Afternoon:
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Brown at war with the City
Jonathan Prynn and Joe Murphy9 Oct 2008
- House prices fall 13 per cent ... the worst for three decades
- City cautious but hopeful as banks start to regroup
- Jobs under threat at firm behind South West Trains
- Bail-out will mean tax rises
- Darling blamed as Iceland’s bank troubles spiral
- Paulson fears that even more US banks may fail
- Bonfire of the billionaires will hurt London
Gordon Brown today launched an unprecedented attack on “excessive and irresponsible” City greed.
He warned that the “days of big bonuses are over” and said bankers guilty of taking excessive risk with other people's money should be “punished”.
The Prime Minister was speaking a day after launching a historic £500 billion rescue package for Britain's banking system. In some of his most critical comments about the Square Mile yet, Mr Brown said: “I am angry too,” when told taxpayers were upset at having to bail out well-heeled bankers.
In an interview with GMTV he said: “I'm angry at irresponsible behaviour. And where there is excessive and irresponsible risk-taking, that is going to be punished.”
The Prime Minister's criticism came as it emerged that London's tycoons have lost billions in the financial meltdown.
Meanwhile, in a calmer City the measures to ease the banking crisis — including a 0.5 per cent rate cut — received only a mixed reception. The FTSE-100 rose 57.28 points to 4423.97, but there were few signs that banks are any more confident about lending to each other. The three month LIBOR rate — a key measure of money market liquidity—was set at 6.28125 per cent, slightly up from yesterday.
Barry Moran, a currency dealer at Bank of Ireland, said: “To see little or no reaction is very disappointing. Things are still very stressed.”
Experts have warned that the extra government borrowing needed to pay for the rescue package will mean long-term tax rises and public spending cuts. Mr Brown hinted that the “price” of the bail-out would be a new era of far tougher regulation of City and “fat-cat” pay. “The days of big bonuses are over,” he said. “One of the conditions of us helping the banks is that we will have to reach an agreement about their executive remuneration.”
Blaming the sub-prime loans scandal in the US for infecting the world's financial systems, he said: “But there have been abuses in our system as well and these have got to be dealt with too. Where these guys have taken irresponsible risks, that is completely unacceptable. The problem is they didn't know what they were buying from America.”
Mr Brown added: “Our economy is built around people who work hard, who show effort, who take responsible decisions, and whether there is excessive and irresponsible risk-taking, that has got to be punished.”
Today a forecast of City bonuses predicted the the total would be down by almost 60 per cent to just over £3.5 billion this year.
The wealthy tycoons who have flocked to London is recent years are also losing huge sums. The biggest single loser, steel magnate Lakshmi Mittall has already seen £20 billion wiped off the fortune that made him Britain's richest man.
Another big victim, British property magnate Robert Tchenguiz, is facing losses of up to £1 billion after borrowing heavily from Icelandic bank Kaupthing.
Reader views (15)
James of London - if your view of Gordon Brown has turned 360 degrees, then your view hasn't changed.
- Duncan, Dubai, 10/10/2008 08:10
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and said bankers guilty of taking excessive risk with other people's money should be “punished”. I hope then you are going to start with the biggest culprit in all this. IE YOU !!!!!!! I listened to him and his glove puppet the other day. I lost count of the times he blamed it all on America and when somebody reminded him he was chancellor for 10 years and should carry some blame he again blamed the USA. The mans a joke !!!
- Duncan Walker, Ex Peckham now Samui Thailand, 10/10/2008 07:12
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Brown sits in Wellington's seat, and he is as expert as Wellington was.
Who'd have thought a quiet grumpy little scott could have the charismatic leadership he is demonstrating?
The city will get over this very rapid interconnected world
financials correction.
The markets are lagging behind the companies they are trading who have begin trading again.
My opinion of him has turned 720 degrees.
- John Ellis, London UK, 09/10/2008 23:39
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In response to David Davies post absolving blame from the banks, the FSA, and complicite' borrowers, under the simplified label of the 'city' is an unhelpful and misleading simplication.
Here there are many causal factors at work which shaped our enforced situation, of which have had conseqeunces for non ex 'masters of the universe' as well.
Tell me how do you feel about being a involuntary bank shareholder to the tune of £16'500 Supporting our carpet bagging banks and there morally bankrupt bonues. How do think you feel I suggest the word is M*G..
- Paul Moloney, New Malden, 09/10/2008 23:29
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"But my opinion of him has turned 360 degrees"
Excellent! That's back to where you started from!
- Tom Stickland, Stroud, 09/10/2008 22:31
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James, are you real? Brown has set no templates, he has just taken the obvious course the IMF directed. If you want to see what poor judgement is look at Gordon's answers to the 1997 Japan bank crisis where he attacked them for building a false economy on the back of poor mortgages etc SOUND FAMILIAR? He then proceeded to remove the Bank of England's power to curb excessive debt, this man does not act he only reacts.
- Dave, Bristol, Bristol England, 09/10/2008 21:03
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Again let's look at the facts.
No one has been prosecuted there no crime has been commited or laws have been broken. Therefore banks and investment houses were working in the legal framework provided to them by the er.. government. Greed ? well that is what drives capitalism on which our enitre economic model is based on. Did Gordon Brown try to curtial this when he had ultimate fiscal power in the U.K no. In fact he used to take credit for it and make it his own.
He forgets, one day he or his party may need the banks and like an unpaid overdraft, the city never forgets!
- Big Andy, London, 09/10/2008 14:12
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Oh get real PM.
Blaming the City for the financial mess is like blaming Tescos for making people fat. In neither instance do you have to buy or binge, whether its food or credit. If you do, you will end up fat, broke or both.
Remember PM, you came out with the crass statement that you had removed boom and bust. Well, the boom is over and we can now enjoy the bust. Didnt you ever hear of economic cycles or asset bubbles? Doh!!
- Dave Davies, Basingstoke, Hants, 09/10/2008 14:10
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Up until yesterday I didn't think Brown had the stomach or initiative to do what he did. But my opinion of him has turned 360 degrees. He indeed has set a template for the world to follow. His actions demonstrates to investors worldwide that Britain when united in a national crisis is a power t be reckoned with. His actions yesterday made me proud to be British. And why Britain is indeed: Great Britain".
- James, London, 09/10/2008 14:08
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"One loyalist Labour MP told the Evening Standard: "This could be our Falklands war."
Shows the Labour party up for what it really is. Primarily obsessed about it's own survival, the 'whatever it takes' idea. Totally shameless tribal politics. But then again hardly suprising given that is exactly the mindset of old bully and control freak Gordon and his stooges. Don't worry Gordon, when you have finished preening and strutting about we won't forget how awful you and you government actually are.
- Bobw, London, 09/10/2008 13:35
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Does GB know when petrol prices are going to fall?In my local area I have seen a whole 2p reduction at Shell and Tseco's still charging 111.9 per litre.This goverment is creaming it from high petrol prices and has no concern about when the price may fall.
- Bob E, London, 09/10/2008 13:11
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The scrounging families will feel the benefit more like.
Ah,the UK,where it's fashionable to be skint.
- Ritchie, Hammersmith, 09/10/2008 12:42
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This governmment really is getting desparate. Special payments to buy a suit or cover travel expenses? When I was out of work years ago no-one gave me any money. Being self employed I had to get on with it, use my savings or starve. These City people that have lost their jobs all got bonuses (yes right down to the office junior) so if they didn't put some money aside whilst they were being paid a very nice salary, then why should the taxpayer, yet again, have to give them a special payment. I keep thinking nothing else will surprise me with this government, and then I'm proved wrong.
- Sue, Orpington, 09/10/2008 12:30
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Gordon, your forecasts are worthless. You forecast a growing economy, as did your puppet Alistair. The reality is a tad different. Yes, oil prices are down to the level they were a year ago, but I notice that I am still paying 20% more for diesel than I was last October. Utility prices are still rising, as are food bills. You may have bailed out the banks, but what about the 31m taxpayers? When do we get our windfall?
- Nobby Clark, Perth, Scotland, 09/10/2008 11:48
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Someone had better shut Gordon up, or he'll inherit Geoff Hoon's "buffoon" nickname. Seriously, which idiots are advising him here? Anyone with a GCSE in Maths can do the sums and know he's talking rubbish.
- Marianne, S W France, 09/10/2008 11:20
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