Alistair Darling: Britain’s Crisis Chancellor

Alistair Darling could be forgiven for complacency when he took over as Chancellor of the Exchequer from Gordon Brown in June 2007. The U.K. economy was in the midst of a record 14th year of expansion and growing at a robust 3 percent pace. The government deficit was modest, and the national debt stood at just under 44 percent of GDP, well below the levels of France, Germany, Japan and the U.S. The City of London was booming under the light-touch regulatory approach of the Financial Services Authority, prompting then–U.S. Treasury secretary Henry Paulson Jr. to consider emulating the British model to shore up New York’s competitive position.

Barely six weeks later the subprime mortgage crisis hit and turned Darling’s world upside down.

In September 2007 depositors staged an old-fashioned run on mortgage lender Northern Rock — the first such run since the Victorian era — after its wholesale funding ran dry, catching the authorities off guard and forcing Darling to nationalize the bank. One year later the global liquidity squeeze that followed the collapse of Lehman Brothers Holdings pushed two of Britain’s biggest banks, Royal Bank of Scotland Group and Lloyds Banking Group, close to the brink, prompting the Treasury to inject £37 billion ($61 billion) of capital, effectively nationalizing them, and to guarantee some £250 billion of loans issued by U.K. banks. Britain’s vaunted regulatory system, it seemed, was no match for the biggest economic and financial crisis since the Great Depression.

The British economy, heavily dependent on the financial sector, has been hit even harder by the crisis than the American economy, where the troubles actually began. Output has fallen for six consecutive quarters, dropping by a cumulative 6.0 percent, making this the worst recession since the deep downturn of 1979–’80. The deteriorating economy, in turn, has left a gaping hole in the government budget.

The Treasury forecasts that the deficit, based on Europe’s Maastricht definition, will hit 12.6 percent of GDP for the current fiscal year, ending March 31, 2010, exceeding the U.S. deficit of 10.0 percent in the fiscal year ended September 30 and up from a deficit of just 2.8 percent two years earlier.To begin plugging the gap, Darling is hiking the top rate of income tax to 50 percent from 40 percent, reversing a tax-cutting trend that dates back to Margaret Thatcher. Even the opposition Conservative Party, which polls show is poised to sweep Brown’s Labour government from power in next year’s general election, concedes that taxes will need to remain high for some time to come.

"The situation is every bit as grim as it appears, and I suspect that most people probably haven’t got a full understanding of how difficult it is," says David Shairp, global market strategist at J.P. Morgan Asset Management in London. "Just to put it in context, the U.K.’s fiscal deficit is larger now relative to GDP than it was when the Labour government went to the International Monetary Fund [for a loan] in 1976."

It will be a daunting challenge for Darling and Brown to try to turn around Labour’s electoral fortunes. Still, the chancellor’s cool pragmatism throughout the crisis has made him a key player in global efforts to revive growth and reform financial regulation.

像美国财政部长蒂莫西·盖特纳和其他G-7同事一样，亲爱的，56岁，需要大规模的公共支出来让经济追溯到轨道上。虽然减少赤字在中期至关重要，但他说，考虑收紧到目前为止。当他反对对方，乔治·奥斯本上月承诺削减支出和冻结大部分政府雇员的薪酬，如果保守党在大选中获胜，达林骂得狗血淋头的紧缩方案，称他们冒着“崩溃的经济。”

The Scottish barrister-turned-politician has been equally active on regulatory reform. The government’s decision, agreed by Brown, Darling and a handful of key aides in late September and early of October last year, to inject tens of billions of pounds of capital into eight of the country’s banks set a model that the U.S. and continental European governments would follow to shore up their banking systems.

现在，就像美国的Geithner一样，他提出了一系列旨在加强现行监管框架的措施，而不是根本重组银行体系。在本月晚些时候举行议会中，亲爱的，预计就阐述了立法提案，使FSA对金融稳定的更大责任，正式建立一个监测系统风险，并改善FSA，财政部和银行之间的协调理事会。在英格兰，并要求银行制定所谓的生活意志，详细说明他们在危机的情况下如何在有序的时尚中被关闭。提案金额达到了轻触，市场知识的主要方法，即U.K.自20世纪90年代末已遵循。

“没有人可以说，过去十年或15年的监管系统已经足够了，”达林告诉亚博赞助欧冠在采访中，“因为它看到发生了什么，它没有说明 - 如果它没有看到发生了什么，那就不起作用了。这是我们需要修复的东西。”

亲爱的可能没有太多的时间去执行他的plans. The Labour Party is looking tired after 12 years in power, and Brown has seen his popularity plunge since taking over as prime minister from Tony Blair in June 2007. The resurgent Conservative Party, led by charismatic Etonian and Oxford University graduate David Cameron, is heavily favored to win the election, which must be held by June 3. Support for the Conservatives stood at 45 percent, 19 points ahead of Labour, according to an opinion poll by London-based ICM Research last month.

不足为奇的是,一个国家where financial services hold such sway over the economy, the Conservatives have made regulatory reform a big plank of their campaign. In July, Osborne proposed abolishing the FSA and making the Bank of England responsible for banking supervision and overall financial stability. Such a move would overturn one of Brown’s signature moves. Days after Labour took office in 1997, Brown gave the central bank independence to set monetary policy and stripped it of supervisory duties, handing those to a newly created FSA.

保守党说,目前政权是有缺陷的because it focuses regulatory attention on individual banks and ignores risks to the financial system. "Even if the FSA had been carrying out microprudential assessment superbly well, [that] would not have been sufficient because there was not — and there still is not — any entity with clear responsibility to knit together the micro and the macro views," says James Sassoon, a former vice chairman of investment banking at UBS who advises Osborne and drafted his regulatory reform proposal. The plan calls for creating a new Financial Regulation Division at the Bank of England to oversee banks, building societies (mortgage banks) and other financial institutions such as insurance companies. It also would establish a Financial Policy Committee, equivalent to the central bank’s rate-setting Monetary Policy Committee, to monitor systemic risk alongside the MPC. The proposal also calls for the creation of an independent Consumer Protection Agency.

Some observers believe it would be misguided to hand financial regulation to the central bank. "The Conservative proposal to reorganize the architecture has not been presented in the context of any particularly logical analysis about the relationship between monetary and supervisory policy, and it doesn’t address the implications of the role played by the Bank of the England itself in the crisis, which many believe kept interest rates low for too long — having not looked closely at credit at all," says David Green, an adviser at the U.K. Financial Reporting Council, an independent corporate governance body, who worked previously as head of international policy at the FSA and before that as a senior banking supervisor at the Bank of England.

绿色和其他人也担心，如果说，新的监管角色可能会与中央银行的货币政策发生冲突，因为它认为需要减少支持金融机构的利率。“这是一种风险 - 事实上，这是货币政策和金融监管首先分裂的主要原因之一，”约翰麦克利亚议会议员和公约财政部委员会议员在一个电子邮件对问题的回复。

英格兰银行州长Mervyn King的州长清楚地意识到潜在的风险。这可能解释为什么他到目前为止提出了最激情的改革提案。在上个月的演讲中，他认为，为了分解该国最大的银行的最佳方式，从他们的风险吉尔投资银行和交易活动中分配零售银行业务和被保险人的存款基地。

"It is important that banks in receipt of public support are not encouraged to earn their way out of that support by resuming the very activities that got them into trouble in the first place," he said. Like most policymakers around the world, however, Darling dismisses the idea of returning to the world of Glass-Steagall, the Depression-era law that separated commercial banking and investment banking in the U.S. The challenges posed by the banking industry are "rather more complex" than King’s characterization of them, he says. What’s needed, he contends, is much more rigorous supervision and higher capital requirements.

The FSA, the one-time poster boy for light-touch regulation, is now leading the charge for tougher regulatory standards. Adair Turner, the authority’s chairman, helped shape the global regulatory debate with an influential report in March that called for raising bank capital requirements, especially for trading activities; reining in bankers’ pay to curb incentives for risk-taking; establishing a systemic risk regulator; and increasing cross-border cooperation in regulating global banks.

FSA已开始在最近几周实施其一些提案，发布规则，禁止银行保证奖金超过一年，要求至少三分之二的奖金金额在三年内支付。当局还制定了新的流动性要求，要求银行持有更多现金和政府债券 - 这些资产可以在危机中迅速出售，以提高现金。FSA明确表示，该规则将适用于在U.K的海外公司的子公司和分支机构。

鉴于英国银行业的重要性，让金融体系恢复健康至关重要的恢复更广泛的经济。根据国家统计局办公室的初步估计，该国国内生产总值截至第三季度的第三季度0.4％。虽然这是对第一季度GDP下降的严重2.4％的改善，但甚至作为法国，德国和美国的衰退仍然陷入衰退。

“问题是，我们对金融部门和房地产市场产生的收入变得太依赖，而且伦敦汇丰银行的经济学家Karen Ward说，这是非常依赖的财政部门和房地产市场的收入。”“所以政府雇用了额外的护士，额外的教学助理，并花了经济部门产生的金钱，在那里生长只有真正看待暂时的经济部门。”

The sheer cost of meeting those public spending obligations is rapidly mounting, adding to the Labour government’s woes. The government is projected to borrow a net £178 billion, or 12.6 percent of GDP, this fiscal year. Welfare costs have surged as the unemployment rate has risen to 7.9 percent in August, up from 5.3 percent in August 2007.

The Bank of England is also using every means at its disposal to try to spark a turnaround. The bank has kept its key short-term lending rate at a record low of 0.5 percent for the past eight months in a bid to spur activity. And like the Federal Reserve Board, the bank has engaged in quantitative easing to get credit flowing again. The central bank has purchased £164.4 billion of U.K. government bonds, fully 95 percent of the £175 billion it has committed to buy, according to HSBC’s Ward. That represents more than three quarters of the government’s projected bond sales of £210 billion this fiscal year. Some analysts believe the poor third-quarter GDP report may prompt the bank to expand its bond purchases.

To close the yawning deficit, Darling earlier this year announced that the government would impose a tax rate of 50 percent on individual incomes of more than £150,000 a year, beginning next April. The move has raised the hackles of the City of London’s financiers and entrepreneurs and prompted a few to quit the country; Guy Hands, the founder of private equity group Terra Firma Capital Partners, relocated to the Channel Island of Guernsey.

Inevitably, the government will have to consider other tax hikes and spending cuts to close the deficit. How and when to do so has become a key issue in the pre-electoral debate between Labour and the Conservatives. Osborne has proposed that a Tory government would slash government administrative costs by one third and freeze the pay of most civil servants in 2011, among other measures.

Darling argues that making cuts now merely runs the risk of triggering a fresh downturn. Many economists are inclined to agree. Says David Blanchflower, professor of economics at Dartmouth College in New Hampshire and a member of the Bank of England’s Monetary Policy Committee until May: "When you’re in a war — and make no mistake, we are in the most severe recession of our lifetimes — you deal with winning the war first, before you worry about paying back the debt."

For Darling the battle to restore the U.K.’s economic and financial health is far from over.