Gordon Brown says he was misled about the extent of reckless lending at the Royal Bank of Scotland.
In his new book explaining the financial crisis, Beyond The Crash: Overcoming The First Crisis of Globalisation, the former Prime Minister writes that as chancellor he was not told about the extent of reckless lending.
Brown says that RBS grew from a sound bank into a reckless speculator, while Sir Fred Goodwin, former chief executive of RBS, “always had a complaint about something the government had failed to do for him”.
Brown writes: “People will rightly ask why we did not know earlier of the fundamental weakness of RBS. The simple answer is we were misled.”
But Ray Boulger, senior technical director at John Charcol, says: “Brown is effectively admitting that despite being reckless, Sir Fred was nevertheless bright enough to fool him and the people he appointed to run the regulator he set up to regulate people like Sir Fred.
“That doesn’t say much about the ability and foresight one might reasonably expect a chancellor of the exchequer to possess, or even his choice of regulator.”
The former PM also describes how, together with the Financial Services Authority, Bank of Eng-land, Treasury and US counter-parts, he began preparing for a collapse.
He says: “Most who joined our financial war-game started with the view that there would be much moral hazard if a rescue was undertaken. After much discussion, most ended with the view that in some circumstances rescues would have to be undertaken.”
Brown says figures from the Council of Mortgage Lenders on July 18 2008 which showed a 32% drop in lending compared to June 2007 made his blood run cold and that this is when he knew a bad recession was looming.