Bernanke trashes Brown’s tripartite system

Gordon Brown’s much heralded tripartite regulatory system failed the first time it was faced with a financial crisis, proof that taking away regulatory powers from the Bank of England was a massive mistake. Now, Ben Bernanke — who is trying to secure a second term as Fed Chairman and keep the Fed’s regulatory powers intact — is citing the Brown model as what not to do, telling the Senate banking committee:

“[O]ver the past few years the government of Britain removed from the Bank of England most of its supervisory authorities. 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.”

As Paul Waugh points out, George Osborne and his team are rather pleased with this effective endorsement of their position by the Fed Chairman.