The age of irresponsibility

Our Prime Minister has left himself wide open to cries of "hypocrite" by trying to somehow exonerate himself from the shambles we are suffering and claiming that he knows the way forward.

I was suggesting yesterday that though the archbishops' shortsightedness led them to accuse short sellers as somehow the only villains in the piece, there are others more "guilty" of greed of failure to act properly. This list includes the mortgage sellers, the banks and the regulatory authorities.

Having looked at the subject, I had assumed that Bush/Greenspan were the guilty parties in the USA and Brown later in the UK. It seems that the laxity in the USA went back to an act in 1977 which tried to promote house ownership by poor people. This act was reinforced by a further one in 1995, under the Clinton Presidency no less, were mortgage lenders were under pressure to offer mortgages in areas where few citizens stood much chance of repaying. Bush was merely the end of a line, and inheriting problems from his predecessors. So why did his advisers not warn him, or was he merely won over by Greenspan's policy of driving down interest rates to stave off recession?

The Conservatives in the UK had passed legislation in the late 1980s which paved the way for the blurring of distinctions between traditional banks and building societies. This was part of a revolution in liberalisation. Competition brought benefits to house buyers. All was well so long as there was supervision of the various bodies. To be fair the situation had thus become much more complicated.

So what went wrong in the UK, which did not have the legislation to twist arms of mortgage lenders? The answer is Gordon Brown, who fudged a a tripartite system, - Treasury, Bank of England and Financial Services Authority, where responsibilities were not clear - as was seen in the early days of the Northern Rock difficulties just a year ago. The system failed in its first major test, and we had the spectacle of depositors lining up outside bank offices to withdraw their deposits. Did any of the three controllers actually advise Northern Rock that their business plan of borrowing short and lending long was risky?

Gordon Brown also presided over vast creations of debt and credit, which raised asset prices and gave a false sense of security. Many households, like the Government itself, had no reserves because they had been spending more than their incomes. When a downturn came, however caused, the bubble was going to burst. Brown's contribution was to press interest rate levels down, and to spend what he could not afford by borrowing. The fact that he spent vast sums in worthwhile projects such as health and education might be an excuse, but as it was generally done without reform it was highly irresponsible.

We are now paying the price of Brown's clumsiness, impatience and an unwillingness to listen to warnings from with the UK and from outside organisations. He was very much part of the age of irresponsibility. He has the Blair attitude which said, "Let's draw a line under..", that is "I'm not admitting I was wrong, but let's forget the past."