US Treasury Secretary Timothy Geithner attacks Labour’s record on banking regulation Timothy Geithner told a conference in Atlanta: ‗The United Kingdom‘s experiment in a strategy of light-touch regulation to attract business to London away from New York and Frankfurt ended tragically. That should be a cautionary note for other countries deciding whether to try to take advantage of the rise in standards in the United States‘ (Timothy Geithner, quoted in the FT, 7 June 2011, link). Labour’s lack of credibility on banking reform Ed Balls, now Labour’s Shadow Chancellor, was a key advisor to Gordon Brown when the system of regulation was designed, and later was City Minister
Ed Balls was Brown’s economic adviser at the Treasury in 2001: ‗He was economic adviser to the Chancellor of the Exchequer, 1997–99; chief economic adviser to HM Treasury, 1999–2004‘ (Ed Balls website, About Ed, 5 August 2010, link).
In 2006 he became City minister. He was Economic Secretary to the Treasury from 2006 to 2007 (Ed Balls website, About Ed, 5 August 2010, link).
Ed Balls defended light-touch City regulation
‗Nothing should be done to put at risk a light-touch, risk-based regulatory regime‘ (Ed Balls, City Minister, Bloomberg Speech, 14 June 2006).
‗I believe we are right to avoid prescriptive, heavy-handed regulation in Britain‘ (Ed Balls, ibid.).
‗In my first speech as City Minister at Bloomberg in London, I argued that London‘s success has been based on... light-touch principle-based regulation‘ (Ed Balls, City Minister, Speech to The Hong Kong General Chamber of Commerce and The British Chamber of Commerce, 13 September 2006).
‗It is important that the FSA continues to deliver a light-touch and risk-based regulatory approach‘ (Ed Balls, City Minister, Bloomberg Speech, 14 June 2006).
Ed Balls reveled in his decision to reject calls for tougher City regulation
‗I hope too the City has taken comfort from the way in which we have responded to new risks and to events‘ (Ed Balls, ibid.).
‗I remember well the internal discussions at the Treasury – and the external pressure in Parliament and among commentators to respond with a regulatory crackdown‘ (Ed Balls, ibid.).
‗I believe we are right to avoid prescriptive, heavy-handed regulation in Britain. Indeed, I believe that while it is Bank of England independence that is regularly cited as the Government‘s most significant financial reform, the establishment of the FSA has been as important for Britain‘ (Ed Balls, ibid.).
Ed Balls gave ‘full credit’ to the architects of Big Bang light-touch regulation of the City
‗Previous governments... have shaped London‘s success... the liberalisation of the City of London and the opening up of our markets in the mid-1980‘s. This Big Bang – and the raft of consolidations, takeovers and influx of foreign institutions and talent it involved, was decisive... I give full credit to those who made that happen‘ (Ed Balls, ibid.).
Ed Balls defended big City bonuses
‗Speaking at the same meeting [as Harriet Harman when she made an attack on bonuses], City minister Ed Balls made a strong defence of the pay-outs, pointing out that they were good for tax revenues and for job creation. He added: ―If the City is doing well, the country is doing well. When it prospers, we all prosper‖‘ (Extract from the Evening Standard, 25 September 2006, link).
Labour oppose our plans to reform banking regulation
In Government, Labour opposed structural reform. Alistair Darling said: o ‗The structure that we have with the Bank and the FSA is the right one‘ (Alistair Darling, Hansard, 30 November 2009, col. 876). o ‗The structure that we have is right‘ (Alistair Darling, Hansard, 8 July 2009, col. 982).
In opposition, Labour have defended the failed tripartite system of reform. o ‗Perhaps there are echoes of the tripartite agreement between the Financial Services Authority, the Bank of England and the Treasury—[Interruption.] The Minister says from a sedentary position, ―That didn‘t work very well.‖ I would not accept all her criticisms of the way it worked‘ (Kerry McCarthy, Hansard¸ Public Bill Committee, 1 March 2011, col. 26) o ‗Instead of making politically convenient and economically ludicrous pronouncements that it was the UK's tripartite system of banking regulation that somehow caused the global credit crunch, can the
Chancellor explain to the House why his own flagship banking reforms are now running late‘ (Angela Eagle, Hansard, 8 February 2011, Col. 137). Criticism of Labour’s Tripartite system of regulation Third Parties have attacked Ed Balls’ failed system of regulation
John McFall: tripartite system is ‘an old banger’. ‗[The tripartite system] may be a Rolls Royce when it sits on the shelf, turns into an old banger when it gets on the ground‘ (John McFall MP, Chairman of the Treasury Select Committee, 25 Sep 2007).
House of Lords Economics Committee: Tripartite ‘failed to maintain financial stability’. ‗The tripartite authorities in the United Kingdom (the Bank of England, Financial Services Authority (FSA) and Treasury) failed to maintain financial stability and were found wanting in dealing with the crisis, in part because the roles of the three parties were not well enough defined and it was not clear who was in charge‘ (House of Lords Select Committee on Economic Affairs, Banking Supervision and Regulation, 2 June 2009)
Treasury Select Committee: Nobody was in charge. ‗When we questioned the Tripartite authorities as to who was in charge, the Governor‘s first reply was ―What do you mean by ‗in charge‘? Would you like to define that?‖‘ (Treasury Select Committee, The run on the Rock, January 2008).
Treasury Select Committee: The system ‘did not seem to have a clear leadership structure’. ‗we are concerned that, to outside observers, the Tripartite authorities did not seem to have a clear leadership structure‘ (Treasury Select Committee, The run on the Rock, January 2008).
British Bankers Association: Nobody was in charge.‗There was insufficient clarity in the allocation of roles, responsibilities and authority among the Tripartite authorities and no one entity had clear power to take the lead‘ British Bankers Association, Memorandum to the Treasury Select Committee, November 2007).