Peter Hoskin

April 2007: when Gordon ignored the warnings

Typically great stuff from the Standard’s Paul Waugh, who has delved into how G7 finance ministers – including one Chancellor Brown – were warned about the dangers of US subprime loans back in April 2007.  The guys sounding the alarm, in a briefing to Brown et al, were the hedge-funders Jim Chanos and Paul Singer, and they were left distinctly unimpressed by the response they received.  Here’s a key passage from Paul’s post:

“‘We were completely and officially ignored,’ said Chanos.

When asked if anyone present had subsequently had apologised for failing to heed the warnings, Mr Chanos replied:

‘Two people, but they shall go nameless – and unfortunately, nobody still in power today.’

That means G Brown was definitely not one of those who apologised for not listening.

Chanos added that he had even named individual banks that were at risk.

‘At that meeting I even disclosed that the entities I’m now putting up on the wall are leveraged 30 to one – you should worry about virtually all of them and you should be concerned, but I am betting with my clients’ money that there’s going to be a big problem here. So there was no doubt as to where I stood on the situation.’

I heard Chanos’ dynamite quotes while listening to Robert Peston’s excellent documentary on Radio 4 ‘Peston and the Money Men’ this week. Pesto is clearly on holiday and no one at the Beeb has spotted the goldust buried in the programme.

You can hear the key section HERE (listen from 12m 40s)

Chanos also makes a robust defence of hedgies, pointing out that many pension funds now act as clients, and says there is no evidence at all that short-selling drove the banking collapse.

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