Gordon Brown: Davos Forum or IMF?

2011-05-07T20:02:06Z

Former British Prime Minister Gordon Brown (2007-2010) will take an unpaid post at the Swiss-based World Economic Forum (WEF), known for its annual economic summit in Davos. Brown had widely been seen as the strongest candidate to take over at the Washington-based IMF if current chief Dominique Strauss-Kahn steps down to run for the French presidency next year.

But to do so Brown would need the support of Britain and Conservative Prime Minister David Cameron has said Brown is "not the most appropriate person" for the job and is responsible for the economic problems his government inherited.

Brown has admitted he made a ‘big mistake’ in failing to regulate the banks properly, saying that his vision had focused too much on dealing with individual banks, rather than looking at the risk of systemic failures.

After half a century of existence the IMF only agreed in 2009 to make the process of selecting top management based on an open, merit-based process. That decision was made in 2009, following nearly a decade of working groups, position papers and reports. It also followed decades of a gentlemen's agreement between Europe and America that Washington would choose the head of the World Bank, while the continent could select the IMF's leader. During that time, membership of the Fund has gone from 29 countries to 187.

In making the announcement, WEF Executive Chairman Klaus Schwab said that the former Chancellor of the Exchequer (1997-2007 under Tony Blair’s Labor government) “will help ensure that the Forum remains rigorous and focused – true to its commitment to improve the state of the world.”

Klaus Schwab, however, had only praise for his friend of many years. In a reference to Brown’s book “Beyond the Crash”, Schwab said, “as his recent book clearly demonstrates, he has valuable insights into the global agenda that will complement and inform many of the Forum’s initiatives.”

See Global Journal interview with Gordon Brown in issue #04

Gordon Brown, the Huge Transition Phase in Our History

2011-04-11T15:56:58Z

“We’re at a Huge Transition Phase in Our History”

Former British Prime Minister Gordon Brown was at the helm in London when the global financial system came close to collapse in the autumn of 2008. He speaks about his snap decision to recapitalize British banks and explains why global regulation has been so long in coming.

Early one morning at the height of the banking crisis, you told your wife Sarah to get ready to move out of Downing Street as you might resign that afternoon. How did she react?

Very professionally. She got on with the preparations. Of course, she couldn’t call in the movers just yet. That would have been a bit too disastrous a signal to the markets.

We’re talking about Wednesday, Oct. 8, 2008. Lehman Brothers had just filed for bankruptcy. In your new book “Beyond the Crash,” you write: “I sensed that if no-one acted, total collapse was imminent.” What exactly were you expecting?

The Royal Bank of Scotland would have collapsed within hours. HBOS was not far behind, and in that case, other European and American banks would have followed. I think people still misunderstand, in retrospect, the scale of the collapse that we were facing: It would have been absolutely catastrophic.

Would the ATM’s have stopped handing out money?

Most likely. People would have been in panic about their savings, there would have been a run on the banks. But what worried me most was that at this moment there was a total lack of leadership about the way forward, both within banks and governments. The banks still deceived themselves. One banker told me on the day before his bank collapsed: “All we need is overnight funds.” He didn’t even realize that his institution was virtually on the brink.

That morning, you announced the immediate recapitalization of the British banks using billions of pounds in public funds, and which basically meant nationalization. Today, you receive a lot of praise for the steps you took. But how did you know then that it would work?

I didn’t. To be honest, it was a gamble. No other country had done it before. I would have resigned that day if it failed. But it worked. Within days, most large economies followed our path. At around the same time, German Finance Minister Peer Steinbrück was still in denial, blaming the problem entirely on Anglo-American banking practices. What really sparked the whole thing was the subprime crisis in America. But what people hadn’t yet realized was that half the subprimes had been sold into European banks. The banks were undercapitalized, and they had a lot of impaired assets on their balance sheets.

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theglobaljournal.net: Latest activities of group Gordon Brown

Gordon Brown: Davos Forum or IMF?

Gordon Brown, the Huge Transition Phase in Our History

“We’re at a Huge Transition Phase in Our History”