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US blames Brown for UK economic woe

US Federal Reserve head Ben Bernanke has blamed the decision to take powers from the Bank of England the crux of the UK’s financial problems.

Speaking to the US senate committee for banking, housing and urban affairs before the vote on his re-election to be chairman of the Federal Reserve, Bernanke urged senators to not allow powers to be taken from the US central bank as the US government looks to diversify the US financial regulatory system.

Bernanke argued against stripping powers from the Fed because he said central bankers are vital in assessing both the macro-economy and complicated financial institutions and used the example of the Bank of England as a reason not to take regulatory powers from central banks.

He said: “In the UK, the political discourse is leaning very heavily towards increasing and adding the supervisory and macro-prudential responsibilities to the central bank. That comes from the experience of the last couple of years where the inability to have complete information greatly hampered the function of the central banks in address those financial stability issues.”

Bernanke said it was a “very serious matter” to essentially take central banks away from financial stability issues.

He said: “When the crisis hit – for example when the Northern Rock bank came under stress – the Bank of England was completely in the dark and unable to deal effectively with what turned out to be a destructive run and a major problem for the British economy.”

Prime Minister Gordon Brown took regulatory power away from the Bank in 1997 and moved much of the decision-making to the then newly-created FSA.

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