Gordon Brown, Prime Minister of Britain during the financial crash of 2008, has spent his time since leaving Parliament after the 2015 general election pursuing a career path followed by many high profile ex-politicians: he has been on the speaker’s circuit and taken a few executive roles in corporate life. He has also written a couple of book, and this week he is publishing his newest offering entitled My Life, Our Times. It is an auto-biography more than a strictly political tome, but there is plenty political content nonetheless. In the book, Gordon Brown, gives his account of the financial crisis, and devotes special attention to the bankers and other executives who were in charge at the world’s largest financial institutions in the lead up to the crash, calling for criminal charges to be brought against those who were at the centre of the calamity.
So far so good. It is indeed clear that some bankers behaved fraudulently. The LIBOR scandal, most prominently, saw traders in several major investment banks collude to fix interest rates, based on which many trillions of securities and derivatives calculate payments, to suits their books rather than to reflect their objective assessment of the market. Investors who have paid higher or received lower payments as a result have every right to expect those responsible to be pursued to the full extend of the law. They are criminals.
But Mr. Brown doesn’t stop there. He extends the call for similar punishment to be applied to “those who crashed the world economy” in 2008, meaning traders and bank executives who presided over losses which contributed to the crisis and subsequent recession. Of course, Mr Brown is not the first to call for criminal charges to be brought against the senior management of failed institutions, but that doesn’t make it any less remarkable. Because while punishing law breakers is what law based societies do, punishing people for making mistakes is a major break with basic legal principles.
Take RBS, whose CEO Fred Goodwin (known as “Fred the Shred” because of his ruthless cost-cutting, and knighted by the government where Gordon Brown served as Chancellor only to see his title revoked in 2012) bought Dutch bank ABN Amro in October 2007 and presided over an aggressive expansion of investment banking and loan activities. Investors have good reason to be unhappy with Mr Goodwin: they lost 98% of their investment when RBS’s stock crashed and taxpayers were forced to bail the bank out a mere year after the ABN Amro acquisition (we take issue with the too-big-to-fail moral hazard here). RBS’s failure undoubtedly contributed to the severity of the recession Britain found itself in from 2008 to 2013 and as such, there is valid reason to be angry at the bank’s leaders – but to date, there is no evidence that Mr Goodwin was guilty of anything but hubris and bad management. Incompetent, but not criminal.
In the US, similar cases abound. Lehman boss Dick Fuld clearly misjudged the risk his bank was taking in the US mortgage market, as did almost every other banking executive. Merrill Lynch, swallowed up by Bank of America when it collapsed, sent the CEO who presided over the calamity, Stan O’Neal, off with a golden parachute worth in excess of $100 million. Reason to be outraged, yes, but again there is no tangible evidence whatsoever that laws were broken. Britain, as all other societies ruled by law, should prosecute those who have broken laws. Those who didn’t, regardless of how repugnant their behaviour might otherwise be, should remain free to go about their business. That is how the system is supposed to work. Breaking the law is for the courts, making mistakes is not.
It is galling to hear a politician regale about punishing immoral behaviour, regardless of whether it falls foul of the law. Mr Brown once bragged he “saved the world” when deciding to bail out the failing UK banks during the crisis, and this is undoubtedly how he honestly judges his own contribution. But a better assessment is that he was part of a government which, as indeed does every government, behaved immorally as a matter of course; whether coercing money from or spying on its citizens, waging unprovoked war in far-away countries, or any of the myriad of other transgressions against the basic rights of the people. Gordon Brown is a deluded hypocrite who lost his moral authority years ago, and his call for non-criminals to face criminal charges only serves to confirm that.