The Bank governor claimed that action by Gordon Brown’s administration had been “too late” to prevent the banking crisis causing a recession, which led to the sharp increase in unemployment.
Sir Mervyn said that he argued “from the beginning of 2008” that British banks required more than £100 billion of extra funding to avert a crisis.
Mr Brown and other senior ministers failed to bail out the banks until October 2008, which was “too late to prevent the financial crisis from spilling over into the world economy”, he claimed.
He said that the delay in intervening, and the subsequent recession led to unemployment in Britain rising by over a million people.
“To many of you this will seem deeply unfair, and it is,” Sir Mervyn said in a BBC lecture broadcast last night. “I can understand why so many people are angry.” (AtW's comment: somebody who is about to retire with a nearly £10 mln pension pot has got amazing understanding of people who are ****ed in big part thanks to his policies.)
The political intervention by the Bank governor is extremely unusual and came just hours before millions of Britons are due to vote today in local and mayoral elections.
The comments are expected to be seized upon by David Cameron and George Osborne to further undermine Labour’s economic record.
Sir Mervyn urged the current government to swiftly introduce banking laws to prevent a repeat of the 2008 crisis, which has led to the deepest recession in Britain for a generation.
In the lecture last night, the Bank governor disclosed details of internal wranglings over the Government’s response to the banking crisis. He said: “In August 2007 came the moment when financial markets began to realise that the emperor had no clothes.
“From the start of the crisis, central banks provided emergency loans but these amounted to little more than holding a sheet in front of the emperor to conceal the nakedness of the banks. They didn’t solve the underlying problem – banks needed not loans but injections of shareholders’ capital in order to be able to absorb losses from the risky investments they had made. From the beginning of 2008, we at the Bank of England began to argue that UK banks needed extra capital – a lot of extra capital, possibly £100 billion or more. It wasn’t a popular message.”
Sir Mervyn said the “bold action” to largely nationalise RBS and Lloyds Banking Group took another nine months.
That bold action in October 2008 could have happened sooner,” he said. “Bailing out the banks came too late to prevent the financial crisis from spilling over into the world economy. The realisation of the true state of the banking system led to a collapse of confidence around the world and a deep global recession. Over 25 million jobs disappeared worldwide. And unemployment in Britain rose by over a million.”
In his first public comments since figures showed that Britain is suffering a double-dip recession, the governor urges politicians not to delay new legislation which means banks will have to separate risky investment banking operations from consumers’ money.
His allegations are likely to anger Mr Brown. The Labour Government’s bail-out of British banks was regarded as an innovative scheme which provided a blueprint for other countries. It was seen as one of the few successful policies of Mr Brown’s short-lived premiership.
The Bank governor is due to retire next year and his analysis of the banking crisis may prompt allegations that he is attempting to “rewrite” history to paint his own role in a more favourable light.
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Will we see more incompetent BoE Governor in the future? I'd be amazed if that's the case
Sir Mervyn said that he argued “from the beginning of 2008” that British banks required more than £100 billion of extra funding to avert a crisis.
Mr Brown and other senior ministers failed to bail out the banks until October 2008, which was “too late to prevent the financial crisis from spilling over into the world economy”, he claimed.
He said that the delay in intervening, and the subsequent recession led to unemployment in Britain rising by over a million people.
“To many of you this will seem deeply unfair, and it is,” Sir Mervyn said in a BBC lecture broadcast last night. “I can understand why so many people are angry.” (AtW's comment: somebody who is about to retire with a nearly £10 mln pension pot has got amazing understanding of people who are ****ed in big part thanks to his policies.)
The political intervention by the Bank governor is extremely unusual and came just hours before millions of Britons are due to vote today in local and mayoral elections.
The comments are expected to be seized upon by David Cameron and George Osborne to further undermine Labour’s economic record.
Sir Mervyn urged the current government to swiftly introduce banking laws to prevent a repeat of the 2008 crisis, which has led to the deepest recession in Britain for a generation.
In the lecture last night, the Bank governor disclosed details of internal wranglings over the Government’s response to the banking crisis. He said: “In August 2007 came the moment when financial markets began to realise that the emperor had no clothes.
“From the start of the crisis, central banks provided emergency loans but these amounted to little more than holding a sheet in front of the emperor to conceal the nakedness of the banks. They didn’t solve the underlying problem – banks needed not loans but injections of shareholders’ capital in order to be able to absorb losses from the risky investments they had made. From the beginning of 2008, we at the Bank of England began to argue that UK banks needed extra capital – a lot of extra capital, possibly £100 billion or more. It wasn’t a popular message.”
Sir Mervyn said the “bold action” to largely nationalise RBS and Lloyds Banking Group took another nine months.
That bold action in October 2008 could have happened sooner,” he said. “Bailing out the banks came too late to prevent the financial crisis from spilling over into the world economy. The realisation of the true state of the banking system led to a collapse of confidence around the world and a deep global recession. Over 25 million jobs disappeared worldwide. And unemployment in Britain rose by over a million.”
In his first public comments since figures showed that Britain is suffering a double-dip recession, the governor urges politicians not to delay new legislation which means banks will have to separate risky investment banking operations from consumers’ money.
His allegations are likely to anger Mr Brown. The Labour Government’s bail-out of British banks was regarded as an innovative scheme which provided a blueprint for other countries. It was seen as one of the few successful policies of Mr Brown’s short-lived premiership.
The Bank governor is due to retire next year and his analysis of the banking crisis may prompt allegations that he is attempting to “rewrite” history to paint his own role in a more favourable light.
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Will we see more incompetent BoE Governor in the future? I'd be amazed if that's the case
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