Gordon Brown: Put rogue bankers in jail or risk another financial crisis

Gordon Brown was on the brink of quitting Downing Street after he finalised the City bailout in 2008, he reveals today as he calls for rogue bankers to be jailed.

The former prime minister uses the second extract from his memoirs to recount the final stages of the rescue package, as well as the attitude of “denial” from Royal Bank of Scotland chief Fred Goodwin, who he says should have been stripped of his previous bonuses.

Brown describes how on the morning in which he would announce the bailout at a special 7am press conference he asked his wife to gather their belongings in case he was forced to quit within hours.

“When I got up the next morning I told Sarah that she would have to be ready to pack our things for a sudden move out of Downing Street. If what I was about to do failed, with markets collapsing further and confidence ebbing from Britain, I would have no choice but to resign. As I walked into the office, I didn’t know if I’d still be there at the end of the day.”

Brown also stunned the square mile this morning but disclosing an attempt by Barclays to buy Royal Bank of Scotland.

It is his withering verdict on big lenders today, and the demand for reckless bankers to be thrown in jail, however, that is likely to attract most attention.

Brown, who was chancellor for 10 years before becoming PM, writes that “little has changed” since the promise in 2009 that the financial services sector would be “brought to heel”.

“One of the arguments for high pay in the banking sector – that they take risk – has not survived the crash,” he writes. 

“With many banks backstopped by the taxpayers, they make their profits at least in part because of the government guarantee. The risks they are taking is often not with their money but with ours. 

“And often bankers are not being compensated for risk but rewarded for failure. It cannot be right that Fred Goodwin walked away with all of his past bonuses untouched, a reported tax-free lump sum of £5m, and even after he agreed to halve his pension it still was said to amount to £300,000 a year.”

The coalition government created a new criminal offence of “reckless misconduct”, designed to deter irresponsible decision-making, but Brown argues that the fraud act of 2006 could also be used because it covers false representation and the abuse of position.

“If bankers who act fraudulently in this way are not put in prison with their bonuses returned, assets confiscated and banned from future practice, we will only give a green light to similar risk-laden behaviour in new forms,” he writes.

Gordon Brown: Why bank bailout put me on brink of quitting… and how Fred Goodwin was stuck in denial