11/08/2009: "gordon brown - bank social contracts"

the plan:

"banks shouldnt be allowed to reap big profits when they do well, yet when they fail, cost the taxpayer billions in bail outs" - gordon brown
let me enlighten you gordon, as you are obviously from another planet and have no apparent knowledge of monetary policy

- banks make big profits, under the laws and financial rules set down for them by YOU, the government!
its a pretty straightforward concept (that labour have failed to grasp) a bank will only look at the actual laws and rules in place and then do business for the maximum profit they can under those rules
when you came to office gordon in 1997, the day after taking your place in office, you changed a fundamental rule of monetary policy, that started the rot (not bad going just one day in the new job) - you made the bank of england independant
now i know what all you labour fans will say, and gordon and his cronies have said it too many times... "but the tories proposed to do the exact same thing!" - this is factually incorrect!

under gordon brown's policy shift, he gave the bank of england independance, however (and its a big however) he set up a tri body with the treasury, bank of england and the financial services authority (fsa) - the FSA was set up for nothing more than maintaining power over policies and actions for one gordon brown, whilst giving the impression to the public that the BofE really were independant.
Under conservative proposals, bank of england independance would have seen the bank maintain its strict controls over the banks/financial institutions.

the one shining policy that should have been retained was the power the BofE had to stop banks from over stretching.
if a bank was seen to be borrowing too much, to lend out too much, the BofE would step in and force the bank to stop borrowing until it could cover any emergency losses if the markets collapsed. (genius bit of policy from the tories, genius in that it worked and stabilised the financial institutions of great britain, so other countries banked with us) this refinancing could be in selling more shares, or selling assets etc, the point being that this set up an emergency fund for each bank/building society etc, so the taxpayer wasnt left to foot the bill for a collapse

just as the banks make big profits - only because they are allowed to under gordon brown's own fiscal rules - the banks are also allowed to "not fail" (what happens when a kid nicks some sweets and gets away with it? chances are they will do it again?) under brown's laws.

ironic, as if the rules set by brown had been good enough in the first place, then no banks would have overstretched, and if they did, then it would have been the emergency fund they had to have in place that bailed them out.
the fact that banks overstretched and had no emergency funds in case of a collapse - was down to being allowed to overstretch their borrowing, openly encouraged by one gordon brown when he was chancellor and later when he was prime minister.

had banks been allowed to fail, the Ł30,000 guarantee for each saver would have still come into force, but we wouldnt have billions of pounds worth of debt for us all to pay back for decades to come!

so when gordon brown advises me and others through the media, regarding monetary policy, it makes me laugh..... because my 9 year old next door neighbour knows more about money works, than does one gordon brown!