Bernanke Bashes Brown Over Regulatory Laxness
American Federal Reserve head Ben Bernanke let it rip over who he thought was to blame for the global banking meltdown: Britain's Prime Minister Gordon Brown.
In comments to the US Senate, Bernanke blamed Brown's decision to take away supervisory powers over the banking system away from the Bank of England. Brown was the UK's chancellor (finance minister) starting in 1997 until he became Prime Minister in 2007. During this time, he was dubbed the 'Iron Chancellor' and boasted repeatedly he had ended the economic cycles of boom and bust that had plagued previous governments.
Bernanke said Brown's decision led to a "destructive run" and a "major problem for the British economy."
“Over the past few years the government of Britain removed from the Bank of England most of its supervisory authorities.
“When the crisis hit - for example when the Northern Rock bank came under stress - the Bank of England was completely in the dark and unable to deal effectively with what turned out to be a destructive run and a major problem for the British economy.”
Britain pioneered something called 'light touch regulation' and exported this around the world via its financial centre, London's the City. Countries like Iceland were particularly burned by this approach. Iceland went bankrupt last year and dropped from being the country with the highest standard of living in the world, to rising unemployment and widespread personal bankruptcy.
To date, the architects of this global economic disaster, Britain's Labour Party, have failed to accept responsibility for causing this crisis. This has now led to high-profile figures like Bernanke speaking out about who is to blame for the regulatory failure and the crisis.
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