I just think it is a good idea and may be it will miraculously happen overnight! If a government can de- regulate at the stroke of a pen, it can re- regulate at the stroke of a pen.

  • Comment number 42.

    If bankers are the new servants, please can I be a servant too ?

    Servants get unlimited opportunity to gamble and pocket the massive winnings themselves, but when they lose we the taxpayer give them our money, and even give them a little bonus on top of their big salary too.

  • Comment number 43.

    coral boom you are right the the black economy is is set to soar. we have been shafted for years by a two party political system which has no chance of delivering any semblance of a sustainable economy. at the forthcoming european elections i urge the voters to ignore all the main political parties either voting for a minority party or by spoiling the paper to show the establishment we have had eough before we see serious civil unrest.

  • Comment number 44.

    "there is no room for parochialism or protectionism in our model of the future",

    Well you read it here! GB is commiting you and me to the deepest/longest depression that you will ever experience.

    Whilst all of our major trading partners talk global but prepare protectionist policies we will continue to be left rudderless in the storm desperately sending Mayday messages - but nobody will be listening.

  • Comment number 45.

    Exactly how many Chance-llors does the UK have? Pity there isn't a conductor capable of ensuring they sing from the same hymnsheet...
    Darling suggests they start printing money, Brown calling for responsibility...excuse me, can I lend you a pair of duelling pistols, gentlement, as you clearly have an affire d'honneur between you?

  • Comment number 46.

    Another announcement by Brown to deflect attention away from himself. The man is a snake. For ten years he facilitated the economic "boom", was happy to take credit for the apparent prosperity and to be photographed, smiling, with the very bankers he now vilifies.

    The leaks by Downing Street to the press (specifically to you Robert) have illustrated all too well his calculated manipulation of information and sentiment to protect himself. Some of the stuff has been secret, commercially sensitive information in the course of ongoing negotiations (e.g. specific details of the amounts concerned in the recapitalisation of the banks last October).

    When will he be scrutinised by the Treasury Select Committee for his part in the crisis?

    Respected journalists should expose him and demand he be held to account.

  • Comment number 47.

    So people...

    Starting to realise that government is by and for the banks? Has been for 300 years.

  • Comment number 48.

    hi Robert this is a non-story and you know it! presumably placed as filler by PM's office in a Sunday paper in the absence of knowig what to say about the growing list of urgent problems that need real action

    pious statements about how we shouldn't have 100% mortgages that no longer exist, redefines the old stable door analogy:

    a whole Noah's ark-worth of animals in pairs have left the sinking ship and disappeared over the horizon mate!

    he'll soon enough be a NINJA PM though sadly we'll get the useless Tories in his place

    Gordy does seem to say one interesting thing when he suggests that retail and investment banking won't be split.

    I interpret this as evidence that he is still in the pocket of the City.

    He's desperately hoping that the City will be able to return to its pre-eminent position as the world hub of tax evasion and avoidance as well as other dodgy dealings, especially if the US and other markets become more regulated.

    Thus, his 'they are our servants now' soundbyte is nothing more than an attempt to throw us off the scent.

    Why don't you get on to the GM story, which is huge, not only here but in Sweden, Germany, S Korea and Canada, all now in play as part of a huge multinational negotiation over bail-out money for jobs. The int'l aspects of the GM bailout encapsulates several of the biggest and most interesting issues in the global slump. In Canada GM is demanding $10bn to keep its factories open and 90% of the voters are against it! Here in the UK we are not even meant to talk about it! May I ask why? It's pathetic to say the least.

  • Comment number 49.

    Welcome back, Bob

  • Comment number 50.

    Look a bit deeper than that. HMG got into debt when Eleanor of Acquitaine paid the equivalent of the entire net assets of the kingdom to the Holy Roman Emperor in 1194 for the ranson of Richard the Lionheart, and only got out of hock a couple of years back. There's a reasonable suspicion on behavioural grounds - they won't release the accounts - that this may simply be bank blackmail to keep the UK in the place it's been since forever.

  • Comment number 51.

    Please everyone sign this now to force the issue:

  • Comment number 52.

    What a wonderful awareness of the real world. You can't get 90% mortgages, let alone 100% ones. And still not a word about real values.

  • Comment number 53.

    People are talking about stable doors: not only is it too late to close it but Brown opened it in the first place. With all these wonderful belated ideas how does Brown think he will be able to fill the Treasury coffers - yes you've guessed it - higher taxes for you and me

  • Comment number 54.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 55.

    So If Gordy wants an end to 6x mortgages, the housing market has a way to fall yet because the average house price is still 6x the average wage. Or am I missing something....

  • Comment number 56.

    "15. At 10:55am on 22 Feb 2009, steve4000 wrote:

    Simplisticly Sensible Bank borrows from it's customers at 5%, lends at 10% and keeps a liquid margin of 20% to cover withdrawals. Everyone is happy."

    Banks do not lend their creditor's money. They create new money to lend to lend to debtors.

    Creditor's money is used as the reserve.

  • Comment number 57.


    Do you work for Gordon. How much are you paid?

    You are never critical of this government yet it is they who have contributed to this mess.

    Not closing public sector final salary pension scheme, not stopping id cards, not stopping nhs computer project. Not stopping excessive gp salaries and pensions. The list goes on.......

  • Comment number 58.

    Brown's comments on closing the door on 100% mortgages shows how out of touch he is.
    Doesn't he know that even 90% mortgages are hard to come by now? I know a young couple who have been told they will need at least 15% deposit to get their first mortgage and they have tried every bank and building society on the high street.
    Where has Mr Brown been?

  • Comment number 59.

    As someone who had his house repossessed in the early nineties following the last debacle in the housing market, I can recall the regulatory body of the time stating that it was the Greed of the banks to "lend out 100% and indeed 110% mortgages to people who could hardly afford it, then offer no help when interest rates ravaged their ability to repay...". "Never again should the banks be allowed to lead ordinary people into such large debt without ensuring their ability to repay."

    In the late 90's to mid 00's we've watched the banks turn out mortgage instruments that were even weaker in monitoring peoples ability to afford repayments (note the difference between ability and willingness - most home owners are very willing to pay back their debts). How can Gordon Brown act as though the banks were to blame when he should have been overseeing the regulators? He should have been ensuring that the situation which caused the fall of the Tories was NOT allowed to happen again - instead he sat back and let financial houses finance huge chunks of the UK economy and did not ask 'where is all this money coming from?'

    It's GB that let GB get into the present situation and though he's a very clever financial whizz - he's not putting his hand up and saying 'err. Whooops. I seem to have, err, got it all wrong and I'm sorry'...

    Take your share of the blame Gordon.
    Your a big guy.

  • Comment number 60.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 61.

    So in summary,

    Brown talked a good game as Chancellor but did little or nothing, so now he's at it again as PM.

    There will be no early election, they know the result, and will cling on desperately. The Iron Chancellor, will go down in history as the Iron Pyrites Chancellor

  • Comment number 62.

    "Or to put it another way, the sanitisation of financial globalisation explicitly requires us to be happy as taxpayers to underwrite global banks that call themselves British, even though we as taxpayers would have only modest influence on the rules constraining the behaviour of those British global banks."

    Is Brown writing the BNP manifesto for them?

    Sprinkle a few negatives and hey presto!

  • Comment number 63.

    So Brown is saying that the main bank problems that need solving are:

    1. 100% mortgages
    2. Bonuses
    3. Boards of Directors

    Regarding 100% mortgages, by bringing the mortgage, unsecured loan and credit card "together" or "all-in-one" accounts it actually improves the security of bank lending not reduce it.

    Regarding bonuses there is no evidence that the bonus arrangements caused bank credit executives to authorise the poor lending decisions of their collegues.

    Regarding bank boards, many bank non executives were higly qualified eg Wanless was non exec at Nothern Rock and had been CEO at Nat West but still did not anticipate that the B of E would refuse liquidity to Northern Rock when the wholesale money markets froze.

    Surely the main poblems were:

    A. Bank credit executive decisions to allow the purchase of securitised loans and CDOs without proper due diligence, which the FSA should have picked up on, and

    B. Central banks being too slow to act as lender of last resort to support bank liquidity - all banks have to lend longer term than they borrow so need the insurance of central bank liquidity.

    Perhaps the third member of the tripartite regulators, the Treasury, should have better managed the FSA and B of E.

    And perhaps the government should itself have acted more prudedently with its own borrowing so that it would have been in a better position to help now.

  • Comment number 64.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 65.

    Sadly I still read comments from people in denial of the truth, the financial system as we have known it is finished, accept this as fact people and move on.
    There is no going back, there is no more `housing market,` it`s gone, all the banks are insolvent, the governments (we the taxpayers) are unable to save them and why should we try? There`s not enough money in existence to make any difference to our situation.
    Time would be better spent educating the public in, and providing resources for, self sufficiency.
    Wake up Britain, your time of stability is short When things start to collapse, in a very few weeks, your cities will become places to avoid.
    Provide for yourselves, your state is bankrupt.

  • Comment number 66.

    Reinstitute Glass-Steagall Act

    Accepting and managing society’s saving is a sacred responsibility bestowed by the legislator exclusively upon commercial banks. The 1999 repeal of the Glass-Steagall Act in the United States, enacted in 1933, removed the wall that the Act had created between the deposit-taking commercial banks and the other types of financial organizations. Investment, insurance, and brokerage firms are no banks and their managers are no bankers. That investment firms are called “banks” is a misnomer.

    The deposit-taking culture of commercial banking contrasts starkly with the culture of investment firms. While commercial banks are the custodians of society's saving and their funding is sourced primarily from people's deposits, investment firms are prohibited from seeking customers' deposits (they fund their operations from the money markets). Different funding sources evolved different cultures. Commercial bankers are typically dedicated to steady long-term banking relationships with depositors and borrowers. Commercial bankers are taught to observe caution in risk management and to view risk control structures with great respect. They earn relatively modest but comfortable compensations in the form of salaries. By contrast, investment managers are aggressive short-term transaction-by-transaction oriented salesmen with performance-bonus driven compensation schemes, high risk-taking tendencies, scant training or interest in risk assessment, along with a commensurate disregard to risk control structures--regarded as impediment to profitable deals. Investment managers describe commercial bankers as "unimaginative" and "boring".

    The current banking meltdown is in a great measure the product of deregulation and eight years of a Bush administration contemptuous of regulation. The combination swung the doors wide open to non-bankers from the investment field to dominate the commercial banking industry. They cobbled together many commercial banking institutions with investment, insurance, and brokerage firms; notwithstanding, their disparate cultures, contaminating by that many of once highly respectable deposit-taking institutions. In their pursuit of millions of dollars in ill-earned performance bonuses, an era of go-go banking was ushered into the management of society's saving.

    The current debacle is a result of the collective failure of greedy lenders, negligent government supervisors, obsequious internal auditors, submissive external auditors obsessed in lucrative consulting contracts with the companies they audit, as well as those pontificating rating agencies’ “experts” who are always one step behind the events and who get paid by the firms they rate.

    To protect national saving, commercial banks must be kept away from investment firms. The Obama administration should restore Glass-Steagall. In the age of globalization, other countries should to enact similar laws.
    Strict regulation and governmental control over commercial banks must be restored.

    Prudent lending and risk management practices must be vigorously enforced at commercial banks so that sanity may be brought back into the management of society’s saving.

    External auditors should perform one function only; namely, auditing. Management consultancies should be separated from audit firms.

    The practice that grew in recent years of compensating senior executives with mainly performance related bonuses, instead of the age-old practice of generous salaries, must stop. Performance bonuses can be soul destroying. In their pursuit of self-enrichment, executives are tempted to not only cut corners on professional and ethical standards but also ignore the spirit of the law, and even violate the law (in the hope that they’ll never be caught). The monumental losses that surfaced in 2008 render the billions of bonus dollars paid to executives a travesty. In retrospect, bank shareholders must be wishing that these bonuses should have been deferred, at least partially, until the quality of the profits the executives had claimed would have passed the test of time as genuine real profits. Performance bonuses have also created obscene disparities in employee compensation within even the same bank, between the executives and employees of the investment divisions, on one hand, and the executives and employees of the commercial banking divisions. Such disparities of incomes replaced the old institutional culture of loyalty, commitment, and collegiality by a culture of disloyalty, exploitation, and I-only-work-here syndrome.

    Elie Elhadj
    [Unsuitable/Broken URL removed by Moderator]

  • Comment number 67.

    Gordon Brown's stance is obvious, surely? After the 2010 election he will not be PM anymore. He doesn't really give a damn about sorting out the economy - he recognises there is no way he can do it before next June - his priority is to keep his enormous ego inflated, hence the attempts to portray himself as a global financial guru.

    Maybe he hopes for some lucrative directorships in the financial sector? If so, that would explain why he won't do the things he ought to do, such as legislating to keep investment banking separate from retail banking.

    If you ask me, Gordon Brown is beginning to realise that he won't be PM for long and has his eye on a future career in the financial sector.

  • Comment number 68.





  • Comment number 69.

    Robert, I think the analogy with horses and stables is the wrong one. The present system is like a blocked loo, and you can pour disinfectant down it but it still isn't sanitised!

  • Comment number 70.


    SOON TO BE 40K per head

    No WONDER the IDIOTS want the B OF E to




  • Comment number 71.

    You really couldn't make it up, could you? Does Gordon the Golem really imagine that we're all as stupid and Harman, Blears, Cooper and Jowell?

  • Comment number 72.

    First of all, we need to see the government stance towards banks as part of Brown's 'blame someone else' strategy - blame Americans, blame foreigners, blame pretty much anyone else, rather than accept responsibility for a decade of incompetence. Banks are an easy target and are Brown's 'blame flavour of the month'.

    Yet another non-announcement from Brown. Stopping banks from making 100% mortgages is rather pointless since they stopped doing that a long time ago anyway. And talk of tightening regulation is a bit rich from a man who accused overseas regimes of being too restrictive!

    This is a headline-printing, do nothing government. The money that Gordon was going to inject into the banks has not actually reached them yet. Of the five policies for helping embattled mortgage payers, none is yet in place. The help for the car industry has not kicked in yet either. For all the talk of intervention, the only real money that has been disbursed so far has been a small VAT handout to retailers.

    The irony is that, despite not actually intervening with real money, the government is presiding over a severe crash in the public finances. This combination points in the same direction that it has pointed all along - print money. Talk up deflation so that printing money seems responsible and non-inflationary. It all fits.

    Brown reminds me of a certain type of army officer, of whom it is said that 'his men would follow him anywhere - but only out of a sense of morbid curiosity'.

  • Comment number 73.








  • Comment number 74.

    I'm astonished that you're all only discussing this from the financial theory angle. We only need to look at as the recent "foreign labour" strikes and the current situation in Ireland to see that the next massive problem for this pathetic government will be to deal with the social unrest which is surely about to erupt. This will add many years to the resolution of the problems.

  • Comment number 75.







  • Comment number 76.

    It's difficult to imagine a more irrelevant comment from a Priome Minister. Who, exactly, is now offering 100% mortgages?
    More populist nonsense. We should expect leadership from our leaders, not this tosh.

  • Comment number 77.

    Seems like only a few weeks ago the government was urging the banks to lend more money. Now it's urging them to be prudent ? Bit surprised by all of this. I thought Gordon would have said to the banks and public :

    "Now - I'd really really like to see the return of the 100% mortgage".

    That way Gordon can be seen to be sustaining prices, while doing nothing that costs any money and knowing full well there is absolutely no bank in its right mind will offer these mortgages in the current climate.

    To anyone that has any illusions about the housing market in this country, it was a vast bubble propped up by the wholesale money markets. Now wholesale money has all but disappeared there are two options. One is to let prices correct (downwards). The other is for someone else to come in to replace the lending provided by the wholesale markets.

    Fortunately I think Gordon has finally realised that the government cannot afford to step in to replace the wholesale lending. The amount required is just too big. Thus there is only one alternative, let the market find its own level.

    Of course the government can't come out and say that it is in favour of a house price correction. This is political suicide. Expect a batch of noisy legislation and rhetoric which makes it look like the government is trying to sustain house prices but in fact has little effect.

    This announcement seems contrary to previous government rhetoric and is a missed opportunity if you ask me.

    Or maybe I'm being too cynical...

  • Comment number 78.





  • Comment number 79.

    There is very little point in talking about rules before we talk about objectives. "If you don't know where you are going you might not get there."

    Having settled on objectives we can debate whether or not a given policy will achieve those objectives.

    Regulation of the banking system should be designed to make sure that banks behave in a way that allows the real economy to best meet the aspirations of our citizens in a sustainable way.

    I am writing this even now I am not British, but Canadian. The experience of the last depression has taught us that beg your neighbor policies will not achieve this aim.

    The system of regulation for banking must somehow be international. National regulation is effectively no regulation for international banks. A Balkanized banking system is unlikely to achieve the objective given above.

  • Comment number 80.

    And who is to head up this Global Regulisation
    Could it be a role that Gordon fancies for himself?
    Does the man have no guilt over the mayhem he has presided over?
    Is he a complete meglomaniac?

  • Comment number 81.






  • Comment number 82.

    Can I bring us back to bonuses where our PM has said, quite rightly, that there should be no reward for failure. There seems to be an evolving concensus that 5 years is time enough to determine whether or not there has been failure.

    It is lucky we have no bonus system for Prime Ministers or Chancellors. If we did, presumably Crash Gordon would have happily pocketed his for the years 1997 to 2003, years essentially when he was living off the favourable legacy he had inherited. Ought success or failure to be assessed after 15 years?

  • Comment number 83.

    Even his eye-catching reflection that perhaps "we should control new mortgages for more than 100 per cent of house value" isn't a formal pledge to outlaw those homeloans that have been shown to be particularly risky by the losses experienced on them by Northern Rock.

    Northern Rock found itself in trouble over the lending market, this together with some wanna be in the limelight journalists made the run on the bank. The scarred people in such a sensational way that money was withdrown from the market starting what it is now a recession..... which is media sensationalism to the extreme

  • Comment number 84.

    SO GORDY??


    NOT YOU!





  • Comment number 85.

    I lived through a BOE Minimum Lending Rate of 17% when all mortgages were variable rate.

    With QE and other indebtedness, rates will rise. If you assume rates go to the same level and assume a 3% addition for profit, risk etc you could conclude that mortgage interest rates will rise to 20%. Can anyone expect to buy a house with a mortgage at current house prices?

    Maybe this is an indication of how far prices could fall.

  • Comment number 86.

    I agree with Gordon Brown.

    The way financial institutions operate need to be adjusted and be more controlled. There is a role for FSA, Government to play here as well, including assessment of risks and imbalances. However, it will be very silly for UK banks to go back to many years ago and do just traditional banking. We would lose markets and many billions of income for the country (taxpayers).

    Please let's remember that these banks (who people now enjoy kicking) for years paid many billions of GBP to taxpayers and employed many thousands of people. The problem now is part of the global financial services evolution. Evolutions come with temporary excesses. Financial world will learn and continue developing. We need to actively participate in this development.

  • Comment number 87.

    Direct quotes from Gordon Brown's first budget - 1997 -

    "I am determined that as a country we never return to the instability, speculation, and negative equity that characterised the housing market in the 1980s and 1990s.

    Volatility is damaging both to the housing market and to the economy as a whole. So stability will be central to our policy to help homeowners. And we must be prepared to take the action necessary to secure it. I will not allow house prices to get out of control and put at risk the sustainability of the recovery."

    If only he had done as he originally said - we would not be in this mess now. He had a chance of been the best UK chancellor ever - he will go down in history as the worst.

  • Comment number 88.









  • Comment number 89.

    I was thinking about lateral thinking recently which makes you see what is not said. Firstly in this whole discussion over what went wrong and who's to blame. Why not look at where it hasn't gone wrong.
    When did anyone mention HSBC who seem to be surviving pretty well. Perhaps it is easier to search out the culprits than to look at what works and adapt and learn.

    Second what about credit card companies such as MBNA who take advantage and whack up their interest rates while maintaining a fixed minimum repayment. They encourage payment by direct debit and of take that minimum repayment. A law that meant the min repayment be raised to a sensible level ( in most cases 2-3% MBNA interest + £5 ) and link it to interest rate changes would mean that raising interest rates would raise min. payment would deter spending which would make them think twice. But of course GB wants people to borrow and spend ( which won't happen because people are not as stupid s he thinks ). Oh for a change of government!
    Wonder what would happen with few months o no gov.........can't be worse surely ?

  • Comment number 90.

    I'm depressed by the majority of comments here. Partisan to the point of stupidity. We have had a conservative government these past 29 years. A rose by any other name would smell as sweet, a turd as foul. If there was any honesty from those who attack Brown they would admit the UK finances would be no different if we'd had a Conservative government for the past 12 years.

  • Comment number 91.

    I can't see that the stable door is going to be shut, and Obama has plenty on his plate so its not certain he will create a perfect resolution.

    Brown is still trying to portray himself as a pure victim.

    Therefore he cannot suddenly draw attention to the FSA regulatory capabilities and approach as he would then have to explain why, as with HBOS, the risk analysis for banks failed over a period of years.

    The bankers did not break any laws. They were creating wealth as they were supposed to.

    There is no coherent move to discipline and control the use of derivative instruments like Credit Default Swaps.

    There is therefore no reason to suppose that the government(s) won't continue to treat this as a "one in a hundred years" event - as though it were actually a random storm that snuck up on us and not a predictable event.

    What we should see are global and national rules and regulation to make sure we harness the benefits of capitalism but don't fall victim to self delusion.

  • Comment number 92.



    10,782,000 YTD.

    19,496,000 FOR 2008.




  • Comment number 93.

    85. OldNick666:

    "With QE and other indebtedness, rates will rise. If you assume rates go to the same level and assume a 3% addition for profit, risk etc you could conclude that mortgage interest rates will rise to 20%. Can anyone expect to buy a house with a mortgage at current house prices?"

    Right. If you look at other countries whose currencies have cracked (Russia and Iceland, to name just two), you will see the kind of interest rates that you are suggesting.

    The UK borrows huge amounts from foreigners, and will, increasingly, be in competition with others for those funds. That points towards higher rates. QE points towards a lower exchange rate, which would in turn push up the cost of the vast quantities of imports on which we are dependent.

    This all points towards an eventual need for higher rates, both to attract funds and to shore up sterling.

  • Comment number 94.




  • Comment number 95.

    The reason the PM and the government cannot stand up to the banks is because the centralised banking system in Europe and America, OWN THE GOVERNMENTS!

    If you look at the way money is produced, not from the government, but through the ENDEBTEDNESS of US the public. Every time you take out a MORTGAGE the bank create the finances for it OUT OF THIN AIR!

    Such is the way of the FRACTIONAL BANKING SYSTEM that a 10% depostie on a £100,000 can create £900,000 for the BANKING SYSTEM.

    This is why we have INFLATION RATES of 7% which as anyone who knows anything about EXPONENTIAL GROWTH CURVES is entirely UNSUSTAINABLE.

    The only way the puplic will ever get out of this MESS, is if we understand how MONEY IS CREATED and begin to protest against this LAWLESS system.

    Here are some names of people who have tried to get rid of the CENTRALISED BANKING SYSTEM:

    A. Lincoln, printed his own money, the 'greenback'. (Assasinated)

    Kennedy, Printed his own money, requiring no interest be created. (Assasinated).

    Ron Paul - Republican candidate for the 2008 elections - wanted dissolution of centralisd banks (Systematically ignored by media.)

    Will BOOM and BUST ever end? Not under this system. The DEBT MONSTER is getting bigger by the day. One day it will eat your HOME too.

  • Comment number 96.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 97.

    We need stringent regulation for retail banking. The banks that handle ordinary people's pay, their current accounts, their savings and so on, should not be firmly kept away from the seductive lights of the great global casino. What's more, the bankers have revealed themselves as incompetent once they try to extend their sights beyond the High Street, surburbia and telephone banking.

    However, the PM still feels that need to do homage to Maggie ...

  • Comment number 98.


    INTEREST RATES AT 12 to 15% in 2010/2011


    CLAIMANTS AT 7,600,000 plus.


  • Comment number 99.

    banks are the "servants of the economy and society and never its master".


  • Comment number 100.

    This is just Brown creating some flak so as to pretend to be doing something.

    His government is a busted flush and he should go and go soon.

    At least now members of the Parliamentary Labour Party are starting to wake up to the disaster they will have to contemplate in June 2010. It is no longer a case that Labour will lose the election it is whether there will be a Labour Party left after the election.

    We need radical banking reform in this country and we need it now. This is not the time for contemplating your navel.


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