Translated material
World Architect
PM Brown has a crisis recovery plan
British Prime Minister Gordon Brown has inspired the stock markets of the Old and New Worlds these days with his large-scale plan to save the country's financial system . After its announcement on Monday, stock exchanges rushed up and closed at unheard-of high levels for these times. The influential French newspaper Le Monde called Brown "the savior of the global financial system."The government buys a controlling stake in the largest British bank RBS (Royal Bank of Scotland), and also becomes the main shareholder of two other leading financial groups - HBOS and Lloyds TSB. The operation will cost British taxpayers £37 billion. The government has decided that employees of these banks will not receive bonuses until performance improves, and shareholders will not receive dividends until the banks pay the treasury. The boards of banks should include government representatives. Brown stressed that banks must immediately resume issuing loans to businesses and individuals.
But Monday's measures represent only the first stage of Brown's plan. The Prime Minister himself told this yesterday to a group of foreign journalists accredited in London, among whom was a Vremya Novostei correspondent. “Stabilization of financial institutions is our first goal,” Brown said, “it is imperative to saturate them with the money supply in order to restore the normal functioning of banks, to ensure that they again begin issuing loans to industrial enterprises, medium and small businesses. In addition, it is of paramount importance that banks resume issuing mortgage loans to the population in 2007 volumes. This will reassure people and restore their confidence in the future.”
But this alone is not enough to fully resolve the current crisis, Brown said. In his opinion, a second stage of anti-crisis measures is necessary. In fact, we are talking about reform of the entire global financial system: “The current failure is the first crisis of the era of globalization, and it must be resolved at the global level. It is an illusion that the flames of the crisis originated in America and that it is America that must deal with it. It is true that US banks have issued loans totaling three times their cash. However, we should not forget that these loans went to production, which was located, say, in Asia or Latin America. Therefore, it is obvious that it is impossible to get rid of the crisis in one single country. We need international efforts and a high level of cooperation between all countries on the planet.”
Among the main principles of the new “global financial architecture” Brown named transparency, integration, responsibility, regulation and global cooperation. In his opinion, transparency of banks, investment and insurance companies is one of the most important conditions that should apply to all markets, countries and regions without exception. Brown is also calling for greater accountability among financial leaders, not just chief executives but all board members who support often too risky decisions. "Our observations indicate that many board members do not always have the competency to make complex financial decisions," Brown said.
The British Prime Minister is convinced that rating agencies, which sometimes issue their assessments based on erroneous data, should also bear responsibility for the real state of banks. It is very important, Brown believes, that a regulatory system for the banking system is created in the world that would provide it with “adequate protection.” We also need a global system to prevent financial shocks. In his opinion, not only European countries and the United States, but also Brazil, India and China will take part in the creation of such a system.
Brown's plan received approval from the newly minted Nobel Prize winner in economics, American Paul Krugman. He credits Gordon Brown and British Chancellor of the Exchequer Alistair Darling with "shaping the nature and direction of rescue operations around the world." According to Krugman, the provisions of the plan are very convincing: “Fortunately for the global economy, Gordon Brown and his team are taking meaningful steps. And perhaps they will be the ones who will lead us out of this crisis.”
Successful actions to overcome the financial crisis immediately affected the opinions of British voters. According to London bookmakers, Brown's popularity rating, which had been falling over the past eight months, went up for the first time.