Saturday, December 05, 2009

Obrogating old orthodoxy...

Interesting couple of posts from Iain Martin last night on his Wall Street Journal blog - with some good points from Andrew Lilico of Europe Economics - musing about what would have happened if UK banks hadn't been bailed out by Brown and Co. and that "the new consensus" is that the UK "would now be in the Great Depression II" if they hadn't.

"But many of the same people who trumpet this as the new orthodoxy were equally fervent believers in the old orthodoxy (which was that there would be no need for a new orthodoxy because most economic problems had apparently been solved)."

Indeed! Iain then refers to the newest National Audit Office: "Maintaining financial stability across the United Kingdom’s banking system" [Link] where it was interesting to read that the UK Treasury expects to have spent £107 million on advisers by April 2010. Now we presume - and indeed the NAO expect - that the taxpayer will get most of this money back but it does surprise me that "Two sets of financial advisers – from Credit Suisse and Deutsche Bank respectively - who were each appointed on retainers of £200,000 a month for a year" (not including success bonuses). Ah well, if they save the country from The Brownstuff I suppose it would be worth it.

Anyway, the point that IM picks up on is the authorities were aware, in 2005, that "the existing legislative framework would not be sufficient in a crisis."

"That's the famous tripartite framework that was introduced with much fanfare in 1997, by the then Chancellor of the Exchequer"

FFS! And let's not forget either, that they were warned as far back as 1997, in an ocular oration.

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Paul said...

It all comes down to whether your political belief system favours big Government or small Government. The first is Labour which wants to have direct control over everything the second is Conservative style where a framework exists but you are trusted to look after it yourself.

Of course the FSA was deemed to failure because of the way it was set-up. What was the DTI and is now BERR could have gone the same way but somebody seems to be in control who knows what they are doing.

Re Credit Suisse and Deutsche Bank advising 'us' I seem to remember the panic on the old 5Live boards anytime DB was mentioned, all the usual right-wing suspects bemoaning the loss of control. Thing is if you can't drive you hire a taxi and the banks couldn't be trusted to run a whelk stall now.

Span Ows said...

Would that be Ian lucas? I know Mandy is the big wig but Lucas is the one with responsibilty for the business sectors. Maybe has a good team of civil servants too.

Love your last line...very true! (whelks...bit like winkles and also damp, cold, could give you the squits and best kept on ice)

Paul said...

"(whelks...bit like winkles and also damp, cold, could give you the squits and best kept on ice)"

I like that, a lot.