FSA: Gordon Brown complicit in credit bust

| 12 March 2009 16:00

The FSA has been on the attack of late. First they warned bankers that heavy regulation was in the offing. Now they are directly accusing Gordon Brown, former Chancellor of the Exchequer and now Prime Minister, of aiding and abetting a bubble.

Britain’s chief financial regulator blamed Gordon Brown yesterday for contributing to the economic crisis, coming close to accusing him of stoking the credit-fuelled housing boom and bust.

Hector Sants, chief executive of the Financial Services Authority (FSA), said that the pro-debt view of government ministers was one of the structural failures that led to the crisis. He said that one problem was “a prevailing mindset of Government and society promoting the benefits of credit and asset inflation, notably in housing”.

The comments appear to be the first time that the FSA has directly criticised the Government for its role in creating some of the imbalances that led to the banking catastrophe of the past two years.

Lord Turner of Ecchinswell, the FSA chairman, and Mr Sants’s boss, hinted last month to MPs on the Treasury Select Committee that the Treasury had put pressure on the FSA to regulate banks as lightly as possible, but he stopped short of direct criticism.

Brown wishes he were in Barack Obama’s position, coming in fresh without the taint of serving in a critical role as the bubble formed. However, he had a prominent role over the last 12 years and this will make his position that much more difficult.

Mr Brown has refused to accept that he made policy mistakes as Chancellor in the years leading up to the crisis. He said this week that he would not “shy away” from decisions he had made, but declined to apologise.

I see Britain’s economy struggling due to the extreme nature of the property bubble there — one more pronounced than in the United States. If we see a divergence of fortunes with the U.S. going forward, you can bet that Gordon Brown will feel the pressure.

Sources
FSA chief Hector Sants says that Gordon Brown contributed to economic crisis – Times Online

avatar About Edward Harrison

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages, a skill he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.

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