Thursday, November 05, 2009

Quote of the Day: Gordon Brown

Piers Morgan: Why didn't you, as a former chancellor,
smell a rat before the system collapsed?
Gordon Brown: Because I didn't know that the AAA-rated subprime
mortgage assets being sold to us and the rest
of Europe from America were valueless.
And nor should I have been expected to know.


Interview in GQ Magazine.

Just read that last sentence again. The arrogance of it.

UPDATE: A reader, who works in the city, writes...

I worked in asset backed securities all through the crunch so I know a lot about how it all works. Brown's statement is misleading in an important way that most people will miss. A lot of people are focussing on the question of "how can subprime be aaa" but the fact is that US subprime aaa paper is really very little to do with what happened here.

The failure of Northern Rock was due to their business model not having adequate provision to handle a liquidity crisis. This was a failure that should have been prevented by more intelligent regulatio.n Blaming the yanks is just nonsense.

34 comments:

Slagella said...

"AAA-rated subprime."

The second word was the clue,

idle said...

"Nor shood I have been expected tae knoo that announcing the sale of oor gold would cause the market tae bottom and rise only after the sale wuz complete. I'm no an expert on this stuff, ye ken".

ILLIBERAL DEMOCRATS said...

Gordon Brown knows nothing of economics and finance - he only knows Labour! By that i mean ehat is best for them!

Gillibrand said...

Well yes you should, because you were Chancellor when during the UK Presidency, Basel II was put into EU law, with its perverse incentives for banks to take risk.

Liz said...

I was reading that in a cafe, then interrupted by friends just before I'd finished the interview. At the time, I was rather relieved to be allowed to put the thing down - it was a *remarkably* cosy, positively-spun piece...but I was chuffed to see that the pic editor had chosen some low-saturation, overexposed pics to go with it - the pics were grey, haggard and said everything the interview didn't.

Bob said...

Well that clinches it, Labour are def. going to get my vote now LOL

Bill Quango MP said...

I'm pretty sure that if I knew then he should have had an inkling.

He'll be saying he doesn't know the price of a cleaner next.

adamcollyer said...

Where can you begin? Every word of that statement is nonsense. Brown is a fool as well as a knave.

Andrew said...

To be honest I don't disagree with him. He can't be expected to know about one particular complex derivative when his job is to overview the government's entire finances. The failure was somewhere in the Treasury, FSA and the Bank of England, and probably shared between all three.

He was wrong to overheat the economy, increase public spending to ridiculous amounts and to vindictively hurt large sectors of the population through tax - pensions, the 10p tax....and selling off the gold at its lowest value for decades.


But, even as a committed Tory, I'm not so sure he's wrong here.

Houdini said...

Yeah, he knew nothing about all those AAA rated sub-prime loans from America that weren't on Northern Rocks books, and he shouldn't have known about them either.

Besides, how can anything sub-prime be triple A rated? I thought the whole definition of sub-prime had something to do with NOT being rated... An oxymoron from a moron.

Ewan said...

I don't remember Osborne warning that things were getting rough, nor that we should be pushing to control the market. Quite the opposite in fact.

Jimmy said...

The assumption behind Iain's piece I suppose is rather flattering. I'm bound to say that if you really have come to expect omniscience from our leaders then Dave Lightweight and Gideon Wallpaper are going to come as a shock.

Victor, NW Kent said...

Yet he could make a speech at Mansion House praising risk-taking in the city, encouraging it.

He has been revealed as an economic disaster himself who, despite a 100% failure rate, still believes that he is a great economist. In fact he has other discredited economists agreeing with him. That is strange as we have been told that two economists in a room will have three opposed opinions.

History will write his epitaph and it will not be flattering.

Mirtha Tidville said...

It really does sum him up doesnt it....the worst, most useless chancellor this country has ever known...wonder how much longer we`ll be lumbered with him now that the Socialists have got what they wanted in Europe...

tapestry said...

A good servant of the EU never questions the actions of his masters. As Gillibrand says, Basel II was the cause of all the trouble, but Brown is paid to sign documents by the EU not to think, or to understand anything.

Thank God Cameron is starting the long job of dismantling the international structures that bring ruin to our shores.

Andy JS said...

It's just dawned on me that the next election campaign is going to be a genuine horror show - not a funny or amusing one, but a real, frightening Halloween (1978) horror show. It's title? Will Labour lose 150 seats or 200? Will they poll 25% - or 20%?

Ed the Shred said...

Brown and all his crew closed their eyes to the massive leverage and sub-prime disease that was coursing through the economy (most typified in the UK by Northern Rock and Granite).

To have opened their eyes and taken any real preventative action would have risked the price rise on their second and primary homes.

6p00e54edf4e7b8833 said...

This may be a strange question, but how many people commenting here KNEW that the AAA Rated CDO Products being sold by Banks across the world were "valueless" ? Until this whole thing blew up, not many of you I'm sure - I work within the industry that's responsible for these Products and the people putting them together didn't know, so how the hell is Gordon Brown meant to know ?

By the way, the Rating is to do with the top level Tranche of the CDO Product (that's the bit that sold to other Banks and Investors) - the sub-prime Tranche isn't sold externally, so it has no need to be Rated - hence the "confusion" around the Rating.

Manfarang said...

You don't need a Phd in economics to know that property prices would go rising on for ever.
Anyway I will gaze into the future-oops Gordon Brown did better than Cameron!
Head to the airports now.Get out while you can.

Hunter-Gatherer said...

I would have bought GQ if I hadn't expected some self serving interview from him. Caught Sir Iain Blair on TV this morning before going to work and was hypnotised by his arrogance as well. Complaining about the politicisation of the police force.

vervet said...

Gordon Brown ... chancer Chancellor and sub-Prime Minister.

Just ignore him and he'll go away in May.

pete-s said...

This colossal fraud of the subprime ratings had been surfacing for some years. How the Treasury managed to ignorant about what was happening is still a mystery. Did Gordon cover his ears going 'la..la..la', so that he can hope that his big financial plan would not collapse around himself.

norman said...

The Labourite Jimmy is at it again.
' Weighty I fixed boom and bust' Gordo was in charge of the nation's economy as the chancellor, not the opposition. Voters know and hence the Labour is going to be wiped out in the next GE. Still these Labour desparados try their best, blaming just about any one except their dear leaders Bliar and Gordo. Pathetic.

tory boys never grow up said...

Your so called reader in the City should perhaps ask himself what was behind the banks withdrawing its funding from Northern Rock before he blames it entirely on their business model/lending practices and says the sub prime crisis had nothing to do with it.

The truth is that there were many things going wrong - not just single isolated factors - and anyone who tells you otherwise is just plain wrong.

tory boys never grow up said...

"Besides, how can anything sub-prime be triple A rated?"

Ask the rating agencies, the investment bankers setting up the structures, the insurers and others providing the credit default insurers, the supposedly clever people in the City who priced and sold this stuff (and the equally clever people who bought it) as though it was AAA for many years. And then ask yourself about the need for proper market regulation going forward - rather than leaving it all to the markets.

Glyn H said...

And were ‘sub-prime’ bundled up mortgages marketed as AAA rated – or is this Mr Browns well known boastfulness getting the better of him, again.

As these devices were the product of well intentioned, lefty, but ill considered, Clinton era legislation, which said it was unfair to discriminate against those with no money or record of ability to handle the stuff, plus a lack of the Sale of Goods Act type of legislation we have here which makes it an offence to misinform punters this was a-coming down the track. Unfortunately Mr Brown (and Mr Balls) thought they knew better and took away to BoE regulatory powers, created another ineffective quango (the FSA) and have now comprehensively proved they knew not what they were doing.

As ever Brown is proved to be a spectacular combination of incompetence and malevolence.

tory boys never grow up said...

Newmania

Never mind you're still Number 2 on the Trolls Daily list.

celticlion said...

There was another deliberate fraud behind all this. Tayside police had it reported to them on 27th October 2006 as Economic Sabotage. They knew the economy would collapse, when it would and how much.

The decided it was outside of their jurisdiction and let the whole lot slide.

Check it out the police will confirm they knew about the crash over 3 years ago.

Mark M said...

"Not my fault, guv"

No, of course he shouldn't have been expected to know. As the chief of the tripartite regulatory system, it obviously wasn't his job to ask what all the private debt (170%+ GDP wasn't it?) we were taking on was made up of. "Oh, sub-prime stuff that is built on ever increasing house prices, that's seems fine to me. Now, where's my knife to go stick in Tony's back?".

Just admit it Gordo. Your regulatory system utterly failed.

boggartblog said...

Gordon did not see the zombie economy coming because he's a zombie himself.

Economy Of The Living Dead

Unsworth said...

This is just Brown floundering around, determined that no matter the circumstances, nothing is ever his fault.

His grasp of reality is decreasing daily.

Sam said...

Morgan asked why the system collapsed, not why the economy wasn't prepared for that collapse.
Surely the near-unprecendented international liquidity crisis is the collapse of system Morgan was reffering to, not the failure of one institution, or even the UK's lack of resilience.
Brown couldn't be expected to have predicted the crisis, but he could have ensured we were better prepared for it.
It might be a quibble, but I'm sure it wasn't lost on the readers of GQ, or Piers Moron for that matter (after all, he does know a thing or two about getting impressive ratings for valueless American talent...)

John Pickworth said...

More crap from the mouth of Gordon...

I remember the HSBC bank buying the American sub-prime lenders Household Financial and Beneficial back in 2003. A deal that was widely reported and indeed introduced the term 'sub-prime' to many broadsheet readers.

Within two years, the whole adventure was turning sour. This too was reported often, as were the calls from our own authorities (BoE etc) about bank under capitalisation risks within the UK.

So, if the newspapers knew. If their readers knew. How come Gordon the self-styled "Greatest Chancellor for 300 years" didn't know?

Seriously! What was the fool doing thoughout this period? Perhaps Piers could ask him next time they meet.

Sobers said...

I knew what was coming, just from reading the broadsheets. It was obvious that something was brewing in America, and when America catches a cold the world sneezes.

Plus the UK house price situation was blatently out of control - in 2006 you had serious articles in the press by people predicting average house prices would be 300K by year X.

@ Andrew(5th Nov): if the tripartite system was at fault for not predicting/preparing for any potential crisis, who designed said tripartite system? One G Brown esq. no less.

@ Tory boys never grow up: Northern rock was borrowing short and lending long. An accident waiting to happen. Any financial regulator with a brain should have realised the potential problem with that business model.

Northern Rock was just the worst case in the UK so it fell first. RBS, Bradford & Bingley, HBoS all over extended themselves lending to the property market and would be bust without the taxpayer. Lloyds, HSBC and Barclays would probably have survived unaided.