Sep 25 2009
The BBC faithfully catalogues how Gordon saved the world – and left us owning zombie banks
Last night’s “The love of Money” show was the BBC at its typical best – offering us low grade propaganda as portentous instant history. I sat through the whole sorry parade and kept calm. Revenge is best served cold.
Where do you begin? There were no voices allowed to say the regulators had made mistakes. No-one asked how come the money markets froze and the lender of last resort, the Bank of England, was unprepared to lend. No-one asked why if these banks were on the brink of collapse days and weeks could pass whilst the UK and US governments tried to cobble together packages without a run on a major bank. We were told this crisis came from nowhere, like a natural phenomenon. It was the perfect storm, the financial tsunami. Maybe greedy bankers were the explanation. Maybe it was just one of those things, designed to allow Gordon the save the world.
No-one questioned the Governor or the Prime Minister to find out how culpable they were. This all happened on their joint watch. Never have our banks fallen so low before. No-one asked why, if they thought the banks were on the verge of collapse, the regulators maintained their licences and kept on telling us they were all solvent. No-one asked if the banks were as now described by the Governor the taxpayers were made to pay such high prices to buy into them.
The one dissenting voice they reported was Fred Goodwin. He is not most people’s favourite character in this crisis, so his was an easy voice to gainsay. He said that RBS was not insolvent but illiquid. That also happens to be what the banking Regulator was saying at the same time. RBS would not have had difficult days late in 2008 if the Bank of England had made more liquidity available to the banking market as a whole or to RBS in particular. No credible person was allowed to make that case.
No-one went off to ask the FSA some tough questions about how they had let banks get to this state. No-one pointed the finger at the Governor for his boom and bust interest rate strategy. No-one queried the prime Minister’s role in changing the regulatory structure in the late 1990s, nor asked why so much mortgage regulation had been brought in to so little effect in the noughties.No-one challenged the government’s decision to back and encourage the Lloyds-HBOS merger.
The main thesis of this election leaflet of a programme was that Gordon brown -assisted by Baroness Vadera – had to step in and save the UK banks, and then go and tell the Americans how to do the same for their banks. Old fashioned bank nationalisation had become an exciting new export product. The programme makers did not listen to their own words. The package the Uk cobbled together provided £50 billion for new equity and £450 billion for new liquidity. It was the liquidity which made the immediate difference.
Nationalising the banks meant the taxpayer has to run huge risks and probably withstand large losses. The underlying reason this was forced on us was a massive monetary policy failure by the Bank and Treasury, aided by a huge regulatory failure to control the cash and capital of the banks properly, followed by bizarre decisions to starve the markets of money and the banks of lender of last resort cash when the crisis struck.
Gordon was picking up a mess of his government’s own making. He has not saved the world. The world’s financial system remains weakened by the excesses of the last decade and by the policy responses of the last two years.
32 Responses to “The BBC faithfully catalogues how Gordon saved the world – and left us owning zombie banks”
John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College...
The level of BBC bias is becoming ever more astonishing.
1) Holby City.
Soviet episode this week where a politician in favour of reforming the NHS is shown to have failed to care for his wife who has MS. He repents. The doctors and nurses of the NHS always do their best. End of morality take.
2) Announcement of death of Piers Merchant.
I follow politics but must say I could only dimly remember him. But he was famous (acc to the BBC) for a sex scandal in the last Tory govt. Very important to remind people of that!
3) Returning soldiers from Afganistan.
Interview with one – “the level of equipment on this tour has been the best of any tour I have ever been on”. Presented as fact, no “balance” at all.
I REALLY don’t want Fox News in the UK, but at this rate the BBC is making it inevitable.
Stuart Fairney Reply:
September 25th, 2009 at 8:14 am
Holby in particular is unwatchable, straight ‘Pravda’ with clean hospitals, caring staff who instantly deal with sick people and never err. Yet remember when wicked ol’ John Major was in power, not a week went by when someone wasn’t complaining about equipment shortages. If there are villans they are comic book, cardboard cut-out ‘managers’ who want to make ‘cuts’ The Nurses in particular seem to qualify for medals (perhaps heroes of the Soviet Union). Quite removed from the nurses of my experience who I have had to literally frogmarch to my wife’s bedside before now.
I can’t comment on the BBC news having been quite unable to watch it for over a year now.
I’m not sure if you could do Fox in the UK because notionally at least, aren’t news broadcasters required to be balanced?
Mike Stallard Reply:
September 25th, 2009 at 3:32 pm
In the gym here this morning in Saudi, I watched Al Jazeera in English. I was impressed. It dealt with all sorts of intereting and unsual places and things from an Arabic sort of perspective.
Then I went out into the hot sunshine and had a swim. It’s nice here finding out facts…..
Europe seems so very far away, so very badly governed, so very frightening and politically correct.
And, just down the road is the HSBC which, I believe, we are underwriting…..
I started to watch this, but then realised it was going to be another tax-payer funded puff-piece for Labour and switched off.
We must keep banging on about Brown’s borrowing binge – which started in 2001-02 and ran up £200bn before the crisis – and the abject failure of his design for regulation via, Bank, Treasury and FSA. Three stools – and the disaster fell through the gaps between them.
Since Peter Lilley, the Conservatives were on the money in criticising the structure. Portillo accepted the “independence” of the BoE on our behalf, but we have been consistent in our criticism of increasing debt and the failure of the FSA.
Not that the BBC would ever admit that!
THE ESSEX BOYS Reply:
September 25th, 2009 at 10:21 am
Even the sometimes trenchant Nick Robinson did a pure advertising piece on the PM on yesterday’s news. It ran on all bulletins including News 24 for most of the day and evening.
We intend asking on his blog if this is the price of a taxpayer funded jolly to New York.
Pity the PM himself looked so totally lacking in any verve or eye contact even and the ham shots of him interacting with staff at Number 10 were so utterly unconvincing.
Come on Nick – don’t take us for complete idiots!
THE ESSEX BOYS Reply:
September 25th, 2009 at 7:32 pm
We blogged the above on Nick Robinson’s site as we intended but received the following message:
· 151. At 11:33am on 25 Sep 2009, THEESSEXBOYS (awaiting moderation)
Where’s my comment?All new members are pre-moderated initially, which means that there will be a short delay between when you post your comment and when it appears while one of our moderators checks it.
Nothing’s appeared since so I guess we got edited out?
We normally don’t bother with the BBC sites – and won’t again if, in Aussie lingo, they can’t cop it sweet!
And our 5 x £142 pa helps pay for that!
Revenge?
“The main thesis of this election leaflet of a programme was that Gordon brown -assisted by Baroness Vadera – had to step in and save the UK banks, and then go and tell the Americans how to do the same for their banks. ”
———————
In today’s Times there is a report “World leaders have announced that the Group of 20 developed and developing nations would become the top economic forum, spreading influence to emerging powers such as China and India.”
In my humble opinion, Gordon wants to be top dog at the G20. It will be his chance to get out of No.10 with dignity before the UK electorate take their revenge at the next election. Being asked to take on a senior role in the G20 will allow him to make an announcement that he is giving up the office of Prime Minister because the international community need him to continue Saving The World.
The award as ‘International Statesman of the Year’ (hahaha) and Lady Vadera’s resignation to work on the G20 are all part of this – and the BBC are playing their part by re-writing history to show Brown as the architect of recovery, rather than one of the major causes of the credit crunch and recession in the UK.
‘Reg’ Goodwin?
It does seem that there is very little balance in the presentation of the whole credit crunch. By that, I mean, that I find my own view that we should not have entered into bank bailout and that the type of ‘quantitative easing’ we have entered into, scatter gun rather than focused on those really deserving and needing in the country (savers and solvent small/medium business i.e. wealth creators), not aired at all..
To date I have assumed and probably still do, that this is because my views are profoundly wrong and not shared by all those with the brains the size of planets(who got us into this mess admittedly) and us such so much of a minority that would earn the same coverage as the ‘flat Earth society’.
My views are not based on anything other than what I see before me, the experience I have learned over the years (I am 47) and what I like to think of as common sense.
The development of my views are that Bank nationalisations and QE are not solving the problem but rather disguising it. Eventually there will be a day of reckoning and under the current format that will be some way in the future, after an ever declining and stagnating economic situation and this will ultimately far more painful than ‘lancing the boil’ now with all the short term pain that induces but then plotting a real path to recovery based on fully liquid and sound finances. In other words having a reasonably steep V rather than a very flat U, W or series of W’s.
Nobody, but nobody from commentators to political parties seems to share this view so perhaps it is not too surprising that the BBC and, to be fair, all other networks spout the same political and economic line.
Now, as I have stated, I fully accept that there are probably people who know much better than me and I will gain no comfort in being proven correct in 15 years and I have to also state that I, whilst passionate about the environment, am not a believer as such in the damage caused by man-made global warming which marks me out as a total Nut, so unless and until there is a significant number of organized people, politicians and commentators who might share these heretical views, the BBC and others will not report them.
I believe the premise of the article is wrong in that the BBC will only reflect (and despite its leanings will have to reflect) lucid and organized alternative views.
Reply: I have been providing that consistent alternative view, as an opponent of bank nationalisation and the current financial policy.
Russell Wright Reply:
September 25th, 2009 at 8:28 am
Quite so.
I am new to this blog (indeed the world of political blogs – quite an eye opener) and this forum.
My point was really dwelling on the ‘organised’ meaning not so much a lone or series of lone voices but a group of respected and credible commentators. Unfortunately your political party does not represent this and, whilst I hope I am wrong, there is more than a whiff about the popular consensus (and ultimately doomed) politics of the Heath era.
Somehow, if there are enough like minded people, a group needs to be formed that will knock down the doors of the ‘consensus’ view.
How this is done, I do not know, but until then the BBC will merely reflect the establishment view supported by all major political parties.
For some reason when accessing the John Redwood blog, I get an entry for 28th Aug 2008 about house prices which I have to progress from.
One respondent, “Albion”,contributed very late to the House prices down 10% story as follows: “The young ‘Dave’Cameron and his Eton chums is no Margaret Thatcher”(29th September 2008).
This was more or less my reaction to the Love of Money pt3: Thank God the Bullingdon Boys were n’t in power!
I seem to remember getting into an argument over bank nationalisation on this blog back then because I felt there were signs some banks were for all practical purposes insolvent . I also put the Sarkozy argument that this was the end of laissez faire.(However there is no archive button on this blog).
But if somebody as tough -minded as Mr Redwood was/is prepared to give Fred Goodwin the benefit of the doubt (what doubt: market signal could not have been more emphatic? ) then it does n’t bear thinking about what the Young Things as Vince Cable calls Cam/Osborne would have done in the circumstances.
reply: MY point was not to praise Reg Goodwin, but to say that not all his arguments were without merit, particularly this one which he shared with the FSA at the time.
I do hope John, your party is going to DO something asap about this canker in our society who leech of our money. Simply forcing them to uphold their remit to be impartial, whilst educating and entertaining would be a start. And, it must be wrong for them to be making money in commercial markets – and destabalising them – using public money.
I’d willingly support a licence fee, obsolete thought I feel this method of funding is in this day and age, to ensure that the British public are once again given real and trusted information, and our culture, once again, celebrated and upheld.
And how about why nobody acted on the huge growth in the funding gap of British banks, as flagged in the following two comments by Edmund Conway of the Telegraph, the first in 2006:
http://www.telegraph.co.uk/finance/2943149/City-faces-meltdown-if-debt-crisis-hits.html
and
http://blogs.telegraph.co.uk/finance/edmundconway/6087947/Definitive_proof_that_the_Bank_of_England_saw_the_financial_crisis_coming/.
Conway is quoting from p.28 of the Bank of England’s July 2006 Financial Stability Report, found here:
http://www.bankofengland.co.uk/publications/fsr/2006/index.htm
Yes, a very sorry state of affairs, neatly summed up.
Do not forget that the media, both paper as well as Radio and Tv, hold some responsibility here as well by not completing forensic in depth interviews and reporting.
Perhaps the success of the spining machines was better than we thought, they did convince much of the media after all.
Many of the general public were also happy to go along with it as well, whilst house prices rose to unrealistic levels, giving a very false impression of wealth.
Er, who the hell is or was Reg Goodwin? Was he the Executive Assistant to the Junior Under-Assistant Supernumerary Waste-disposal Receptacle Monitoring Operative at RBS?
I think you mean Fred Goodwin. Fred the Shred, for goodness’ sake: not Reg the Veg. Or did you get his name wrong deliberately, to disparage him by showing the same contempt for him that Churchill displayed by continually mispronouncing German during WW2?
reply: No – an error. Mea culpa. Now corrected.
“Gordon was picking up a mess of his government’s own making”. Nope. Gordon, is picking up his own mess.
Everything he did to financial services, banking, the treasury, the Bank fo England and so on was designed to give him the opportunity to do exactly as he liked with no-one able to look at the whole picture other than him. His ‘reforms’ were a classic lefty power grab to allow him to manipulate everything. The purpose of the FSMA 2000 which created the appalling FSA was to create a ’secret police’ on the lines of the Stasi to use abitrary bureaucratic edict to destroy businesses and reputations if they started getting at all grumpy about all this mess. It was never ‘light touch’ regulation. It was nationalisation by regulation. And it was wrong touch.
And now he wants to go and organise the G20? Give me strength!
What struck me was the lack of understanding of the subject by the producers and presenters of this programme. They spin the government line because they don’t know enough to question it. The BBC has been running scared since Blair threatened them with break-up after the Iraq WMD affair. They are equally scared of a Tory government privatising the non-public service bits of its empire.
Can I make a suggestion. There is an excellent web-site for high school and college students, US based. It should be compulsory viewing for television producers of this type of programme; and MPs. Simple as it is, it is probably beyond the understanding of anyone who has been through the English education system since the early seventies; ZaNuLabour’s client state of voters that is.
This link will take you to the videos in Khan’s “credit crisis” play list; specifically to the first on CDS. Play the whole of this “playlist” if you have time.
http://www.youtube.com/user/khanacademy#play/user/945E4F0ED131E4D1/9/a1lVOO9Y080
Talking of producers of tv programmes. If the Tories have a plan to break-up the BBC – a must have for me – start with the executive producers and the production units (BBC) / companies they run.
Put all the licence money into a one fund that will invest in those producers programme ideas and share in the profits if they are successful at selling them at home and abroad to channel operators / programme commissioners. The public service bits can be done with grants from the same fund; with a claw-back if these types of programme get sold.
When that is done we can start on the platform and broadcast channel ownership and running off some, if not all of the licence tax. (I include the World Service in this plan, even though it is funded separately).
Just to give some balance (I appreciate this is a blog and so is by design imbalanced) the BBC did an excellent Panorama about banks encouraging tax evasion. It clearly demonstrated that banks both state owned and private actively and openly encourage tax evasion for their customers. There was a particularly amusing questioning of Peter Mandelson where he looked very alarmed. I recommend everyone to see this bit if nothing else.
Holby City not true to life? My word! Sack the BBC!! Reds the lot of ‘em.
Stuart Fairney Reply:
September 25th, 2009 at 8:29 pm
It’s okay for shows to be drama rather than realism of course but this is getting very ‘Volkischer Beobachter’
Re BBc News: Am I the only one sick and tired of so called news stories being prefaced ‘the BBC has learned that’ etc. etc. The BBC is not a classroom pupil – it doesn’t learn anything. It obtains news from many sources (it used to be a minimum of two collaborated sources) and then puts it’s own biased slant on it. I resent paying a huge licence fee to be spoon fed inuendo every time I want to find out what is hapening in the real world.
And then we had Nick Robinson doing a propaganda piece for Gordon Brown on the news.
I thought the programme epitomised the BBC. It was pure propaganda. I’m glad you watched it. We have a real problem here.
It was Brown hagiography, not balanced objective analysis. I wouldn’t be surprised if Shriti Vadera wrote the script.
6 months into a Conservative administration can’t you just imagine how they will be spinning the ruthless Tory cuts? The suffering hospitals, the struggling schools? You ain’t seen nothing yet.
Hi John,
This is a question, not a political point, would actually like to know your answer to it. i am not an expert in banking finance – but I do have an issue with one of your points.
You state that the issue is illiquidity and not insolvency. In the case of Northern Rock, the very cheap inter-bank finance had frozen and they didn’t have sufficient access to credit to continue trading.
The Government could have just injected liquidity (on a very large scale via BOE) to Northern Rock and not taken ownership. However, their business model was flawed. By simply lending to Northern Rock, arguably the Government was doing the same as the banks – lending to unsuitable businesses. Northern Rock would have been free to continue trading under poor management.
By taking an ownership stake, we were effectively foreclosing on Northern Rock. The bank could be put into administration and either sold off in parts or restructured to continue trading.
Surely being lender of last resort was not enough?
Like i say – interested to know your opinion.
James
Reply: I was talking of Lloyds and RBS. In the case of Northern Rock I would have lent against security for the taxpayers. The shareholders should have rescued the capital side if that also needed doing, or else the Directors should have sold assets
Andrew Gately Reply:
September 25th, 2009 at 8:43 pm
Thank goodness for someone with a common sense answer to Northern Rock.
The issue around Northern Rock has been clouded in so much nonsense that people have forgotten the actual issue. At the end of the day Northern Rock should have been given a loan without any fuss, charged a slightly higher rate of interest and told to repay it over a five year period by cutting the amount it was lending.
Mr Redwood,
its too late to fix the recession, but after the forthcoming election you will have every opportunity to sort out the messenger. Seperate the entertainments, and public service elements (ie the Open University etc ) from the news department, and then privatise the news, make them compete for their time on the BBC. Then watch the over staffing stop and the flying around the world by the “pretty faces” to cover stories in exotic places. How many of the pretty faces ended up having long weekends in Praia da Luz, and who covered the same story from wet and miserable west Yorkshire. How did Emily Maitless come to provide 3 less than useless reports on the death of Micheal Jackson, and then was not seen on TV for the following 2 weeks. Did someone get hteir holiday flight paid for ??
I was shouting much the same thing at the telly last night. A well run bank does not need capital.
The skewed logic of Alistair Darling that RBS did have a capital problem which is why we ended up owning so much of it.
Er RBS balance sheet is a 1000 billion, I am sure 25 billion wouldn’t make much difference.
And why would private investors support a rights issue when the price is below the market value due to the threat of nationalisation.
You are braver than me. I haven’t watched that series as I knew it would try to whitewash the reasons. It would just make me too annoyed to watch it.
all there programmes were ridiculous.
The second ones was full of left wing commentators and edited to blame only Alan Greenspan
However you tell this story the fact remains that the banks where allowed to do what they want and any interference was with ‘wealth creation’. A fallacy and spin that probably most of the contributors to this post bought into. This doctrine was false and failed. The government then had to bail them out. Oh yes they did! Now you are all so clever at seeing through the BBC and their version of this story Funny that.
Your house is worth three times what you paid and you kept your job. The emperors clothes are rather nice aren’t they? If you did not then you are stupid for not seeing the bubble, especially if you are a higher earner with a mortgage on a car and the rest of your money blown. How the other half live. Where did you school?
I’m watching it now – and as you say the political bias is breath tacking ( onto prog 2 right now – listening as I type ).
Just because its subtle bias by omission doesn’t mean its bias.
If we are able to overcome the BBC’s support for Labour at the next election then we must move quickly to dispatch them.
Just got to the love in between Alan Greenspan and Gordon Brown.
Any chance they will point out how Clinton kicked of the sub-prime mess with his insistence of lending a proportion of mortgages to thsoe who can’t afford them ?
I won’t hold my breath – except to count to 10 to keep the blood pressure down.
Does the BBC really think of itself as unbiased ? If so how do they manage the self delusion ?
DBC Reed Reply:
September 27th, 2009 at 8:27 am
To be fair ,all leading politicians in the U.S.supported providing mortgage finance to people who could not afford it: Clinton was one of many; Bush (Jnr) had a proclamation about America’s “Ownership Society”on the Net even after the election which ousted him.The Americans did have some justification in combatting the racism that led to the redlining of minority areas to deny them cheap mortgages.
What excuse can UK politicians have for foisting mortgages on a more racially intergrated British working-class / middle class and then making sure house prices keep on rising?It gets them elected?It’s easier than providing jobs? That would appear to be the case.Other advantages for lazy politicians: people with big mortgages don’t strike ; people with rising house values do n’t mind slight diminutions in purchasing power as long as house prices are “buoyant” (i.e. unaffordable by the young).