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— View from the City —
True, we hate those fat-cat bankers. We hate them because they got rich by playing on our own greed. But we're not talking about that. Gordon Brown, the prime minister, tells us this is a crisis made in America, where the bankers and their unsavory agents sold people subprime mortgages in exactly the same way they sold them here. They then bundled them up and sold them to European bankers, who didn't understand what they were getting, poor things. Our chaps are just innocent victims.
And Brown knows what he's talking about. After all, he was in charge of
the U.K.'s finances for 10 years before he got the top job. As prime
minister, he still bears the medieval title First Lord of the Treasury.
Besides, we also know the objects of our charity still have a
stranglehold over the economy. The prime minister has explained to us
that we have to buy stakes in the banks, because without our support,
there will be no lending to small businesses that need to finance their
Christmas stock or to householders who need to fill the Christmas
stocking. Without our cash, they will foreclose on people who took out
mortgages at 125% of the value of their properties. And they will not
lend money against the value of our homes without at least asking a few
searching questions about how we plan to pay them back.
Brown is transformed by all this. The man whose big idea was once to lead the world in giving aid to Africa is now boasting of how his plan for the banks has been adopted by governments in Europe and North America. Two weeks ago, he was dour, dithering and about to be ousted. Now he is the smiling, decisive world-statesman. Paul Krugman celebrated winning the Nobel Prize for Economics this month by writing a piece for the British newspaper The Guardian. In it, he proclaimed Brown as the hero of the hour, who left the U.S. struggling to catch up. U.S. Treasury Secretary Henry Paulson's hesitant and incoherent initial response might have been distorted by the ideology of an administration whose philosophy of government could be summed up as "private good, public bad," Krugman wrote, "which must have made it hard to face up to the need for partial government ownership of the financial sector." But Brown and his officials had acted with clarity and "stunning speed." Perhaps. But the British prime minister is likely to see his ratings fall again, once voters realize that while our money has rescued the banks, we still have to live through a recession. As well as taking a few token scalps at the newly part-nationalized banks, Brown has said they had agreed to restore lending to 2007 levels. How will that work, exactly? Will they go back to making irresponsible mortgage offers? Will they be making new covenant-lite loans to lunatic leveraged buyouts? Will his government, which will now control or influence 45% of Britain's household mortgage market, avoid the temptation to reinflate the housing bubble for political ends? His record as the ultimate owner of Northern Rock plc, which the government nationalized earlier this year, suggests not. Northern Rock has shrunk its loan book, paid down part of its debt to the government and avoided unfair competition with its private-sector peers. But with so much of the sector now in public hands, and the European Union now effectively silenced as a watchdog on unfair competition and market-distorting state aid to banks, will Brown retain his moral rectitude when a general election looms? And the Northern Rock story provides a useful antidote to Krugman's lavish praise. Brown dithered for months over taking it into public ownership, because, as a socialist, he was afraid of the stigma of being the first leader of his country to nationalize a bank. Now he goes around promoting himself as the innovator who will save the world. That's a slight exaggeration, to put it mildly. As Krugman points out, temporary cash injections have been used in previous financial crises. Brown's own party, then in opposition, was advocating the nationalization of banks in 1983 -- one reason why it lost that year's election and stayed out of power for a further 14 years. Remember this. Gordon Brown didn't invent nationalization. Karl Marx did. |
They say charity begins at home. That's probably why there have been no pop concerts for Bank Aid to bail out the starving money men. The poor fellows may be on the bread line and homeless, but they're our homeless, not refugees from famine and mayhem in Africa. So of course we back our government in giving freely.
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