So Brown did not abolish boom and bust...

[foxy lady]

What frightens me about all this is that it started back in 2000 when the FSA failed to protect policy holders in Equitable Life. Even now those policy holders have not had their losses made good. The FSA was charged with overseeing the conduct of such institutions as banks, building societies and pension providers and yet failed to regulate the way Equitable Life was run.

 

It probably all went wrong when the Bank of England was given its' independence and the FSA seemed to loose direction.

 

http://www.independent.co.uk/news/business/news/equitable-life-management--blew-238-years-of-history-627811.html

 

Equitable Life management 'blew 238 years of history'

 

By Andrew Garfield, Financial Editor

Monday, 18 December 2000

 

 

David Hyman, the retired stockbroker who brought the legal action that precipitated the crisis at Equitable Life, yesterday insisted that Equitable management was entirely to blame for the debacle.

 

Mr Hyman's victory in the House of Lords turned to ashes 10 days ago when Equitable had to close its doors to new business after failing to find a buyer. He also blamed regulators for not forcing the firm to act earlier to ensure it had made enough provision for its obligations to guaranteed annuity holders.

 

"I am distressed," Mr Hyman said in an interview with The Independent yesterday. "Equitable was a wonderful company with a cast-iron reputation. It has blown it through total incompetence [and] blown 238 years of history through one silly decision."

 

The Financial Services Authority has responded angrily to suggestions that it should have been tougher with Equitable Life. Yesterday, the FSA said it was looking at the whole area of "with profits" policies and said they needed to become more transparent and easier to understand.

 

An FSA spokeswoman said: "People need to understand what they are getting. If people did understand them, would they still buy them? Maybe they would, but it is something we need to look at."

 

Sir Howard Davies, chairman of the FSA, has questioned the need for rigid 25-year policies in an age when people's lifestyles and working patterns are much more irregular. While dismissing suggestions that with-profits policies would be banned, he is seeking tougher rules on selling such policies and pushing the industry to build flexible alternatives. The FSA has also said it is putting pressure on Equitable to cut the penalties for policymakers wishing to leave the insurer.

 

Mr Hyman's test case was funded by Equitable Life as it attempted to settle the controversy over attempts to renege on commitments made to 90,000 holders of policies that guaranteed a specified annuity rate, irrespective of the market rates for these polices.

 

The initial complaint against its policy of cutting terminal bonuses to pensioners who elected to exercise the guarantees was thrown out by the High Court, but Equitable lost on appeal and in July the House of Lords ruled that those who had lost out should be retrospectively compensated.

 

After the judgment, Equitable put itself up for sale, but when Prudential pulled out of the bidding on 8 December Equitable closed its doors to new business Alan Nash, the managing director, resigned.

 

Mr Hyman said he was sad about what had happened but that Equitable was to blame. He said the Equitable had made promises to guaranteed annuity holders that it thought would never have to be made good.

 

In his affidavit to the court he said he had bought his guaranteed annuity as he recalled a time when interest rates were as low as 2 per cent, and he could foresee a time when they might be that low again. He said that possibility did not seem to have occurred to either management or the actuaries.

 

Mr Hyman said the regulators should have insisted that Equitable set aside some provisions for these guarantees.

 

He added: "The actuaries behaved stupidly and almost criminally. They did not believe it could happen. They should have cut bonuses and set aside provisions. But they wanted to be top of the table."

 

 

 

 

 

 

That was 9 years ago. We seem to have learned little.

[epiphany]

Well understandably the neo-lib "free market" (read: socialised risk, privatised profit) advocates might be wary of strenghtening this currently light-touch FSA, and I would share that wariness. However, if we are to continue to perpetuate this market fundamentalism hangover from the 80s and 90s, we can't simply continue to nibble around the edges.

[esme]

well he seems to have got rid of "boom" pretty successfully

[Tony]

This graph is going around the City today... "No more boom and bust"

 

http://av.r.ftdata.co.uk/files/2010/05/boom-to-bust.jpg

 

It says it all really.

[Uptowngirl]

To be fair, the exact opposite is also true - people say that the "bust" is his fault then claim that the "boom" wasn't his - I agree with you that you can't have it both ways, either he gets credit and blame for both, or neither.

 

I'm not at all sure this is worse than the 80's though - there doesn't seem to be the same sort of desperation etc

 

I am not sure that what you say is true. Brown took over in a time of falling unemployment and rising prosperity. So it is perfectly possible to have a mild boom without him making a contribution. Indeed his time as Chancellor saw no growth in the UK stock market, and as a result a stagnation of our pension funds, which he also chose to tax for good measure. Most of the reduction in unemployment since 1997 has been due to creating jobs in the public sector that do not contribute to GDP, and to increased student numbers. All of this led to the public sector debt that we have today, and that was Brown's doing.

[HeadingNorth]

It should be remembered that, despite "No more boom and bust" indeed being Gordon Brown's most famous statement of all, in his first news interview after the bust hit he denied ever having said it, and claimed people were trying to make him look bad by pinning a fake claim on him.

[Vague_Boy]

Gordon Brown's time as Chancellor was famous for his boast that he had abolished "boom and bust".

 

But don't you understand? Anything good over the last 13 years is down to Gordon. Anything bad, well that's a global problem that started in America.

 

He's very vocal about blaming America, except when St. Obama is in the room. Then he goes very quiet and has a "Brokeback Mountain" moment.

 

They can affect the economy by excessive borrowing undermining confidence in the currency and the country.

 

Please do not confuse the issue with your true facts.