Why Britain is leading the world out of the banking crisis
On Tuesday, the US was the latest nation to follow Gordon Brown's blueprint for rescuing banks.
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Alistair Darling, Brown's treasury chief, was telling US counterparts exactly this during the G-7 meetings in Washington over the weekend. The plan was a hard sell there too. US Treasury Secretary Henry Paulson had already dismissed partial nationalization as a mark of failure. But by Monday, he was selling it to US bank executives.Skip to next paragraph
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"About two weeks ago, Paulson was very reluctant to inject capital into the banking system in the way the UK has done," says Richard Harris, a former consultant to major US investment banks and now professor of finance at Exeter University, England.
"It might be his belief that it wouldn't solve the problem – and he might yet be right; it might be more ideological, the sense that it is not right for a government that supports the free market to be investing heavily in the large section of banking sector," Professor Harris adds.
While the ideology is awkward for the Bush administration, it suits Brown. For as long as Brown has been in government, his left-of-center Labour colleagues have bemoaned the huge salaries and corporate greed that drips out of the City of London. In taking bank stakes this week, Brown has made it clear that the "era of irresponsibility" is over.
The bank rescue operation – if successful – could mark a major transformation in Brown's political fortunes. Financial crises are supposed to topple governments. (In 2001, Argentina went through four presidents in a few short weeks.)
But this crisis could be the making of Brown, who was written off by party and public after a wretched summer of electoral defeats and muddled policies. Labour has clawed back lost ground in the polls to be within sight of the Conservative opposition once again. A weekend survey found a slender majority felt that Brown and Mr. Darling were a safer pair of hands than the untested Tory pairing of David Cameron and George Osborne.
Even adversaries are admitting Brown's found his feet. "Over the last two weeks, they have done the right thing. The intervention has been broadly right," admits Vince Cable, a member of Parliament in the opposition Liberal Democrats. But he adds that Brown is still leading Britain into a near-certain recession.
Significantly, rebels in Brown's own party, who were spoiling to oust him four weeks ago, have been silenced in admiration. Suddenly the stiff, dour man who has such a hard time appealing to his electorate appears relaxed and confident, if a little tired.
"The whole situation has turned around," says Lindsay Hoyle, a Labour MP previously critical of the government. "There's nobody more able to deal with the situation than Gordon Brown. He is on home ground. The party feel he is getting to grips with the issues facing us and facing the world."