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Gordon Brown says he was misled by RBS

Gordon Brown is claiming he was misled about the extent of reckless lending at the Royal Bank of Scotland.

BROWN

In his new book explaining the financial crisis, Beyond the Crash, the former prime minister writes that as chancellor of the exchequer he was not told about the extent of the reckless lending.

Brown says 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 says: “People will rightly ask why we did not know earlier of the fundamental weakness of Royal Bank of Scotland. The simple answer is: we were misled.”

Last week the Financial Services Authority cleared RBS of any wrongdoing after the bank required a government bailout to save it from collapse in 2008.

He also claims that if bankers bonuses had been 10% less every year between 2000 and 2007 then they would have had the capital to withstand the crisis.

He says: “The reason bankers’ pay is absolutely crucial to the wider story is because there is a very particular relationship between actions taken by one person and consequences suffered by everyone. Excesses in remuneration are not cost-free.

“We can now detail in the most precise terms the cost of excessive remuneration at the expense of adequate capitalisation. We now know that, if British bankers had paid themselves 10% less per year between 2000 and 2007, they would have had more capital, some £50bn more, to help them to withstand the crisis.

“The extent of the under capitalisation of our banks was £50bn, and was exactly the sum put up by the taxpayers for the emergency stabilisation of our banking system.”

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Comments
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  • Tony Blair 9th December 2010 at 12:16 pm

    Gordon is just like me – arrogant, unrepentant, wealthy and completely ignorant of the long term devastation caused by our overspending. But the best bit is that we are great at blaming everyone else.

  • Paul Nash 7th December 2010 at 5:20 pm

    Gordon Brown the ‘Iron Chancellor’

    You have got to be kidding?

  • Jonathan Miller 7th December 2010 at 2:30 pm

    So RBS pulled the wool over his eye then?! Next it will be the voices were telling him to sell the gold!

  • AP 7th December 2010 at 1:41 pm

    Brown still can’t work it out. If the Bankers had received £50b less in bonuses then the treasury would have received £15B in tax out of the additional profits leaving the banks with £35b in reserve, not £50b, but the treasury would have lost £11B in additional tax on the bonuses so his numbers are off (no change there). And the bonus when spent created more economic activity (multiplier effect etc).

    All in all My Brown is most definitely in the right job at the moment

  • Paul 7th December 2010 at 12:48 pm

    Maybe he should apply the same logic to public sector pay and the UK plc’s ability to withstand the crisis. Heck, we could have properly done Keynesianism by using reserves for bailouts, as opposed to going cap in hand to the markets. Idiot.

  • Luke Atkinson 7th December 2010 at 12:30 pm

    A complete contradiction from the FSA’s findings….or lack of as the case may be!