What to make of Brown’s new mea culpa over bank regulation in the run-up to the crash?
The prime minister has told ITV (in a programme to be screened tonight at 7.30pm) that in the 1990s the banks begged to be free of regulation and Labour in effect accepted this.
It’s a striking confession. Until now Brown has usually sought to shift the blame on to failures of international – rather than national – regulation of financial markets. And of course he has insisted that the credit crunch was imported from the US.
Alistair Darling has also blamed the banks instead of the regulators as recently as last summer.
As such Brown’s “contrition” is highly relevant. Ed Balls, at this morning’s Labour press conference, also made the admission: “We should, in retrospect, have been tougher on some of the investment banks who didn’t really know the risks they were running.”
Labour may well have made the right choices in dealing with the aftermath of Lehman Brothers. Yet the party was in denial about the financial bubble building up in the UK – even as the cracks began to show.
Angela Eagle, a Treasury minister, in April 2008 mocked a Liberal Democrat warning that Britain faced a bubble and was “at risk of recession”. This read “like the storyboard for “Apocalypse Now”, she joked in the Commons.
“Fortunately for all of us, however, that colourful and lurid fiction has no real bearing on the macro-economic reality.”
Even after the crash, Gordon Brown denied again and again that there had been widespread irresponsible lending in the UK; despite evidence that the problems within HBOS, in particular, came from foolish loan practices.
As recently as Monday, in a Today interview with John Humphries, Brown sought to evade responsibility once again.
Why then admit the mistake tonight? Here are a few reasons.
1] Brown has formulated a confession that still pins the blame on bankers rather than him. “I’ve learnt from that. You don’t listen to the industry when they way: ‘This is good for us.’”
2] The Tories are still on shaky ground on the issue, having called for the government to be even more liberal in terms of bank regulation.*
3] Better to come out with this now than be pinned down during the election TV debates by Cameron and Clegg.
Incidentally, it was Tony Blair who – as far as I can work out – formulated this excuse in an interview with the FT in January. He pointed out that heavy regulation of the City (while the music was still playing) would have prompted an outcry. He was almost certainly right.
* Although they point out that Peter Lilley, then the Shadow Chancellor, warned the House of Commons that:
“with the removal of banking control to the Financial Services Authority – the ‘super-SIB’ – it is difficult to see how and whether the Bank remains, as it surely must, responsible for ensuring the liquidity of the banking system and preventing systemic collapse.” (Hansard, 11 November, 1997)