| Topic: | Re:Re:Are the general public warming to Gordon Brown in his handling of the financial crisis? Discuss | |
| Posted by: | Fraser Pearce | |
| Date/Time: | 10/10/08 16:03:00 |
| Time will tell. If the public are warming to Brown though, it perhaps proves we get the leaders we deserve. ------- As for this week’s events, Brown, Darling (and Osborne) can’t have it both ways. The ‘British’ rescue plan announced was initially floated last weekend to the EU’s inner sanctum of leaders in Paris and, on Tuesday, nodded through at the EU’s Ecofin meeting. It’s no coincidence then that the ‘British’ plan happened one day after an emergency meeting of the finance ministers of the 27 EU member states, where it was agreed EU regulation could be ignored. Brown and Darling’s plan therefore depended entirely on prior EU approval and, as a result, became British policy without so much as a single vote in Westminster. The British rescue plan therefore wasn’t a unilateral action, the Westminster parliament wasn’t consulted beforehand, no prior parliamentary debate allowed, no vote taken. So, if Brown and Darling don’t have the power to make the decisions, they shouldn’t really be given the praise. Likewise, they don’t deserve to be apportioned blame by the likes of George Osborne either (as he’d have similar constraints if he were Chancellor). If the British plan works then - which, in the long term, I don’t think it will - praise should perhaps be shared by Barroso and the 26 other EU leaders. Compare this approach however with America’s, where their plan was open to prior public scrutiny, debated, initially rejected by congressional vote, re-visited and finally approved by the democratically elected representatives. In America we see popular democracy in action. In Europe, horse trading behind closed doors, away from popular scrutiny, unencumbered by the need for prior parliamentary assent let alone popular approval. ------- As for financial regulation, some boring detail follows, so switch off now… The UK doesn’t have a tripartite regulatory system of the bank of England, the Treasury and the FSA. Instead, we have a “4 level regulatory approach” pioneered by the EU’s Lamfalussy Report in 2001. A key point of Lamfalussy is that regulatory agencies such as the FSA bear core responsibility for the banking system, not the central banks or national governments. In effect, the FSA is the designated “competent authority” dealing with EU regulations developed under the EU’s ‘Financial Services Action Plan’. This has meant that the power of central banks and elected politicians has been relegated below that of the EU and its national regulatory agencies such as the FSA. As a consequence, the regulatory system in place in the EU means national governments and central banks no longer possess the power or authority to be as agile as the US Treasury and Federal Reserve Board (which is probably both a good and bad thing). [In September 2007, for example, Mervyn King spoke at a House of Commons Treasury Committee hearing. When asked to explain why “panic” over Northern Rock was allowed to happen, King explained that "the interaction between four apparently unconnected pieces of legislation prevented us from carrying out the operation we wanted to do".] ------- So, there’s a whole thicket of supranational regulation the likes of Brown and Darling have to reckon with. On a national level we have the Bank of England, FSA and government. The Maastricht Treaty mandated Bank of England independence - with Gordon Brown disingenuously taking credit for this in his first day as Chancellor. The FSA was given national pre-eminence for financial regulation via the EU’s Lamfalussy Report. On an EU level, Lamfalussy led to the Committee of European Banking Supervisors. Then the EU has the Financial Services Action Plan, the Committee of European Insurance and Occupational Pensions Supervisors, the Committee of European Securities Regulators, the European Insurance and Occupational Pensions Committee and the European Banking Committee. On top of these we have the EU’s Inter-Institutional Monitoring Group (IIMG). Then there’s the Financial Services Directorate and Competition Directorate. Above that we have the European Central Bank and the European Investment Bank. Then there are the EU Parliament, the Commission and the Council – the Council being the EU’s ‘cabinet’ comprised of national leaders such as Brown, Merkel, Sarkozy, etc, with last weekend’s Paris meeting effectively being a meeting of the EU cabinet’s inner cabinet. From this level downwards EU countries are handed about 80% of their laws and regulations. Then we have real supranational bodies such as the Basel Committee of Banking Supervision, Bank of International Settlements, the World Bank, IMF and OECD. ------- Given the multiple levels of regulatory bodies involved here, there’s merit to Gordon Brown’s suggestions that the IMF be the strategic focus going forward. Then again, given the way he’s pissed over the British economy, Brown might just be pitching for a bigger bailout. |