Brown, the financial saviour?
Carousel OpinionPublished November 27, 2008 at 18:41 3 Comments
Poor Gordon Brown – it seems our Prime Minister can’t do right for doing wrong. His government’s policy to buy shares in private banks was bound to come up against criticism and, sure enough, opposition supporters and general malcontents were lining up to complain. “Why should our money be used to prop up business’ that have failed through their own fault?” In short, because something had to.
Until recently, a total financial meltdown wasn’t an impossibility. After the collapse of Lehman Brothers, faith in the banks evaporated and people raced to sell their shares and put their savings elsewhere. Even the most prudent banks were at risk. Had that happened, it would have been disastrous for all of us. Like it or not, banks are different to other businesses – they are the central hub of our entire society. That’s where earnings are kept. That’s where the business that pay wages put their profits. That’s where the organisations we rely on make deposits and withdrawls. You can’t tell a bank they’ve made its own bed and have to lie in it, because we’ll be snuggling right up with them.
As for the question of why it’s our money – well, who else’s was it going to be? People are quite fond of saying ‘the government is taking my money’ as if the government is some separate entity with an agenda of its own. It isn’t. Gordon Brown is not taking your taxes to buy himself a Mercedes. The government ‘takes our money’ to fund our education, our health care, our prison systems and now – because it’s just as vital and just as unavoidable – to keep our economy working.
So, if something had to be done and we had to be the one’s to do it, why this? Why buy shares in failing banks with our money? Put simply, because it was the only way we were ever going to get a return on it. Other plans, like the multi-billion dollar hand out proposed in America, might well rescue the banks from crisis, but we get no reward for our money when the banks recover again. Yes, the banks might not be what you personally would’ve chosen to invest in at the moment, but thanks to government intervention they will stay in business and, in time, will go back to providing a profit for their shareholders. Ladies and gentleman, you are those shareholders now.
This policy would never have come up in an ideal world. But, in reality, it was the best way to limit the damage already done. Confidence in our banks have been restored – perhaps not fully, but share prices have picked up and our money is safe. And instead of a hand out, we’ve been assured a return on our investment. That’s why countries across the world are following this model, and that’s why a lot of whiners need to shut up.
Jamie, taking into account you wrote this quite a while ago and the financial landscape has changed a lot since, I think you have still missed the critical issue that it was Brown’s fault for allowing this mess to develop anyway.
He created the ‘tri-partite’ system which allowed the FSA and BoE to ‘pass the buck’ as to who should actually be in charge of regulating what the banks were doing, and he allowed banks to not only massively leverage (borrow money from wholesale sources) but, even more crucially, allowed them to invest in products they did not properly understand the risks of.
It’s not much to call him a financial saviour and say his recovery plan has been a success, when he is the one who presided over our banks gambling too much with our money in the first place.
I should probably update this website – if it wasn’t surplus to our needs, maybe i’ll do that later haha. I never wrote such a thing… I just published it
A point to consider, however, is your retrospective itnduction. You can’t really criticise something being inaccurate or missing the point on the basis of new developments and new perspectives that develop as a product of what has already been discussed. With the ‘economic discourse’ if you can call it that, producing new arguments that found the basis of developing theories for what went wrong. It’s hardly the case that this triad, which sits comfortably in your lap for a nice neat theory of ‘what went wrong’, is completely to blame. Consumerism is much the case.
You are probably correct about this, and I particularly like your article – which will be in the next print with substantial coverage. However, the subtext of this article does not imply Brown as a saviour, it is a rhetorical device to attract commentary – hence the sarcastic cartoon.
On a side note – Brown is dodging Cameron’s bullets in PMQs and it is only really a matter of time before one hits him and a leadership crisis is established? Or maybe the labour party are so deep under that they cannot see the summit above the undergrowth of mistakes.
Interesting point Ryan
thanks for your response Jamie, i did mention at the beginning of my post that the financial outlook etc has changed substantially even since this article was published, and rather than criticise the piece and Brown’s actions to ‘’save the world” i focussed more on the regulatory aspect of how this event was allowed to occur in the first place, and i explored this a lot further in my article and i’m really pleased you like it and are going to publish it. it is promising to see that since i wrote the article a new banking act has come into force which gives the BoE more powers to prevent banking crises, and the FSA and Brown have both made statements akin to admitting their regulation failed, which is at least the first step to reform, recovery and the restoration of confidence in the system and our economy.