Bankers should’ve been jailed over crash, says Gordon Brown
. . . and Fred the Shred should pay back his bonuses, be stripped of his pension – and be banned from running a company again
GoRDoN Brown has called for scores of bankers to be thrown in jail for their part in the financial crash which almost crippled the country’s economy.
Writing in his memoirs, the former prime minister declares that senior bankers from Northern Rock should be among the first to go to prison for making fraudulent claims about its finances.
And he says other guilty men – including shamed former RBS chief executive Fred Goodwin – should be forced to return their bonuses, be stripped of their generous pensions and be banned for life from becoming a company director.
Mr Brown warns that unless serious action is taken, another crisis sparked by reckless risk-taking is ‘inevitable’. ‘If bankers who act fraudulently are not put in jail with their bonuses returned, assets confis- cated and banned from future practice, we will only give a green light to similar riskladen behaviour in new forms,’ he writes.
‘We still do not have the right balance between the capital that banks need, the dividends they pay, the remuneration they give employees and the contribution they make to the public for the social costs of their risk-taking.’
The outspoken comments come from his book, My Life our Times. He discusses the defining story of his three-year premiership: the near-collapse of Britain’s banking system.
The former Labour leader hits out at a series of the biggest names in high street banking, saying:
÷The actions of Northern Rock’s bosses in covering up their financial situation were ‘ but a short step from criminality’;
÷RBS wasted millions on plush headquarters, pointless sponsorship schemes and private jets for its bosses;
÷Mr Goodwin, known as Fred the Shred, failed to display any contrition for leading his bank to the brink of collapse;
÷Barclays bosses misled the pub- lic and the British authorities about an ‘unconscionable’ deal with the Gulf states.
Mr Brown also turns his fire on David Cameron, accusing him of being too soft on the banks after he took office in 2010. He points out that while major bankers have been prosecuted for fraud in countries such as Iceland, Spain and Ireland, nothing has happened in the UK.
The former PM accuses the banks of paying far too much in dividends. As a result, they did not have enough capital saved up – which meant they had to be bailed out by the state to the tune of £50billion. ‘Little has changed since the promise in 2009 that we bring finance to heel,’ he says. ‘The banks that were deemed “too big to fail” are now even bigger.
‘Some regulators freely confess that risks have morphed and migrated out of the formal banking system and if the next crisis came they would still not know what is owed and by whom and to whom. 2009 has proved to be the turning point at which history failed to turn.
‘ Dividends and bankers’ pay today represent almost exactly the same share of banks’ revenues as before the crisis hit.’ Mr Brown points out that since 2008, the financial sector has paid out £128billion in bonuses – enough to recapitalise Britain’s banks.
A typical senior banker still earns £1.3million a year and ‘Britain has three-quarters – more than 4,000 – of Europe’s one million-euro bankers, a figure that has risen 50 per cent since the crisis’, he says.
‘Even at RBS, which has had £58billion of accumulated losses and is guaranteed by the taxpayer, the number of bank employees earning more than one million euros has barely changed – 121, down from 131.’ He calls for senior bankers to be charged under the Fraud Act 2006, which criminalises fraud by false representation, failing to disclose information and abuse of position.
Mr Brown lays into Northern Rock, which had to be nationalised by his government early in 2008. He says it was far too dependent on short-term loans – and was guilty of covering up its debts.
‘No other bank relied so much on short-term borrowing – often overnight lending – from the marketplace and at the same time paying low interest rates to fund long-term mortgages, so much so that their very survival depended on it,’ he says. ‘They had no plan B if the short-term financial markets dried up. Indeed, their strategy was so aggressive that it was but a short step from criminality: when they issued figures for mortgage debts in the months before the bank’s col-
‘Little has changed since 2009’ ‘Never expressed real contrition’
lapse, they had failed to disclose the arrears of hundreds of mortgages.’
on RBS, Mr Brown accuses Mr Goodwin of agreeing to the catastrophic takeover bid of Dutch firm ABN Amro in 2007, which brought RBS to its knees, on the flimsiest of evidence. ‘Yet at no point did I ever hear Fred Goodwin express real contrition to me – or to anyone else – for his role in the bank’s collapse,’ he says.
Mr Brown accuses RBS and Mr Goodwin of the shameful waste of billions of pounds.
By the time the bank collapsed, Mr Goodwin ‘had from his company a private suite in the Savoy costing £700,000 a year, a fleet of 12 chauffeur-driven Mercedes limousines with RBS emblazoned all over them, and he regularly used a private jet at the weekend – whether for boar hunting in Spain or following the glamorous F1 circuit around the world’.
RBS wasted an estimated £200million a year in a sponsorship budget. Last night RBS said it would not comment.