Transcript of speech given by the Prime Minister at the Foreign Press Association in London, 26 January 2009.
Read the transcript:
Prime Minister:
Let me say how pleased I am to be at the Foreign Press Association again. It is a week where there will be a huge amount of focus on the international economy as well as each of our national economies.
Across the world in every continent and every country we are confronting challenges we have never had to meet before - a failure in the banking system upon which we rely to fuel our economies, a fall in lending as banks face their greatest losses ever with businesses and families unable to access affordable credit, and that brings a cycle of low consumer demand, job losses and further reductions then in consumer demand.
These unprecedented challenges have demanded new policies, but they also demand new ways of thinking and governing. So in advance of the G20 London Summit, which will be held here in a few weeks time, I want to speak to you about how we can meet and overcome the crisis now, how we can map our recovery in Britain and internationally, and how by considered but radical reform of our global financial system we can ensure for each other’s countries the benefits in jobs and growth that will come only from shared policy responses and the coordinated international action that I believe we can undertake together.
By responding to the challenges we face now, and by acting together internationally for our future, our task is to replace uncertainty by clear action, insecurity with hope, and fear with confidence. Some say today that there is more to fear than fear itself, I say that by restoring confidence today we can be far more confident about tomorrow.
Our starting point is to ensure that we have the right diagnosis so that we can prescribe the right solutions.
The sheer scale and speed of recent events makes this no ordinary crisis, but one that is quite unprecedented. The crisis is clearly not the result of an ordinary cycle of domestic inflationary pressures leading to high interest rates that has been the common cause of most post-war recessions. The problems, linked country by country, were not triggered by domestic macroeconomic failures. There will be continuing debate about when, and why, and what went wrong. Regulators need to change, governments need to respond, and certainly excessive imbalances had built up over the years between the major economies. But the central challenge we face, and we have now to overcome, is an unprecedented failure in the international financial system.
Our banking systems and our national banking systems have been shown to be totally interdependent and interconnected and while the crisis started in the United States of America, its effects are worldwide. Trillions of dollars of United States securities are held by non-United States institutions. Some estimates suggest it is as much as $4 trillion that have passed from America to the rest of the world, and a large proportion of these are held by European banks. And as these assets are written down the banks’ ability to support new lending is severely reduced with real direct and severe repercussions on businesses and families.
Securitisation, which is the packaging up and selling of these assets across the markets, was meant to diversify risks across the system. Instead a mechanism to spread risk became a means of spreading contagion. And what was originally thought to be an ingenious way of bringing in non-bank investors such as pension funds became instead, as banks bought each other’s securitised assets, the source of huge interbank exposure and over-leveraging. And as the sources of funding dried up, non-bank investors have retreated to the safety of government debt. At the same time banks facing losses on their overseas lending have increasingly retrenched to the familiarity of their home markets and the result has been a capacity gap with countries suffering from the loss of foreign and non-bank lending capacity which gave money to borrowers, whether it is businesses or home owners.
In Britain, somewhat contrary to popular perception, UK bank lending actually grew in the third quarter of last year by nearly 4%, but non-bank lending fell and overall UK lending by non-UK institutions has fallen by £100 billion since the second quarter of 2007. So foreign banks’ lending capacity has been cut and it is in order to fill that gap that we put forward last week a programme of support for the economy with an expansion of new lending.
And let me explain how the programme is one of three essential building blocks for recovery that we have put in place in recent months here in Britain, our stability and recovery plan to respond to the impact of the world financial crisis.
First, of course, was bank recapitalisation to prevent the banking system which provides the life-blood of our economy from collapsing. If we had not put together the banking rescue scheme of last October, pensioners could have lost years of savings and hundreds of thousands more jobs in this country would have been lost, with millions more put at risk. But because we did what we did, today no ordinary UK savers have lost their deposits and now every major country of the world has followed us with similar action and we have provided banks with the capital to enable them to absorb increased losses.
Our second action has been a monetary and fiscal stimulus for the economy. The Bank of England has moved quickly and decisively to cut interest rates, to help borrowers in the housing market and companies needing funds to continue to invest, and it has done so with an unprecedented degree of coordination with other central banks across the world. And today our interest rates are at their lowest level in history. Since the Bank of England started cutting interest rates in October last year, over 4 million home owners on tracker mortgages have seen cuts in their monthly payments averaging around £150. And now with inflation falling sharply, government debt levels low by international standards, and with the effectiveness of monetary policy potentially weakened by continuing strains in the financial system, it has been both necessary and prudent to accompany this radical monetary relaxation with the major fiscal stimulus we announced in the Pre-Budget Report.
So we have increased investment in our infrastructure, we have raised the pension, increased child benefit, cut VAT, lowered taxes by raising tax allowances, and we have taken targeted action to try and prevent the short-term impact of the recession from having long lasting effects on productivity and confidence, new support for those losing their jobs to find a new job or a new skill quickly, while helping people suffering a large drop in income to avoid repossessions. And we will continue to invest now in the programmes that will ensure our country’s future success in the digital low carbon competitive global economy that will matter so much in future years.
But equally we will not do anything to put our long term fiscal strength at risk. The Government’s cost of borrowing is low, our inflation target remains the anchor of our policy. We have put in place plans to restore fiscal balance as the economy recovers, we have measures that include a modest increase in tax, paid by higher earners, and firm control over public spending.
Moreover, the money that we are using to support the UK banking system is not free money, it is being used to acquire assets, or being provided in the form of guarantees of lending in return for commercial fees. Over £16 billion, some two-thirds of the loan to Northern Rock which the Bank of England provided last year, has already been repaid and ahead of schedule.
The third element of our domestic recovery plan is the credit stimulus we are giving to remove the obstacles to lending. We have a £21 billion support package for businesses with a turnover of up to £500 million, and last week we set out a wider set of measures focused on increasing the amount of lending available to mortgage borrowers and to the larger businesses who want to invest and create jobs. So our policy is aimed at recreating an efficient, responsible and profitable banking system where there are appropriate rewards for the next generation of private capital which we want to encourage to enter this industry.
So these are the three stages of our stability and recovery plan for national economic security: a stabilisation of the banking system; the monetary and fiscal stimuluses we have announced; and last week’s announcement of our programme to support the expansion of new bank lending. And together they are designed to bring security for savers, security for jobs with real help now to get people back into work as quickly as possible and to protect existing jobs, security for homes to ensure no unavoidable repossessions for those who have lost their jobs or suffered sharp falls in income, and security of finance so that credit-worthy businesses can get access to the funds they need to invest and create jobs now and in the future, and those who can afford a mortgage can get one. And it means security for our economy in the future with investment in the infrastructure and new sectors of the economy that form the foundation of our future growth and prosperity.
The lesson of recent events is when banks fail and markets falter, it is only governments who can step in to provide the economic security that businesses and families need. But at each and every stage the benefits in jobs and growth that flow from such actions can be multiplied greatly if they are coordinated with our international partners.
So while we can do a great deal nationally, we have to act internationally. If what happens to a bank in one country can within minutes bring potentially devastating effects on banks in a different continent, then only a truly international response in policy and in governance can be effective. And if we all coordinate our response then there will be a quicker global and British recovery.
We know now that financial institutions are international, that capital flows are global, but their regulators and supervisors have remained so far only national. So we have highly interdependent financial flows which dwarf world GDP, but as yet no effective system for policing them. And as the downturn spreads across the world we are for the first time seeing cross-border flows growing more slowly than domestic flows and we are seeing banks favouring their domestic lending over foreign lending. And this is a trend which must be halted if we are to avoid the risk of a damaging worldwide spiral of deleveraging and then deglobalisation with adverse consequences for all our economies. We can sustain a consensus for an open global economy where countries can draw on their deep capital markets to finance faster development which benefits us all, but only if we can provide also a means of responding when these markets fail.
We have not yet seen the same protectionism in trade with ‘beggar thy neighbour’ policies such as the 1930s, and I will fight hard to ensure we do not. But we will also need to ensure that we do not exercise a new form of financial protectionism or mercantilism, a retreat into domestic lending and domestic financial markets. This is the deglobalisation threat. The stakes are high. Unless we create a new consensus which embeds international financial markets in a framework that is global in governance and accountability, I fear that the legitimacy of globalisation will be lost and public support for it will erode, imperilling all our prosperities.
So we face a choice: we could allow this crisis to start a retreat from globalisation, as some want. We could close our markets for capital, financial services, trade and for labour and reduce the risks of globalisation, but that would reduce global growth, deny us the benefits of global trade, confine millions to global poverty. Or we could view the threats and challenges we face today as the difficult birth pangs of a new global order and our task now is nothing less than making the transition through a new internationalism through the benefits of an expanding global economy, not muddling through as pessimists but making the necessary adjustment to a better future and setting new rules for this new global order.
Now more than half a century ago world leaders, educated by the mistakes of the 1930s, concluded that the era of a failed laissez faire and of absentee government was over. They created not just new international institutions like the International Monetary Fund and the World Bank, but they also created a new set of rules for the international economy and they gave expression to a new global public purpose that prosperity had to be sustained to be shared.
Now today, aware of our dependence upon each other, conscious of the risk of a new financial protectionism, we need to summon up that same public purpose. History is not destiny, it is the sum total of the choices of each generation. The answer to the present crisis is not to let it take its course or just to muddle through, not just hoping that things might get better, but to take action internationally as well as nationally that will secure for this and future generations the benefits of a truly global market while at the same time taming its excesses.
Our aim must be an international financial system for the 21st century that recognises all the new realities, that we are in open - not sheltered - economies, international – not national – capital markets, global – not local - competition. What our predecessors did for the different world of the post-war era of discrete national economies, we must now do for the post-national economies, for the global economy in which economically no nation is an island.
Just as bank recapitalisation and fiscal expansion programmes were taken up round the world, so we now need the widest possible international agreement on how to proceed to the next stage as we focus on the London G20 Summit at the start of April. The priorities I believe are clear.
First, as I argued almost ten years ago in Harvard, we need an early warning system so that international financial flows are properly monitored and systemic global imbalances are not allowed to develop and become potential sources of instability. As a first step we must build upon the platform of the Financial Stability Forum to create the framework for international governance that we currently lack. I am therefore keen for the membership of the Financial Stability Forum to be widened, for its role working with the IMF and the Bank of International Settlements to be put on a clearer and stronger footing.
Secondly, we need at a global level to consider the regulatory deficit. For the last decade I have been making the case that the current patchwork of ad hoc international regulation is inadequate. When capital flows are global, but regulators only national, we have to agree a new era of global cooperation and coordination so that we have a common set of principles and new rules for a world of global capital flows. At the G20 in April we should seek to discuss the charter of principles that would guide financial regulation and supervision and one which we can all follow. Under this we need to bring into the regulatory system non-bank financial institutions and complex new markets and products. If financial firms are doing similar things then the principles by which they are regulated must be the same, regardless of their business models and countries of origin.
And third, just as the regulatory system has to accept common standards, so too must financial institutions. We need agreed transparency and agreed standards of corporate governance, including an international standard of best practice for financial institutions. We need to consider how best to strengthen risk management and incentive structures inside banks. Rewards need to be linked, not to short term irresponsible and excessive risk-taking, but to hard work, merit, enterprise and long term and responsible risk-taking. Boards and audit committees backed by auditors who are truly independent must show that they understand the magnitude of the risks being taken because of the complexity of new products. The simple rule of a board must be if you don’t understand the risk then don’t take it.
To seek to address a damaging worldwide spiral of excessive and disorderly deleveraging, Alistair Darling and I will be inviting the world’s largest international banks’ Chief Executive Officers, whose activities support growth and jobs in many different countries, to meet us in advance of the G20 and discuss how we can prevent what I have called the retreat into financial mercantilism.
I would propose that we also look at other ways of dealing with global deleveraging. Half of the increase in debt in recent years has been the result of transactions within the international financial system itself, not lending to business and households. Instead of reducing lending to the real economy we should consider, as the Governor of the Bank of England has suggested, the viability, complex as it might be, of reducing their exposure to each other.
Over the coming weeks as we prepare for the G20 we will be considering with our partners to what extent international financial institutions and development banks might increase their lending to offset the withdrawal of private sector banks. This is relevant, especially in countries where unlike for example the UK, the rapid withdrawal of capital cannot be counteracted by national Exchequers. This could mean the International Monetary Fund and other financial institutions playing a bigger role in crisis prevention as well as crisis management, lending to replace private sector flows and thus to enable the restructuring of the domestic financial system in many countries.
An enhanced role for the World Bank could mean increased lending to vital infrastructure, environmental and poverty reduction projects, and providing an active cyclical boost to the global economy. To help global trade, which is declining, the International Finance Corporation could step into the breach for export finance. It has trebled its trade finance to 3 billion but the trade finance gap could be as high as 25 billion.
Let us therefore be clear. This is an international economic hurricane sweeping the world and lashing our country but we are taking action to calm the storm, to bring order out of chaos. Britain is better placed to benefit as the storm passes, as pass it will. We will succeed, but only if we leave behind yesterday’s solutions and reshape our international institutions for the challenges of today and tomorrow.
And let us never forget that this is about people’s lives and their livelihoods, it is about economic reality and a steady resolve to do what is right for Britain and the world in a testing time. As we do what is right here to deal with a crisis that is global in cause and scope, so Britain will lead in the reform of our global financial system and we will lead so that we can advance recovery and we can prevent a crisis such as this from ever happening again.
Thank you very much.
Question:
We have seen a flight from sterling dramatically, and [indistinct] said that the British economy has finished because there is nothing to sell, oil and the City is collapsing. What do you think of it – is it true or not?
Prime Minister:
First of all there is a long history of trying to target the exchange rate, not only in our history but in the history of many countries. There have been long attempts to target the rate of exchange, whether it be shadowing the deutschmark, shadowing the ERM, being part of the Exchange Rate Mechanism. British policy is not based on targeting the exchange rate, it is based on targeting interest rates through inflation and it is our low inflation that is absolutely central to the policies that we are pursuing.
As far as the British economy is concerned, we have low public debt, we have low inflation, we have low interest rates. Corporate debt in our country – that is the debt owed by companies – is far lower than in any previous times when we have faced international difficulties. We are in a strong position because we have taken action early, both to recapitalise our banks and to inject resources into our economy. We are fortunate that other parts of the world are also doing similar things. Now we all have the same challenge. Every country represented here today has the same challenge, and that is the resumption and extension of lending by the banks to business and to individuals. That is why we put our proposals over the last few days to ensure the extension of lending. We have now a scheme in place for small businesses, we have working capital available for medium size businesses, we have just announced measures that will help the larger businesses.
While this crisis is unprecedented, because it is as I said a failure in the international banking system, I believe that we are putting in place the measures that will not only take us through this problem but will also prepare us best for the future. Let us remember that most of our new investment is in the new areas of the future: to get education and skills levels up, to invest in the environment, to invest in the digital industries of the future, to make sure that we have the correct physical as well as technological infrastructure to prepare for the future. The expansion in public investment of about £10 billion between last year and the coming financial year is designed to achieve all these things.
So I am confident that the British economy, while facing this international storm, is in a better position than in previous downturns to deal with its problems and I am confident that we are putting in place the right measures to deal with it. But my point today is this, that for one nation to be able to move through these difficulties you need cooperation and coordination of policy across the world. If this is a set of global problems then you need a set of internationally coordinated actions, and that is why I have proposed new roles for the International Monetary Fund and the World Bank today and a new set of standards and principles that can be accepted by all countries.
Question:
One of the reasons why the British Government has chosen not to participate in the euro has always been that the British economy was out of sync with the rest of Europe, and now it seems all connected. So do you see any future in the UK joining the euro, do you think that would have made a difference, and is that part of that international framework you are talking about?
Prime Minister:
What is connected is the banking and financial systems. That is rather different from saying that your macroeconomic policy and the growth path of your economy is exactly the same. But what has been shown in the last few weeks is this. Most of the exposures that have caused trouble in Britain are international exposures, either to sub-prime mortgages in the States or by international acquisitions that have been less valuable than people thought. And half the lending in Britain over the last ten years has been by foreign institutions and non-bank institutions. So the interconnectedness of the world economy, perhaps it is shown best in eastern Europe at the moment where German, Austrian, Italian and Belgian banks are pulling out of eastern Europe because they are obviously having to deal with some of their domestic problems and there is a loss of lending capacity in eastern Europe.
So the whole world is interconnected. The question then is how do you have an international system that works so that people can be absolutely sure about what is being lent, absolutely sure about the assets and liabilities, and absolutely sure that the practices that are being followed are the right ones? That will need supervision and acceptance of a role for international cooperation, not just within Europe but right across the world. Everybody knows this is global, but when you look at the means by which we have to deal with the problems, most of the regulation and supervisory systems are either national or regional, and what I am saying today is that we have to have the global cooperation that is necessary.
Question:
Could I ask you to what extent, Prime Minister, would you urge other countries to take up the sorts of measures of guaranteeing loans that you put forward last week? And why do you think that it is that perhaps there is a reluctance to do so among your European partners so far? And if I could just allow Westminster politics to intrude for a moment, on the issue concerning your four Labour Peers, have you considered withdrawing the Whip from them for the time being given the gravity of the charges they face?
Prime Minister:
Well first of all on your first question, I think the Dutch have just announced today that they are following a similar insurance-based model. What you have got to do is deal with the difficult assets in banks and find a way of allowing the rest of the banking system, which is healthy, to move forward. Every country is looking at how it can do this so that they can actually expand lending. They are not doing it to deal with the problems of the past, they are doing it because it is only by dealing with the problems of the past that you can get the expansion of lending for the future. So there are different models, there are a great deal of similarities between them. This morning the Dutch government announced that it was doing an insurance-based model very similar to what we have announced. There is flexibility in what we have announced and what we can do. We are having discussions obviously with the banks themselves, but I have no doubt that the end product of this is, having capitalised the banks and stopped them collapsing, then having created greater demand in the economy through the expansion of the fiscal and monetary policy, we have now got to get the expansion of lending that is necessary to meet any rising demand. That expansion of lending relies on us using the Bank of England where the Governor has advocated to operate in a different way to lend directly to the corporate bond markets, as well as the measures we have taken for small businesses.
So it is absolutely clear that the rest of the world is dealing with Stage three. We perhaps have been in the lead in dealing with this. Perhaps people have questioned how this can be best done. I think our model is flexible enough to deal with the difficulties that we see and I think people will know that we are dealing with this problem so that the expansion of lending can take place.
As for the House of Lords, these are very serious allegations, it is precisely because of that that Lady Royall announced yesterday she would investigate the matter as an issue of urgency. I know that she will be meeting those who have been named. We have also asked the Sub-Committee on Lords’ interests to investigate this under the new procedures that now exist in the House of Lords. It is important that you don’t pre-judge these investigations but these are serious allegations, we are determined to get to the bottom of what has happened and whatever action needs to be taken will be taken.
Question:
Prime Minister you have been saying that this crisis started from America and now it is a global problem so it requires global action. Yes, there is no doubt that the US has the primary responsibility for the crisis, but for the rest of the world the UK has secondary responsibility for this crisis, as German Prime Minister Merkel criticised the US, also the UK, for not supporting their idea to have tougher regulation on hedge funds back in 2007, and this may be because the UK has so-called light touch regulation. So it is a little bit strange for the rest of the world to see the UK only demands coordinated action without admitting the UK’s responsibility. Don’t you see any responsibility for the crisis?
Prime Minister:
We have always advocated transparency in the hedge fund market and we have made proposals systematically to deal with those groups of financial institutions that are in what you might call the shadow banking system and not under the proper supervision which is there for the banking system as a whole. If you look back over the last ten years since the Asian crisis which revealed many of these problems, we have been advocating both the international supervision that is now seen I think by most people to be necessary, and reforms in transparency and disclosure. So Britain has continued to be in the lead of demanding reforms in those areas. Now every financial system will have to look at how it organises its affairs better in the future. What have been discovered are things that were unknown sometimes within companies to the boards of directors themselves. So every financial system will have to respond, but every financial system will have to find a way of working with international partners because if something that happens in America can affect every country in Europe, there needs to be a means by which the regulators and supervisors are more closely linked to each other, to identify the problems early, to deal with the problems, and then of course to make sure that the financial system is secure.
Most people’s dealings with the financial system are to have their savings made secure, to be able to get a loan for a mortgage or for a car. If you are a small business you want working capital, and the financial system must be able to show that trust and confidence is sufficiently restored so that people can feel safe and secure in the way they do this. Our proposals are for tougher regulation internationally as well as nationally. It is clear that starts with transparency and disclosure, but it is also clear that we have got to look at other ways that international cooperation can be effective in making the economy move forward. All of us have lessons to be learnt from these things, regulation will indeed change in every country as we learn the lessons of what is happening globally and apply them both nationally and internationally.
Question:
Prime Minister what kind of decisions, what kind of rules would you like to see in other European countries, what is the most important thing for you right now?
Prime Minister:
We are just setting up at the moment colleges of regulators. Colleges of supervisors or regulators will mean that if you take one big international company that is operating in many countries, then instead of it dealing with individual supervisors it will now deal with a group of supervisors brought together to look at the challenges and assets and liabilities and what is happening to one big international financial company. So that is one of the first steps that we are already taking. The second is to widen the net so that not only banks but non-bank institutions, every kind of financial institution is within the supervisory net. There will be issues about tax and regulatory havens that will have to be dealt with, there is absolutely no doubt that this is a problem that now has to be addressed. And as we move forward to the G20 we are proposing if you like a charter of principles that will govern the individual behaviour of each country, a charter that everyone can subscribe to, including the whole of the European Union. And I believe that the measures that then flow from that, whether they are in relation to hedge funds, or derivatives, or other financial products, will be in line with principles of transparency, proper disclosure and people assessing and managing their risks.
Question:
Prime Minister you have outlined the series of steps to boost the economy and get the banks lending again, how disappointed are you then that your action last week, designed to restore public and market confidence, has had the opposite effect?
Prime Minister:
I think you will see over the next few days and weeks how the measures that we announced last week are measures that are being discussed now in every country of the world. There is a danger sometimes in being the first to act on a particular set of measures that you think are important for the future, but I think you will see that every single country now is dealing if you like with the third stage of stability and recovery. First, they had to recapitalise their banks and of course while we took the lead, other countries did in the end think it was the right thing to do and it was a policy that stopped the collapse of the banks; secondly, every country is now looking at monetary and fiscal stimulus so interest rates are coming down, if they are not already down, and at the same time every country that I know of is injecting money into its economy by giving people more consumer power. The third stage is: if people have the power to consume and if you have prevented the collapse of the banks, how can we get them to expand their lending? And our measures over the last week have been to get the lending expanded to small, medium and large firms, and then of course get the home ownership market restored with new incentives and new opportunities for people to lend for houses. So as you go through the next few weeks I believe that you will see other countries adopting possibly not absolutely the same but similar ways of dealing with this problem. All of us have to deal with this and deal with it as quickly as possible and that is the need to expand lending.
I have just been explaining today that the problem that we have had in Britain is that while the domestic lenders such as our banks have increased their lending over recent months, that we have lost a number of foreign banks and non-bank institutions from the lending market, and so we have to replace them in one way or the other by a greater expansion of lending in other areas. So that is the problem that we are dealing with and while people were, as you know, surprised when the Royal Bank of Scotland had to write off so much, the policies that we are proposing are not for the past, they are for the future, they are about the expansion of lending. I believe that we will see other countries doing similar things.
Question:
[Indistinct] and what makes you so confident that the others will follow, given the fact that the FSA has failed dramatically to pick up the problems of Northern Rock, the problems at the Royal Bank of Scotland, and your [indistinct] record is actually not good at all. So why should the others follow you? And as you know the German government has already poured cold water on your insurance scheme that you have.
Prime Minister:
First of all the colleges of supervisors will be global, and the reason is that the international institutions themselves recognise that this is a better way of moving forward and I know that there is American support for this as well as European support. The second thing is that the problems that regulators all over the world have been dealing with is that they were monitoring solvency, but the issues became issues also of liquidity, and regulators will have to make sure that in future they are not just monitoring the solvency of a particular institution, but its liquidity, its ability to get funds. And I think that the other thing that people are recognising is that a range of institutions were outside the traditional banking system, but the methods by which they were supervised were different. I happen to think that the Financial Services Authority, which brought the different self-regulated bodies together in 1997 and 1998, was a major step forward. The fact that other countries have followed that model and are looking at that model for financial services regulation is actually a sign that that is the right model for the future.
But let’s be honest, regulators in every part of Europe, and in every part of the world, are recognising that they did not know enough about particularly the shadow banking activities of large institutions that were formally based in their countries. I believe that it is only by global cooperation that we can find an answer to these problems. If you have your national regulator in any country of Europe, he or she is having to monitor financial flows that are coming from all over the world, and particularly in this case from America. Now we know that half the sub-prime mortgage market in America was bought up by European institutions and the system by which the credibility of these assets was monitored depended on cooperation with America. Understanding what had actually happened in America, as well as the action of individual regulators in Europe is a more complex discussion than simply blaming one regulator. The system of international regulation has got to mean that if someone is buying massive amounts of assets from America, there is some way of communicating both the risks and the responsibilities that are attached to buying these assets up, and that is what didn’t fully happen and that is why we are having to deal at least with part of the problem is international supervision that works together.
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