KRUGMAN: Has Gordon Brown, the British prime minister, saved the world financial system?

[BigBearJohn]

O.K., the question is premature — we still don’t know the exact shape of the planned financial rescues in Europe or for that matter the United States, let alone whether they’ll really work. What we do know, however, is that Mr. Brown and Alistair Darling, the chancellor of the Exchequer (equivalent to our Treasury secretary), have defined the character of the worldwide rescue effort, with other wealthy nations playing catch-up.

This is an unexpected turn of events. The British government is, after all, very much a junior partner when it comes to world economic affairs. It’s true that London is one of the world’s great financial centers, but the British economy is far smaller than the U.S. economy, and the Bank of England doesn’t have anything like the influence either of the Federal Reserve or of the European Central Bank. So you don’t expect to see Britain playing a leadership role.

But the Brown government has shown itself willing to think clearly about the financial crisis, and act quickly on its conclusions. And this combination of clarity and decisiveness hasn’t been matched by any other Western government, least of all our own.

What is the nature of the crisis? The details can be insanely complex, but the basics are fairly simple. The bursting of the housing bubble has led to large losses for anyone who bought assets backed by mortgage payments; these losses have left many financial institutions with too much debt and too little capital to provide the credit the economy needs; troubled financial institutions have tried to meet their debts and increase their capital by selling assets, but this has driven asset prices down, reducing their capital even further.

What can be done to stem the crisis? Aid to homeowners, though desirable, can’t prevent large losses on bad loans, and in any case will take effect too slowly to help in the current panic. The natural thing to do, then — and the solution adopted in many previous financial crises — is to deal with the problem of inadequate financial capital by having governments provide financial institutions with more capital in return for a share of ownership.

http://www.nytimes.com/2008/10/13/opinion/13krugman.html?hp=&pagewanted=print

[vaberella]

1. I say Obama saved the world since it was Obama's plan. But Brown had the power to execute.

Damn this election process.

[regnaD kciN]

2. The irony, of course...

...is that Brown is fairly certain to lose an upcoming election to the Tories. :-(

[Prophet 451]

5. Yeah but that's got little to do with him

Most of the complaints about Labour have little to do with Brown. Effectively, I think Blair handed him a poison pill by hanging on until the public distaste had spread from Blair to the party generally.

[regnaD kciN]

7. But the irony there...

...is that, if British elections had been held earlier, we probably would have had a Conservative P.M. who subscribes to the Republican philosophy of "private good, public bad," and never would have countenanced such an approach, let alone served as an advance guard for it -- and we might all be headed closer to a worldwide depression because of that lack.

[muriel_volestrangler]

8. No, Brown's unpopularity has been a significant part of Labour's problem

For instance, look at this poll from Sunday:

The Conservative lead over Labour has halved from 19% to 10% over the past month. Labour is up seven points to 33%, its best showing since January, while the Tories are down three on 43%. The Liberal Democrats are two points down on 14%.

Brown’s personal rating, while still in negative territory on minus 34%, shows an improvement of 19 points since last month and is the highest since March. By 33% to 27%, people trust him and Alistair Darling more than David Cameron and George Osborne to handle the crisis.

http://www.timesonline.co.uk/tol/news/politics/article4926891.ece

So Brown used to have a 'personal rating' of minus 53%! The same poll a month agohad:

Do you think Gordon Brown is doing well or badly as Prime Minister?
Very well 1
Fairly well 19
Fairly badly 34
Very badly 39
Don’t know 6

This time it was:

Very well 4
Fairly well 27
Fairly badly 34
Very badly 31
Don’t know 5


The only thing is that no-one in Labour could take over and get much better results. But it's clear that the events of the past month or so have had some of people thinking "well, Brown does at least know what he's doing with this stuff", and that is what has pulled Labour up in the polls - not enough to get them re-elected, for now, but not the rout it looked like earlier.

[Prophet 451]

9. I think it'll be a rout anyway

Essentially, we're now at the eleven year mark which seems to be about the upper limit of how long the British public will tolerate a single party. Thatcher lasted eleven years as well.

[cui bono]

3. Thank God It Passed.

:sarcasm:

[4lbs]

4. Well... America's been saddled with the worst administration in my memory for 8 years.

Has the head chimp finished reading "My Pet Goat" yet?

[Kolesar]

6. U.S. Treasury sec'y Henry Paulson...called for government purchases of mortgage-backed securities

Henry Paulson, the U.S. Treasury secretary, announced his plan for a $700 billion financial bailout, he rejected this obvious path, saying, “That’s what you do when you have failure.” Instead, he called for government purchases of toxic mortgage-backed securities, based on the theory that ... actually, it never was clear what his theory was.
...
I also wonder how much the Femafication of government under President Bush contributed to Mr. Paulson’s fumble. All across the executive branch, knowledgeable professionals have been driven out; there may not have been anyone left at Treasury with the stature and background to tell Mr. Paulson that he wasn’t making sense.

Luckily for the world economy, however, Gordon Brown and his officials are making sense. And they may have shown us the way through this crisis.
...

Ok, somebody has to say it...Heck of a job, Brown!