King attacks Labour over credit spree King attacks Labour over credit spree
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  1. #1

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    Default King attacks Labour over credit spree

    http://business.timesonline.co.uk/to...cle5807797.ece

    Bank Governor says deep debts run up by Labour during the boom years are hampering the country's recovery

    The Governor of the Bank of England said that the country was so deep in debt before the financial crisis that it is making recovery more difficult.

    Speaking this morning in front of an influential panel of MPs, Mr King took a side-swipe at the Government, saying debt levels had meant the UK fiscal stimulus had to be smaller than in other countries.

    “I do think public debt matters. We get to this crisis with levels of public borrowing that were too high and that made it difficult," he said. But he dismissed the suggestion that UK plc was going bust as “wild exaggeration”.

    Mr King also criticised the way in which the bank bailouts were accounted for in the public accounts - in line with European rules.

    The ONS said last week that the banks could add up to £1.5 trillion to the public debt. However, it reported that, while the debts and liquid assets of the RBS and Lloyds TSB would be added to the books, illiquid assets, such as properties owned by the banks, would not be included. It said this was because the accounts needed to give an idea of the level of debt the Government had that could not immediately be repaid if it needed to be.

    Mr King said he did not understand why the ONS had taken that decision.

    The Governor refused to be drawn on whether Sir Fred Goodwin, the former RBS chief executive, should give up his £650,000 a year pension, saying he did not want to jump on the bandwagon of "unappealing vengeance". But he highlighed that the bonus culture in the banks was unhealthy. He said that compensation packages were set up to "reward gamblers if they won the gamble" but with no penalty if they lost.

    "In the future, compensation packages will look very different. The real question about Goodwin’s pension is how on earth was it that the board, shareholders and financial press all thought it was a good idea in the first place,” Mr King continued.

    The Governor also denied that the Bank was responsible for the financial crisis. While being questioned by the MPs, he said it "simply had no powers to take any action".

    "We don't have a single power that we didn't have before and I hope you will remember that when you try to hold us accountable for things," he said.

    But he admitted that he regretted not pushing the Financial Services Authority for more powers. He said that the Bank had tried to avoid a "turf war" with the FSA but that it was now being blamed for events over which it had no influence.

    He also said that the lesson learned from the crisis was "not to expect too much from regulators". He said that anyone who had tried to warn banks about excessive risks in the lead-up to the crisis would have been vilified.

    He said that the Bank was limited to flagging up the issues through speeches or reports it issued. Referring to the Banking Act, he said: "You voted for an Act that clearly defines our powers but don't hold us to account for things for which we are not responsible."

    The Governor also underlined the Bank's intention to use quantitative easing - sometimes called printing money - to boost the economy. But he tried to allay fears that the move could cause a jump in inflation: “We are not going to allow a great inflationary surge. The problem at present is not that the amount of money in the economy is growing too rapidly, threatening an inflationary surge, it’s that the amount of money in the economy is growing too slowly," he said.

    Sterling jumped against the dollar after his remarks, rising from $1.4270 to just above $1.4230.

    Mr King said it was “impossible to say” how much capital will be required to shore up the banking system and that it would take many months to assess the scale of the toxic assets held by the banks. But he said that it was vital to “find out what is on the balance sheet of the major banks. How much capital banks will need in the end is impossible to tell,” he said.

    Banks and other companies that have too much debt should be monitored more closely, Mr King said. "Most financial crises of the past have been characterised by excessive leverage."
    Last edited by DiscoStu; 26th February 2009 at 15:42.
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  2. #2

    Better than AtW

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    Sounds like an intelligent and measured summing-up.
    Hard Brexit now!
    #prayfornodeal

  3. #3

    Richer than sasguru

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    Quote Originally Posted by sasguru View Post
    Sounds like an intelligent and measured summing-up.
    WTF is it doing here on CUK then?

    I was miserable and depressed, but CUK turned it all around. Now I'm depressed and miserable.

  4. #4

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    Quote Originally Posted by DimPrawn View Post
    WTF is it doing here on CUK then?

    The same thing as a goat tied to a tree is doing in a tiger hunt.

  5. #5

    Obstinate Git

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    Quote Originally Posted by expat View Post
    The same thing as a goat tied to a tree is doing in a tiger hunt.
    tulipting itself?

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    "Sterling jumped against the dollar after his remarks, rising from $1.4270 to just above $1.4230"

    Is God willing to prevent evil, but not able? Then he is not omnipotent. Is he able, but not willing? Then he is malevolent. Is he both able and willing? Then whence cometh evil? Is he neither able nor willing? Then why call him God? - Epicurus

  7. #7

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    King's getting braver since he had his contract renewed.

  8. #8

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    Nss

  9. #9

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    Quote Originally Posted by expat View Post
    The same thing as a goat tied to a tree is doing in a tiger hunt.
    On cuk the tigers never sem to get the goat but end up fighting with each other. I suppose it beats being shot.

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