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Hedge fund boss accuses PM of ignoring crunch alarm bell
Paul Waugh, Deputy Political Editor26 Aug 2009
Gordon Brown ignored a stark warning that "toxic" bank loans could lead to global financial collapse, a leading US hedge fund chief has revealed.
Jim Chanos said that Mr Brown, while Chancellor of the Exchequer, was given a briefing that predicted banks were in dire danger - more than a year before the crisis hit last year.
Mr Chanos, who made his name correctly predicting the downfall of Enron, said that Mr Brown and other G7 finance ministers were told of the "canary in the coal mine" but chose to carry on regardless.
His remarks were today seized on by shadow chancellor George Osborne as proof that Mr Brown failed to act to protect Britain's economy from the looming financial crisis that triggered global recession. "We all know Gordon Brown didn't fix the roof when the sun was shining - and here it appears is yet another example of him getting clear advice at the time that that was a mistake," said Mr Osborne.
The revelations are an embarrassment to Mr Brown, who hopes to fight the general election by highlighting his role in steering the UK through the downturn.
At a closed session at the US Treasury in April 2007, G7 finance ministers were warned that banks were holding massive loans that could never be repaid. Mr Chanos told a BBC Radio 4 documentary: "We were completely and officially ignored." .
Reader views (34)
i see a single pertinent comment among the above and it's by "william" of london: "
if it was a briefing at the UNITED STATES Treasury involving ALL G7 finance minister, why did the then US trade secretary, Paulson - remember it the BUSH administration in power at the time, no doubt so beloved by all the ranters here - ignore the warning, along with all of the others. If Brown was guilty, so were the rest of them; why single out him? After all, that makes Bush guilty, and Sarkosy and Merkel and Berlesconni and ......... you name them. "
- Michael Roloff, seattle, wa. u.s.a., 27/08/2009 02:24
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Leave Gordon Brown alone I cannot understand why there are so many unkind comments re our beloved Prime Minister? He is busy at the moment filling out his expenses form and claiming for his second home he will be with you shortly.
- Ann, Norfolk, 26/08/2009 22:48
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Colin from Barking you speak for yourself. That is the trouble with Brown he is only used to running his bath as he certainly does not run the country. If you have news to the contrary please let us all know because I fear we have been missing something. A Prime Minister who is the full ticket one suspects.
- Kellie, Norfolk, 26/08/2009 22:43
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Brown is the most incompetent dishonest and dangerous politician in 100 years. He has personally caused more UK wealth destruction than WW2.
His moral mask was ripped off by McBride who exposed the way Brown operated for years by personal smearing rivals and families. His economic ignorance is proven in his absurd boasts 'I ended the economic cycle' a delusion near insanity to claim he ended a cycle of 2,000 years. We all know what happened next. He removed supervision of banks from the Bank of England who had managed safely for 100 years. He and Balls ordered FSA to 'Regulate Light', disregard bank plans of HBOS and RBS that were reckless and run by his cronies. Brown boasted to other countries to copy him!
Brown's Crash wiped out 30-40% UK Share values and 25-45% of UK house values. Other countries did not copy Brown, like Canada and Norway who were careful. His ignorance and incompetence are proven. His pathetic claim to have reduced inflation when everyone knew it was due to cheap goods from China. He did change RPI to CPI to exclude housing inflation which was so he looked good, only it was huge stpidity as low inflation meant low interest rates and a housing boom. Then Brown boasted 'I ended boom and bust!! Pathetic.
Brown's real legacy is huge unemployment, vast State debts to crush future generations, government that is not fit for purpose, and his open border policy has lead to now over 300 terror plots active in the UK. Brown Broke the UK
- Abdul, bradford uk, 26/08/2009 22:02
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I just find it difficult to believe that there are still people (fools, welfare scroungers, idiots...?) who are prepared to support and even vote labour!
- John Bell, Nottm, UK, 26/08/2009 20:24
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Whether you like Brown or not, or are disturbed by pictures showing sweat, the fact is that the guy did his duty when the going was tough. His decisions (along with Darling's and King's) did save the British economy from meltdown. Other leaders in the US and the EU as well as Asia took similar action. The Tories would have failed the test, as they have stated that they would have gone against mainstream economists and savagely cut DURING a bank meltdown and recession, instead of pumping money into the economy.
The Brown haters are basically insecure in the face of intellectual ability, and feel more comfortable in mocking mode, like schoolboy bullies who love attacking the clever but dour kid at school. But they will still reap the benefits of the upturn when it comes, even as they take the mickey and have a go at sweaty old Broon. They would sweat too, if they had his responsibilities.
But when you think about it carefully, the guy does keep his cool. Even under pressure from those who want a kneejerk reaction against the SNP friends of Libya, he has kept his counsel.
- Ben, London, England, 26/08/2009 19:58
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This has all been lost in the banking crisis and the cuts debate. The crisis didnt appear out of nowhere and if Brown was such a great chancellor he would have made some attempts to slow things down, even if most of the damage was done.
Brown was concentrating on getting Blair out and missed it all
- Ade, london, 26/08/2009 19:40
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I'm not in the least bit surprised. The last thing I ever expect to hear from Gordon Brown is the truth.
- Boudicca, Guildford, England, 26/08/2009 17:50
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The root of this is deeper than the Banks, the Banks are the symptom.
The root is that Western style economeys are no longer substainable in their present form simply because demand outsrips our capability to supply. We make nothing ( except Cars and weapons ) but consume everthing, like locusts.
So to keep the West Income going, Banks produced high yields on others peoples money..China and Middle East in particular.
Now the bubble has burst and Poiticians are saying things are getting back to ' normal' well normal is what got us in this mess in the first place and we have not even paid for it yet,will do for the next 2 generatioins by which we will be dead and they will have to pick up the pieces of the next crash.
It is not the Banking system that needs a complete overhaul but the whole Western economy.
We are much like a plauge of rats feeding off the resources of the world and to be honest the world would be a better place without all the developed western cultures. Now thats a real Green Policy.
- Clif, London, 26/08/2009 17:41
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Colin from Barking Essex - your comment also applies to Brown, he has never run the country, and judging by his appearance, has never run a bath either.
- David, Fleet UK, 26/08/2009 17:28
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When does he listen to anyone if he has not had the idea/thought first?
- Macdangler, Wimbledon SW19, 26/08/2009 16:57
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This is not rocket science. I could see it coming back in 2003 because people then were starting to live beyond their means and relying on the increasing value of their house. But Gordon and Tony wanted to give the impression of continued prosperity for the 2005 election. They were buying votes on the back of increasing debt and conned the electorate.
- David, Doncaster, UK, 26/08/2009 16:18
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Highly amusing to read the comments and insults on here from people who have only ever run a bath.Let alone a country.
- Colin, barking essex, 26/08/2009 15:54
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Unfortunately it was already too late to clear up the mess. All of the politicians must have realised that their banking systems were already utterly bust but with their employment contracts and benefits they could adopt the "I'm all right Jack" approach and hope it was just an American problem. Wrong!
They failed to go home and start a covert due diligence exercise to forensicly audit their banks and put in place contingency plans as well as immediately jacking up capital ratios and forcing higher lending standards. They followed Chuck Prince at Citi who said [mid 2007]" as long as the music is playing we will keep dancing...but when it stops things could get very complicated", bad move.
- James Macleod Ritchie, Oyster Bay Cove, 26/08/2009 15:39
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William of London, I think we are right to single out Brown. After all he was/is in charge of the UK economy the others you mention are not. He could also have done something to restrain UK banks and speculators, but I suspect was all too happy to receive the tax income and decided to take chances. Why should we not blame Brown? He happily accepts any credit offered so he can take the brickbats.
- James Elliott, Eastbourne UK, 26/08/2009 15:33
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Hello, is there anyone there? Its obvious that Gordon Brown vacated months ago. There is definitely grey matter missing!
- Kazann, London, 26/08/2009 15:13
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Ben and Martin,
You know, I might of agreed with each of your comments, except... except I remember how hard Brown and his cohorts worked to persuade us last autumn that, it was the Iron Chancellor, and he alone, who'd been ringing the bell and tirelessly working for change to prevent the global credit crisis that, alas, came to pass. We were asked then to give the PM the benefit of the doubt, we were told nobody had foreseen the problems except he.
So, using your '20:20 hindsight', can you not now see that this particular line of defence, used exhaustively last autumn was indeed rubbish and that this revelation is yet another nail in the coffin of this medicious and vainglorious PM and his league of milksop ministers.
I hope the 'Boy George' does stick it to them. Hard. And should he ever become Chancellor and turn out to be anything like as incompetant as the oaf Brown, then I hope somebody does the same to him. He would deserve no less.
- Rxb, Southend, 26/08/2009 15:13
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I can't stand the sight of him, but please keep publishing the pictures to remind me and everyone else how awful he is!!
- Sandy, Ealing, London, 26/08/2009 15:09
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For the anti-Brown ranters on this page ask yourself this question:
if it was a briefing at the UNITED STATES Treasury involving ALL G7 finance minister, why did the then US trade secretary, Paulson - remember it the BUSH administration in power at the time, no doubt so beloved by all the ranters here - ignore the warning, along with all of the others. If Brown was guilty, so were the rest of them; why single out him? After all, that makes Bush guilty, and Sarkosy and Merkel and Berlesconni and ......... you name them.
That also goes for most of the people in the City and the Banks themselves. Those Banks were holding massive bad debts, so why did their accounts not reflect this?
More importantly why did your pension funds still hold share in those banks when they were effectively bust? Why are you not blaming the pension fund managers, as they have just lost you your money?
And if Osborne and Cameron are so prescient, how come they missed all of the warning signs too and were calling for evem more deregulation??!!
- William, London, UK, 26/08/2009 14:15
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So Gordon Brown should have stepped in and done something - not quite sure what. You can imagine the press reaction if the boss of (say) Northern Rock had stood up at his AGM and told the shareholders that they would have made even more money had it not been for government regulation. Every commentator - no doubt with George Osborne as cheerleader in chief - would have told GB and Co to butt out and leave the management of banks and other financial institutions to the professionals. Which is what happened and look where that has left the world's economies.
- Tonyb, Melbourne, Australia, 26/08/2009 14:10
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Brown never makes mistakes does he?
- Roger, Winchester, England, 26/08/2009 13:57
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ASW - Great post I completely agree.
Now lets wait for Keith Price to give his deluded comments on Brown.....
- Chris H, Kent, 26/08/2009 13:34
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Very many thanks, Evening Standard.
Not the sort of story, unfortunately, that the BBC will choose to highlight on their pro-ZaNuLabour 'news' programmes!
Today, as ever, they'd rather rabbit on all day about the latest social ill , saturation coverage of a few hours of football hooliganism by a couple of hundred idiots at a solitary football match.
Perhaps, only when all 'their' viewers have deserted 'Aunty' for web-stream news, they'll begin to wonder where their next Trotskyist state jobs are to come from.
- Dave, Cumbria, 26/08/2009 13:21
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What was the FSA (Financial Services Authority) doing to protect UK investors and workers? The FSA was asleep at the wheel as the Northern Rock, RBS,HBOS and Iceland Banks collapse happened. Voters will have a clear choice on Financial Regulation at the General Election.
- Andrew, London, 26/08/2009 13:10
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Please do not publish photos of Brown. Most people I know cannot bear the sight of this dishonest incompetent who has delivered nothing but wrack and ruin to this country.
- Osming, London, 26/08/2009 12:12
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Everything is AOK how else can Britain afford to pay £6.4 Billion for EU Membershio next year, without the guidance of our fabled Leader.
- William, Hay~Heath UK, 26/08/2009 12:03
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any institution including governments will get advice from a multiple of sources. The one thing you can guarantee in the world of global economics is that you will get conflicting advice from all the sources. If things were so black and white, then all the banks would not have been hit with the losses they took.
Ignoring advice that with the benefit of hindsight appeared to be correct, seems to have been the norm for everyone
- Martin_Clerkenwell, london, 26/08/2009 11:32
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The rest of the world should be thanking us, he was offering the job of heading the IMF, can you imgaine the state the global economy would now be in if he'd taken it?
- Bob, Cheam, 26/08/2009 11:31
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What an unmitigated distaster James Brown has been for The UK. One of his legacies is the manner in which we watched his great friend, Blair, driven into abject poverty after his, Blair's, selfless sacrifices on behalf of The UK.
- Oldrightie, Ludlow,UK, 26/08/2009 11:25
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Brown is the most incompetent leader ever and he and his incompetent idiotic, thieving, lying ministers are also to blame. He has no integrity, no sense, no nerve and is completely spineless. Like Bliar before him, he has brought this country to its knees and betrayed the indigenous people over and over again.
- Lin, London England, 26/08/2009 11:08
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There must be a hundred pundits a day shooting off advice to governments on this or that issue. Why should one particular hedge fund manager be listened to rather than the other 99 giving contradictory predictions?
It's so easy for Osborne with 20-20 hindsight to say that pundit X should have been listened to. What we need to know is, if Boy George was so smart and all-knowing, how come he was calling for even more deregulation and promising to match Labour's spending just before the crisis broke?
- Ben, London, England, 26/08/2009 11:07
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Leave the guy alone, we do not need more evidence that he's incompetent.
- En, London, 26/08/2009 10:38
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BROWN: "I don't care what anyone thinks, I'm right and everyone is wrong".
No chance of an early General Election. He's here to stay to the very bitter end. He sold the gold, raided the pensions, kicked the low earners in the teeth with the 10p tax, sneaked into signing the EU treaty.
He knows he is lying, but still thinks he can get away with it. Just watch his body language. Always looks away when he lies.
- Asw, HK, 26/08/2009 10:28
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Just another example of Brown lacking leadership skills. When confronted with advice that is unplatable Brown again took the easy way out and sat on his hands in the vain hope that things would work themselves out. At the same time I also remember him being questioned about people borrowing five times their income and he said it was a matter of personal choice! I just do not know how anyone can praise this man. He has caused one disaster after another. His ham acting yesterday when talking about the Lockerbie incident was pathetic. I just think he has lost the plot. He can`t be honest with the public about anything nowadays. Like Mandleson, he is fast becoming the master of double speak - not actually lying; but actually not telling the truth either.
- B Gare, Norfolk Gorleston, 26/08/2009 10:17
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