Parris and Heffer urge Conservatives to keep their distance from Brown during financial crisis

In The Times, Matthew Parris warns that the Conservatives must "block their ears" to calls for cross-party support over the financial crisis. Gordon Brown's motivation, he argues, would be narrow party interest, concealed by a call for national unity:

"Mr Brown's real intention will be less worthy: to silence critics and bind political rivals into policies that they will not subsequently be able to criticise; to pre-empt their blaming him if things go wrong; to allow himself to slur those who voice disagreement in Parliament and the media as “unpatriotic”; to imply that any challenge to his own leadership is irresponsible; to stifle discussion of his own past role in the “Age of Irresponsibility”; and to go into the next election having effectively nobbled the opposition parties.

"Messrs Cameron, Clegg, Osborne and Dr Cable should view this with extreme wariness. The danger is huge. Say “yes” and they may be sucked in to complicity in failure to rescue economic growth. Say “no” and they may be blamed for aggravating the failure."

In today's Telegraph, Simon Heffer makes the case that Brown is rightly to be blamed for the current crisis. It is now, he says, up to the Conservatives as the opposition party to take the lead in bringing down the government.

"Let there be no doubt about the extent of Gordon Brown’s culpability for the crisis. As Chancellor, he raised huge sums and borrowed yet more in order to build a client state of tame Labour voters on the public payroll – whether as employees or claimants. He pushed Britain to live way beyond its means not merely in this way, but by putting excessive amounts of money into circulation that banks could lend on with cavalier irresponsibility.

"... I have suspected, and this week’s non-events in the Tory party confirm my view, that they didn’t seek the recall of Parliament because they had nothing to say. They couldn’t bring themselves to attack the policies that exacerbated this mess because for the most part they supported them – certainly on incontinent public spending. Now, they are not taking on the Government’s handling of this crisis because they haven’t a clue what they would do differently."

Comments

[Freddie Fencepost]

Can someone tell me why whenever I turn on the television I only see Vince Cable giving us his pearls of wisdom?

What has happened to George Osborne. He seems to have become the invisible man in this crisis!

I fear he is out of his depth.

Something must be done!

[Opinicus]

The duty of an opposition is to oppose

We should sack the eunuch's in Parliament and send our journalists in to fight for us.

I compared the crowd on Question Time this week and last week. Last week they were sneering at Labour this week they were sneering at the financial system. In political terms that means us, unless we get up and do something.

[Tabman]

Freddie Fencepost - Osborne's busy ...

[Tony Makara]

This is good advice from Parris and Heffer. I'm glad I'm not the only one who seems to feel that David Cameron and George Osborne have appeared servile of late. Nothing wrong with consensus when there is common ground or national need, but Gordon Brown is largely responsible for this mess by encouraging debt and the bail-out is just govt throwing money at bad lending in the hope of saving its neck at the next election. At the moment it looks like Gordon Brown is calling all the shots and Mr Cameron and Mr Osborne are letting Brown dictate to them on economic matters. I support David Cameron but I don't support his support for Brown or the rip-off bail-out. Good comments from Parris and Heffer.

Brown out! No to the bail-out!

[Iain]

Freddie Fencepost, other wise its Ken Clarke who is sent in to give the Conservatives some presence in financial matters. That this economic meltdown is seen as benefiting Brown rather than the Conservatives sums up the abject failure of the Shadow Treasury team.

A messageboard contribution worth reading is Mr Marsdens on The Platform section, who dissected Brown's record and shows the Shadow Treasury team facts they should have brought to the publics attention, but have so far failed to do.

[christina Speight]

I fear that Messrs Parris and Heffer are merely baying at the moon. Cameron hasn’t got his heart in pinning the blame for the mess on Brown and Osborne is all at sea, out of his depth.

The party has plenty of experience in its ranks to replace Osborne and, to signal a more appropriate stance, Cameron should replace him forthwith.

This does not mean blanket opposition to all proposals to get us all out of a highly dangerous situation but it does mean continual assertion of the culpability of Blair-Brown for losing control of credit during the last 11 years, and dragging us even deeper into the morass than other countries.

[Matthew]

I couldn't agree more.

It was refreshing when watching the McCain v Obama debate to see ARGUMENTS about the economy, to see them making political capital out of it, saying that it was George W Bush's 'disasterous economic policy', or alternatively Obama's campaign contributions from Fanny Mae that were to blame.

We are not at war. We have not been attacked. Our economy, the responsibility of Gordon Brown, has been ruined, after 10 years of squandered boom, we now have the bust.

Why are we not shouting from the rooftops how much of a mess Gordon Brown made of things? How he allowed house prices to triple, meaning far greater ruin for homeowners in the recession , how he built our economy on debt, how he raped and pillaged pensioners' funds so that now in the downturn they are in a far worse position than they should be in, how after 11 years of Labour, the FTSE has fallen in value from where it was in 1997.

Supposedly Labour's strength is on the economy, now that we are in Brown's Bust, it is supposed to boost them.

Surely not. This is Brown's bust, and he must take the blame. If the public pereceive otherwise, that is because we are squandering the opportunity, 15% ahead in the pools, to correctly assign the blame for Labour's mismanagement of the economy. They have a shocking record.

[Rugfish]

Reading his full piece, it's an intelligent observation of Brown's cunning personality.
David Cameron needs to block any such attempt immediately and step off the blindingly obvious route which is peddaling the party toward destruction in the polls.

Yes, he can agree with support for our banking in the way it's happened, but he should be riding on the reasons why it got to this state and attacking Brown in all directions. God there's enough to go at !

He should also be calling for a general election so people can decide Browns competence over the economy and their taxes and the national debt, which go to HIS leadership.

He should not promise more of the same, he should get a sizeable piece of paper and a ballpoint pen and get drafting a real plan to improve industry, protect jobs, reduce financial burdens on families, kicking half the ludicrous spending into touch.

Why is he not doing this ???
ID cards - how much are they costing ?
2 Aircraft carriers - what are they for and who needs them ?
Contractors to government - why ? ( is it incompetent to do the job itself ) ???
EFTA membership and building trade links around the globe ourselves....for the British people.

Have a go at why Brown took away everything and now wants to suggest he's giving it back by borrowing ?

Brown will never change, he cannot change, he's the same guy who wrote a pamphlet of how to rob benefits from the state.

Come on people ( DC and George ), what's up with you ?

Also, for Gods sake will you get John Redwood into a roll where he can open his mouth on TV please and bring David Davis back.

[Patsy Sergeant]

Freddie Fencepost - Probably because you watch BBC!

As Tony says I think this is an extremely good idea!

In the first paragraph of the Matthew Parris quote, I think he highlights quite accurately just how devious and single-minded MR. Brown is, as people have said on this website - and in print, over AND over again, Mr. Brown's sole aim is to stay in power at the top of the tree. Do not forget that Mr. Brown had ten years of being over-shadowed by a better-looking, more approachable AND more likeable colleague at the top, and ten years is a long time, time enough for mindset habits to form, so there is no way on this earth that he will permit another colleague with very similar character traits within a million miles of his top notch...........

[Mike Routhorn]

Cameron and Osborne would be well-advised to put some distance between themselves and Brown.

This week's big splurge has done nothing to ease the LIBOR rate and there must be a danger that the cash will get drawn down and just hoarded.

And as for kicking our friends in Iceland in their darkest hour...

[Freddie Fencepost]

UNBELIEVABLE!!!!!!!!!!

I now read that at this moment of financial crisis WILLIAM HAGUE found time to join Barclays fat cats on Lake Como for a Jolly!!!!

What on earth was he thinking.

Next David Cameron will be off to Rwanda again.

A week in politics really is a long time

[David Parker]

There was a time when the Conservative policy of letting Brown dig himself into an even deeper hole was probably the correct strategy, but that time has passed.
If Cameron hopes to be seen as a PM in waiting he must show some leadership qualities.
It is not being unpatriotic to say that the Tories will consider and support any realistic proposals to restore confidence in the economy, whilst at the same time bitterly criticising Brown for his part in the responsibility for Britain's weakness.

At the moment, Cameron's indecision and inactivity has inflicted a double whammy on the Conservative party. It has allowed Brown to exploit the situation to his own advantage by taking political centre stage, almost unopposed, whilst at the same time it has exposed the Conservative shadow cabinet to the accusation that they have no policies of their own and are out of their depth. This is something which is gaining credence, not merely with the general public, but with many of their own supporters as well as the crucial floating voters.
An added disadvantage to the Tories is that their front bench is uncomfortably reminiscent, in some cases, of the city fat cats who now bear the brunt of the blame for the present crisis. Does it give an impression of a mixture of angry passionate young firebrands, balanced by some wise old heads, or a typical selection of the complacent young professional political class?

[Curly]

I've been saying it for days, it's time that the Opposition woke up and got out of Brown's bed. Huge budget deficits have encouraged the boom built on debt, eventually the bubble has burst, yet alternative austere, low spend, low tax policies are not on the agenda.

Cameron has handed the tactical initiative back to Brown simply because the current Opposition front bench refuse to countenance moving away from Labour's spending plans.

They seem to expect the next election to be handed over on a plate without working for it.

[Iain]

"There was a time when the Conservative policy of letting Brown dig himself into an even deeper hole was probably the correct strategy"

No it was never the correct strategy, if the Conservatives had put down some markers in the publics mind about Brown's debt fuelled economy then they wouldn't be floundering around now looking for an economic narrative. For in putting down some economic markers they would have put the blame for this crisis on Brown's debt fuelled economy, not the market economy the Conservative support. So instead of the Conservatives being able to say that we have to throw tax payers money to sort out the problems Brown has created, its now looks as if the state is having to throw money at the problems markets have created.

[Nigel Rathbone]

Most of the comments on this thread highlight a shocking lack of understanding of what has happened here.

Get this in perspective. This is not some local, Brown-induced crisis. OK, there are some actions he could have taken as Chancellor which might have made some slight difference at the margins of the UK impact of this crisis - BUT: it is demonstrably a global crisis (Brown's performance as Chancellor is not responsible for the problems in the USA, Germany, Iceland, Japan) so to blame it squarely on him is patently absurd.

On the contrary, the action by Brown and Darling this week are leading the world, and other countries will certainly have to follow.

In the light of all that, it is perfectly right for Cameron and the Conservatives to offer bipartisan support. It truly is in the national interest - the stakes are just too high and it is just too late to do anything else.

Brown and Darling have just had to face the worst economic crisis ANY British ministers have faced since Ramsay MacDonald and Philip Snowden (And so far they have handled it rather better than their Labour predecessors). Just ponder on that - Major, Thatcher, Wilson, Macmillan, Attlee - none of them EVER had to take an emergency decision on this sort of scale.

How can Cameron do anything other than offer support for that?

[Matt Wright]

Thats not really correct Iain. I've seen PRs and leaflets and been delivering same for many months about debt and the mismanagement of the economy. Over a year ago my own PRs and newlsetters were saying some of the stuff being said now. However I do agree the party needs rise to the occassion and I'm sure it will.

[Iain]

"This is not some local, Brown-induced crisis. OK,"

Nigel Rathbone, though there is an international element to this, it is also true to say that there is a very British element to this made in Brown's No11. In fact the 'international' element to this crisis, the problems which orgininate in the US are the same problems Brown allowed to develop here, the massive budget deficit, the massive ballance of payments deficit, the collapse in household savings, the bubble property market, both debtor nations overly reliant on international credit, and when that credit dried up we got crunched.

[Nigel Rathbone]

Iain I do understand the origins of this crisis, but thank you for your explanation anyway.

But you make my point yourself: "the problems which orgininate in the US are the same problems Brown allowed to develop here"

The SAME problems. Brown's stewardship of our economy can be criticised of course, but in general terms he was following global trends, as was the US economy. There is absolutely NO evidence that a Conservative Chancellor would have done anything differently.

Brown has at least talked about improving global regulation even if he was ultimately unable to do anything about it. Did he have Conservative support?

[christina Speight]

Nigel Rathbone at 11:37

You've totally missed the point. Indeed you're part of the problem!@ We are in a worse situation than anybody but Iceland and we'll find it more difficult to get out of the chaos than anyone else because we are grossly over-borrowed and ALL because Blair-Brown lost control of credit.

This blame must be pinned on them otherwise they -and the country - will never learn.

Of course individual policies especially global ones can be supported but the lessons have got to be learned or it will be the guilty ones who prosper - and I don't mean the banks - they operated in the political economic climate Brown had set.

As for the Global element. London was the leading (or no 2!) financial centre of the world. Global crises like this must, by definition, have a British element and that British element is Brown.

And Nigel - read Iain immediately above if you want more details.

[Opinicus]

@Nigel Rathbone RIP

...He always played the game and always lost.

It doesn't matter whether Brown was directly responsible or not - although I have to agree with Christina Speight on it rather than you.

The fact is that the new Labour government has spent 11 yrs harming this government's institutions, sovereignty, pensions, schools, army etc. and must be got rid of.

This is a big stick with which to beat them out of office. The voters are not as prissy as you and would urge us to wield it if the limp wrists at CCHQ could only strain themselves to pick it up.

[Iain]

"but in general terms he was following global trends"

Nigel Rathbone, Brown wasn't following he was leading the charge over the precipice.

The collapse in personal savings, at a 40 year low, we have more personal debt that half of the rest of Europe. A housing bubble which is worse than the US's. A balance of payments deficit that beyond anything we have ever experienced, and in percentage terms worse than the US's. A budget deficit that is only out done by Egypt Pakistan and Hungary. And entering a recession with the state taking more of the GDP than we usually have when exiting a recession, in fact in the same ball park figures that had Healey running to the IMF.

[Richard North]

Actually, if you look for it, both David Cameron and George Osborne talk a lot of sense about the financial crisis. (look for Cameron's detailed references to "capital adequacy" is his speech linked - it is impressive.)

There problem is that, when they do, no one - and especially the Tory blogs - reports them. Unsuprisingly, they have learned that, if they want to get publicity, they have to go for the low-grade "reality TV" stuff.

It is ironic that we then hear complaints that they do not address the serious subjects. They do - too few want to listen.

[David Parker]

Nigel Rathbone,

Nobody has suggested that Brown could have averted the global financial crisis. However, his initial reaction was to blame everybody but himself and furthermore to claim that, because of his economic policies, Britain was in a stronger position than most other countries to weather the storm. In fact,even though the situation was already out of his control, he persued a policy of delay and denial and sought to turn Cameron's offer of bipartisanship to his own personal political advantage.

It is premature to claim that Brown has handled this situation better than others in previous similar (but less extreme)situations, since, so far he has totally failed to handle it.

[Rugfish]

Just a correction here.
Brown didn't LOSE control, he gave away control of the banks by the Bank of England which allowed banks to "invest" UK deposits in U.S. sub-prime mortgages which would/could/should have otherwise at the least been glanced at by Eddie George and Mervyn King before they got in to it.

The fact the FSA didn't know what they were doing and obviously the Bank of England itself couldn't actually understand the instruments ( nor could the bankers ), was all we need to know.

Brown's interference in banking regulation was clearly responsible for that.
I can't imagine Ken Clarke, Lawson, or Lamont allowing UK deposits of this magnitude being sent out of the country without asking where they were going ?

Prudent judgement went out the UK window the day Brown stepped into office so you can only imagine how much 11 years of these "investments" add up to.

I won't recite the spending and the giving away of rebates, the gold reserve sale etc as this should all add up to Brown's incompetence log for PMQ's.

Maybe someone needs to actually ask some questions about all these things in that place to make the point clearer ?

Additionally, it could help if Brown's "global plans" to right it, were not paraded as an excuse for his own actions too, because saying we ALL made the same mistake doesn't mean some could not have avoided it IF they'd had good sound prudent financial judgement and the regulation in place at the central banks.

If central banks do not regulate high the street banks to which they loan money, then my cat could tell you there'd be a problem.

For me, I'd like to know what the banks were doing with taxpayers money if I'd been Chancellor for 11 years and in that job on a wave of support for my judgement. I'd be thinking I'd made a drastic mistake now if I was him but of course I have a Phd in hindsight like everyone else I guess.

[Richard North]

Rugfish - It wasn't "Brown's interference in banking regulation ...".

Read what your own leader David Cameron has to say on this.

Quite righly, in a long, intelligent passage on the Basel Accord (spool down to his section on "Capital Adequacy"), he points up the damage done to the system with this agreement, with its "pro-cyclical" effects on liquidity.

You and many others need to get to grips with the fact that there has been a slow, quiet revolution in banking regulation, triggered by Basel II and implemented in the UK by EU law.

Further, the fact is that - as far as the UK and the other EU member states go, banking regulation is now an exclusive competence of the EU. It is no longer "Brown's" regulation but EU law, brought to you by the same organisation with gave us the Common Fisheries Policy - with similar devastating effects.

[Patsy Sergeant]

I totally agree with Christina!, and with Jonathan @ 12.25, and Iain and Richard North and David Parker! I am afraid Nigel Rathbone you sound like a Labour apologist!

Rugfish your post @ 13.07 should get a wider audience! If the 'man in the street' could read something composed as straightforwardly and with as short paragraphs as your blog, it would educate them mightily! And it would do everybody good if the man in the street DID understand a bit more about finance and banking! even if only superficially.

Gordon Brown is a political activist first and foremost and probably has been since University, he is also a Tax specialist --- a specialist in devising taxes! And I would say that his knowledge of banking, finance and the free market would be influenced by his political preferences!

[Patsy Sergeant]

Yes, Richard North the two directives 2006/48 and 2006/49.

But even so Brown would NOT agree to a Referendum, and went along with the Lisbon Treaty, so over eleven years he has 'gone along' with evermore EU interference in UK institutions. AND, only this week insisted that HIS party threw out a ten minute Bill which would have required that EU participation/interference in UK laws have public knowledge or be readily available to the public. And it had cross party support!

[Rugfish]

Thanks for that Richard North | October 11, 2008 at 13:41 and I agree with what you say in regards Basel, but my understanding is that capital resources were simply replaced by the facility made available to sell on debt within financial instruments.....thus turning liabilities into asset resources ( capital ), which could then be utilised on another loan (s).

If I'm wrong here then I stand corrected.
But if I'm right then of course 'someone' should have been informed that was occuring, looked at it, weighed up the risk and the consequences if the debt risk ratios were not evaluated correctly or if their value depreciated in the event of a falling or incorrect value.

That would surely mean, given that the Bank of England had nothing to do with it and the FSA didn't know such things things existed until the backside fell out of it, that someone in the treasury was responsible too otherwise why do we have government.

I can see Basel would certainly have given the impression great minds had worked it all out, but clearly the flaw in the system wasn't spotted by anyone and now we have the benfit of hindsight. Even so, it may be forgiven but I don't think it should be excused as a 'global problem' especially.

If for instance Britain's BofE had not been taken out of the equation, then surely it could have been asking questions about these instruments even though Basel had agreed the actual liquidity ?

What happened was more the case of creative business and accounting rather than the liquidity agreements under Basel I feel, and that 'should / could' have been down to 'inspection' and scrutiny by competent prudent bankers with experience rather than 'no one' don't you think ?

[christina Speight]

Just before lunch I spoke to a senior executive in a leading American bank and his "take" on regulators was devastatingly harsh. He says he despairs of ever being able to deal with A regulator, they continually change and so no cooperation is possible. He attributes this to low pay.

Now - and here I have a quibble with Richard North - Brown hived off the FSA from the BoE and left a gaping hole through which the 'wide boys' galloped. The EU is certainly the ultimate regulator but ikt is the national regulators that do the donkey dazy-to-day work so one can't just dismiss the whole shambles as being all the EU's fault because it isn't. The EU appears to have far less comprehension of what's going on than any of the major national governments.

Brown presided over - and gloried in - London being the world's prime financial centre. So this makes London a prime cause of the "Global" chaos.

It's Brown, Brown all the way as a cause of the GLOBAL crisis and why on earth can't Cameron and his useless poodle say so for heaven's sake?

[Rugfish]

Oh, as for the EU sticking its nose in to our business I don't think it helps.
Firstly, they fell prey to the same problem and they can't see their own way out of it. More bureaucratic claptrappers in the UK we do not need.

All we need is one guy with some commonsense, some experience and the back up to do the job, and that man is sat in the Bank of England. However it IS a global problem of course and that will take some global agreement to put it right, but if Brown gets his way, we'll have EU stamped on every bank note here and the Bank of England as Europe's central bank and him the head of it all.

Actually, the first bit sounds quite good until you put him in charge then it all turns to crap.

I think I'd at the moment I'd just like someone in there who can actually stand and hold his hands up and say "I made a mistake and I'm resigning unless someone has a revolver".

[ChrisD]

"Actually, if you look for it, both David Cameron and George Osborne talk a lot of sense about the financial crisis. (look for Cameron's detailed references to "capital adequacy" is his speech linked - it is impressive.)

There problem is that, when they do, no one - and especially the Tory blogs - reports them. Unsuprisingly, they have learned that, if they want to get publicity, they have to go for the low-grade "reality TV" stuff.

It is ironic that we then hear complaints that they do not address the serious subjects. They do - too few want to listen."

Agree with your post Richard.
Don't often post on here anymore, and only recognise a few long time posters. Though I did spot a Libdem, Hi Tabman.
The astroturfers change their names, but the content is still the same though.
We are in economic meltdown right now, and we don't yet know where we are going to hit the bottom, much less how long it will take to recover.
Normal politics were suspended this week, and quite rightly. But, I found the partisan braying and punch and judy politics from the government at PMQ's this Wednesday totally out of place. I genuinely would have been angry had Cameron and Osborne indulged in similar behaviour for cheap political gain.
It would not have even registered in the midst of the big news, and might have come back to haunt them later.

Can anyone remember what Gordon Brown the Shadow Chancellor was doing or saying on Black Wednesday, or even in the immediate aftermath? Exactly!

Matthew Parris should not worry too much though, Brown had his chance to bind both Osborne and Cable into his committee right at the start and he blew it. But the fact that the opposition parties were co-operative is on record.

Adam Boulton on This Week pointed out that the Cameron team have read every book written of the New Labour crew, and that does add to their understanding of their opponents. Cameron and Osborne know Brown too well, and they would have known just how he would react to any offer of assistance from them.
Had he taken up the offer in a proactive way then, he would have reaped the benefits, but if he tries to then bind them into his government in a reactive way later because he or Labour are performing badly in the polls and media, it will look like the cynical political move that it is.

[Richard North]

Rugfish - I wish it was true when you say that "the flaw in the system wasn't spotted by anyone and now we have the benfit of hindsight."

It was spotted well in advance. David Cameron's speech was in March. Through March and April, the Bank of England monetary committee was warning of the impending disaster, on precisely the grounds set out by DC, and others in the pages of the Financial Times were saying the same thing.

As it turns out - and I am working on this now, for a post on my own blog - the EU commission also knew about the problem well in advance and agreed. Right now, it is now rushing through "emergency" legislation to correct the problem.

Their problem though is that the EU legislative system is so cumbersome that it has taken the commission nearly a year to re-write the legislation and it will take 8-10 months to get it approved and into force. Yet we can't change the law. We have to wait for the EU to act.

Christina - the FSA is based on an EU model and, for reasons we explain here, had to take over the regulatory functions from the BoE after the latter had been made independent, in order to conform with EU law.

There are separate strands to this issue - yes, the Treasury wanted to emasculate the BoE, but it used EU law to achieve that (that is often the case in modern government ... the officials play Brussels off against Ministers - and vice versa - in order to get their way). Brown's complicity helped. The sad fact is though, that the FSA is a necessary and inescapable consequence of EU law.

[christina Speight]

I;m sorry, but all this talk simultaneously about the "EU legislative system is so cumbersome that it has taken the commission nearly a year to re-write the legislation" combined with we can't do anything because the EU rules say we can't seems ludicruous.

Any government of mettle (and opposition for that matter) would have said "THIS is a question of the survival of our nation and since the EU is incapable (being split between the Commission and the ECB) we have to act unilaterally (followed of course by humbug phrases of regret - blah, blah) " Every other player of significance does that anyway.

What Richard is saying is rather like the Chamberlain government in 1940 saying " we can't fight Hitler because we have a peace pact with him."

If we'd taken that attitude in 1940 we'd not be here to argue the toss now.

[Richard North]

If you have read some of the threads on this blog alone, I've had to battle to get some people even to accept that the EU is involved at all.

For sure, we could tell the EU to get stuffed, but, at the moment, our political classes seem to be afflicted with selective blindness, a trait shared by the media.

[Rugfish]

Richard, I'm sorry if I sound like a pain in the neck on this but it's as well to get these things straight. David Cameron may well have made a speech about the cause in March 2008 but the event actually happened in September 2007. I know because I was on the sharp end of Libor rates drying up and hiked lender arrangement fees coming from all lenders in order to attempt to make up their then little known loss.

Libor lenders pulled out of the market completely then. Lender like GMAC, Kensington, SALT, and many more, all dried up and couldn't lend because the mortgage portfolio's couldn't be sold. Plus they were having to buy some back. Kensington for instance lost £10 million in 12 weeks and had to sell. Southern Pacific ( Lehman Bros ) were just starting to use Northern Rock as brokers with a new suite of offices in the pipe and 2500 new staff. They couldn't do all that and the market started on a downward spiral in September 2007.

David Cameron was able to talk about this in March this year and the issue hadn't really become public knowledge then.

High lender fees are still applied to a lot of mortgages and that's really the only way someone can get a half decent rate but the loan to value ratio is so reduced it is almost impossible to arrange a remortgage now because values have tumbled and new buyers need massive deposits.

The thing is in a complete mess and the cause is down to selling on financial instruments which included mortgage products which were overrated. That once released capital to the markets and gave products for investment purposes, hence the banks leaked depositors funds away like seives for 11 years and were not watched or prevented because the Bank of England's remit was changed and the FSA were/are clueless. ( The FSA CEO resigned over it ) but Gordon Brown blamed the world.

[Richard Calhoun]

The two correspondents are Spot on!

Let Brown drown in his sea of debt!

[Richard North]

Rugfish - you are quite right ... but Cameron has picked it up and was aware it could happen again... it was already happening. Inter-bank lending then was already beginning to seize up. And this was not the only time Cameron mentioned it. He even tried it out on the Marr show.

The EU commission actually picked it up the problem in October 2007 - almost exactly a year ago, when it was raised at Ecofin. That set off the process of revising the legislation.

Prof. Peter Spencer was warning about it last December and even Tim Congdon wrote about it in April of this year - see here.

The problem has been well known and well understood for some time. But it isn't just lending that has frozen – the regulatory system has as well.

[Richard North]

BTW - I'm not saying the legislation caused the problem. Its effect, by being "pro-cyclical", has been to magnify the problems inherent in the system and, because of the inflexibility, has hampered attempts to deal with the problem.

[christina Speight]

Richard - I accept that on paper the EU IS involved. N obody that reads your blog can be in any doubt of that. BUT that's not the question.

The question is twofold 'Since the EU stops our freedom of action are we to go down bemoaning that fact or blithely act unilaterally and sort out the mess afterwards (after all you and I will shed no tears if our action wrecks the grandiose pretensions of the EU).

The second part of the question - and here I sense we will disagree - is whether our own inadequacies in the brief given to the FSA. its lines of communication and responsibility to the BoE and the remuneration of its staff (see what one of the World's biggest banks told me today ... somewhere above @1452)

The EU constructed its rules based on the ECB and its necessary separation from any regulator and I cannot believe that some de facto - if not de jure - tweaking on our part would have caused any upset in Brussels. The point is our politicians have no stomach for the fight to save the country

[Rugfish]

Richard,

We are both right then.
I wrote quite a sizeable sized email on the subject to DC last year as I felt he would be able to get the message out to warn people. Vis a vis the Libor problem and what it would entail for the industry and the country in terms of lack of mortgages.

My imagination didn't stretch to other forms of credit and I didn't know that British banks were wrapped up in the sub-prime market either Except I knew HSBC laid off 800 of its U.S. staff last year so I should have known too.

All I'm saying is that Brown actually took away the oversight of the BofE.....( my guess ) is that it 'could' have spotted it earlier and stemmed the problem as well as the size of losses had he not done that, but who's to say whether it would !?

Also last year I think it could have been Paul Mason did a report or perhaps some other, and spoke with a top ex-city financier/banker, who said he had discussed the financial instruments with the BofE and they looked completely vague and unaware of what he was talking about because they didn't know what instruments were wrapped together. ( Out of touch ).

It comes back to Brown but I hear what you're saying of the Basel agreement and you're right on that. I just think that agreement gave a false sense of security that everything would be alright and Brown ( because he knew know better ), would not know how banks operated. Thus he would also be clueless when he went into office and concentrated on taking the 'glory' and hiking taxes.....Hence, "I have eradicated boom and bust forever".........

[Rugfish]

God my spelling is bad tonight !

[Richard North]

Christina - you are right, and so am I! What we have seen is a cultural thing, driven by the different regulatory ethos of European countries, imported here via the EU.

I am not going to wax lyrical about the "old days", but as a former enforcement officer, I saw the old and the new.

The "old" system was based on trust, experience and respect for authority, exercised wisely and firmly. A great deal of reliance was placed on the expertise, judgement and professionalism of the regulator, who worked often to very loose guidlines and had a great deal of latitude.

In the "new", they took the "trust" out of the system and replaced it with "procedures". You stopped having to prove you were trustworthy. As long as you could fill the right tick-boxes, you could get away with anything.

Then they replaced judgement with "compliance officers" and changed the ethos, ignoring the spririt of the law and working to the letter. If it isn't "illegal", according to clever and expensive lawyers, it became "permissible".

This is a complex and interesting issue. I've taken a sideways look at it here, and there is much more to say about it.

Basically, across all walks of life, we've changed the regulatory paradigm – from slaughterhouses to banks. It is a foreign import and one that does not work for our culture.

[Richard North]

Rugfish:

"... who ... had discussed the financial instruments with the BofE and they looked completely vague and unaware of what he was talking about because they didn't know what instruments were wrapped together. ( Out of touch )."

Of course they were "out of touch". The BoE was no longer responsible for enforcement Plus they had lost two thirds of their staff, shifted to the FSA, so they neither had the means nor the need to keep "in touch".

Osborne/Cameron are right when they say that authority must be returned to the Bank, but that is easier said than done. First, we have to put two fingers up to the EU and, before we do that, we have to get wider recognition that the EU is a problem - not the only problem, but a major part of it.

[Richard North]

I never thought I'd find myself doing this: writing in defence of Cameron and Osborne.

[Richard]

"Top Tory William Hague flew off on Barclays £500,000 Italian jolly as markets crashed"

I do not care if he went to support his wife or if he paid for the trip himself, the simple fact is he should not have gone under the current circumstances. Anyone with half a brain could have predicted what the headlines would be!

It seems that Hague and others on the Conservative benches would far rather spend their time writing books and taking on work outside of the House of Commons.

Hague is supposed to be one of our better performers, why is he not out there in the media attacking the Government for their current behaviour and reminding voters who got us into this mess in the first place. Actually, why is not anyone from the Conservative Party doing that?

Every time I switch on the television, open a newspaper or tune into the wireless all I see or hear is Vince Cable! Where is George Osborne?

As others have said, the Conservatives had better buck their ideas up and start getting angry of they will be in serious trouble. Already Labour are creeping up in the polls while we are slipping.

If Brown pulls this off the Government will get all the credit, the Conservative Party will not get any and if Brown fails we will get just as much blame as we supported him one hundred per cent!