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Tuesday, February 19, 2008

The Failure of The UK's Financial System

Those of you who missed last night's Dispatches documentary on Channel 4, about how the banks have gambled away billions of pounds of our money, should access a re-run of it as soon as possible.

In the programme, private equity financier Jon Moulton laid the blame for the current financial meltdown firmly at the door of the banks that gambled billions of pounds away on high risk sub prime mortgages in the USA.

Northern Rock, unsurprisingly, was mentioned more than few times. Moulton, aside from blaming the then board of this bank for destroying it because of their greed and arrogance, also directed his ire towards Gordon Brown.

Who he stated, quite correctly, wrecked the financial regulatory regime when he took away the Bank of England's responsibility for monitoring and regulating financial institutions and the markets in 1997 and split it up across:

-The Treasury
-The FSA
-The Bank of England

Moulton noted, as I have done many times on this site, that the tripartite regime's major failing is that no one is actually in charge; as was self evident when Northern Wreck imploded.

Moulton castigated the three members of the regime for their incompetence, and for failing to heed the obvious warning signs of the financial storm heading our way He warned that worse is to come, as the banks announce their results over the coming weeks.

Indeed, we see today that Barclays profits have been hit by a massive £1.64BN write down emanating from their failed gamble in the US sub prime market.

Will things improve?

In the short to medium term, no:

1 Banks and other financial institutions are taking massive losses, and continue to draw in their lines of credit. In other words, they will stop lending to each other and to the ordinary person in the street. The economy will take a very severe hit.

2 As long as Gordon Brown is Prime Minister, and that looks likely for the next year or so, the current failed tripartite regulatory mechanism will not be changed for the better. He is the arrogant architect of this failure, but will never admit to it.

As stated, watch the Dispatches documentary on Channel 4,

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