‘Brown knew what needed to be done’
From The Financial Times:
It’s hard to believe now, but when the global financial crisis started in spring 2007 there were many people who did not see the severity of what was to come. Even in late 2008, after the troubles at Merrill Lynch and Lehman Brothers, many were still in denial (especially those who were responsible for the creation of the crisis).
Gordon Brown is not in this category. As soon as Northern Rock began to teeter, he realised there were deep structural problems with the financial sector and he tried to act on what he saw. He grasped immediately that the problem was not just one of liquidity but of a weakness in the financial sector built on years of mismanagement, lax regulation and reckless speculation. He also saw early on that unless a government recapitalisation was accompanied by requirements that banks continue lending to businesses, the crisis in the financial sector would spread to the broader economy.
“We needed to overturn 30 years of policymaking,” Brown writes. No cash without government involvement became his mantra and he tried to persuade the Americans and the Europeans to his way of thinking. In the end, the US gave up on its ill-fated strategy of having the government enter the garbage disposal business by taking all the banks’ toxic assets on to its books, and followed Brown’s strategy of equity injections. But without the constraints that Brown insisted upon, money that poured into the banks poured out in bonuses and dividends. Brown recognised that getting credit flowing would be difficult at best; but at least he gave it a try. The US strategy of letting the banks continue with the same practices, including credit card abuses, was doomed economically and politically.