Newspaper article The Evening Standard (London, England)

Here's the Way to Start Solving the Credit Crisis

Newspaper article The Evening Standard (London, England)

Here's the Way to Start Solving the Credit Crisis

Article excerpt


HE REALLY can't resist it, can he? You might think that after more than a decade of introducing economically trivial, crowd pleasing measures as Chancellor, Gordon Brown could kick the habit as Prime Minister.

Yet here he goes again, with free prescriptions for cancer patients (applause), promises to take more two-year-olds away from their parents and put them in nurseries (applause) and money for children to play online computer games (thunderous applause).

He might claim that this is no time for a novice, but experience is valueless if you don't learn from it, and neither Brown's little treats nor his threats to spey the fat cats will be of any help to the millions who are about to be engulfed in the financial tsunami that is spreading out from the City.

He has been bounced into the creation of a dominant domestic bank, and savers will find the rates on their Halifax accounts cut, while borrowers can expect to pay more for their mortgages.

Small businesses may find it impossible to borrow, and even if they can, the terms will effectively siphon off any profit they may be making. He can bang on about fairness, but fairness of opportunity doesn't grow out of yet more government interference. It grows out of competition, simplicity and low taxes.

Overpaid City bankers are always an easy target in the fairness debate, and it's now clear that these masters of the universe owed most of their fortunes to a combination of luck and clever use of other people's money. For better or worse, many of them have now got away with it, and most of the proposed cures,from higher tax rates on top incomes to a ban on paying bonuses in cash, are likely to be counterproductive. Bear Stearns and Lehman Brothers paid bonuses in shares the holders couldn't sell. It clearly made no difference to the bankers' attitude to risk. …

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