:00:15. > :00:18.This trailer was barely noticed when it first appeared on YouTube,
:00:18. > :00:24.now the American film, it seems, is creating turmoil across the Muslim
:00:24. > :00:28.world. After the Libya killings, more
:00:28. > :00:35.violent protests rock Egypt, Yemen, Tunisia and Bangladesh. Thousands
:00:35. > :00:37.take to the streets to condemn its portrayal of Islam. We ask if the
:00:37. > :00:40.Arab Spring has changed relations between the Middle East and the
:00:40. > :00:44.west. Remember this, it is five years to the day since panic broke
:00:44. > :00:48.out at Northern Rock, marking the start of five years of gloom.
:00:48. > :00:52.quite sure in the 50s or 60s, if a Chancellor stood up and said your
:00:52. > :00:55.money is safe, that would be the end of the conversation. Here in
:00:55. > :01:00.2007, nobody believes the Chancellor. The Chancellor of the
:01:00. > :01:06.time is with us here. We ask if he is convinced his decisions were the
:01:06. > :01:12.right ones. We ask our panel what lesson it is taught us about crisis
:01:12. > :01:17.management and fairness. The Hillsborough families waited 23
:01:17. > :01:21.years for truth, has the day of reckoning come.
:01:21. > :01:27.Serious questions have been asked today in Liverpool today, about a
:01:27. > :01:34.role played by a man who is now one of the country's most senior police
:01:34. > :01:40.chiefs. Good evening. When a 40-minute --
:01:40. > :01:47.14-minute trailer of it was posted on YouTube in June, not many people
:01:47. > :01:52.noticed. Now the Muslim world is in turmoil, over a film they believe
:01:52. > :01:56.denigrates the Prophet Mohammed and Islam. In Cairo heavy clashes with
:01:56. > :02:01.police, in Bangladesh, a thousand demonstrator gathered to burn the
:02:01. > :02:04.American flag. If the Arab Spring looked like offering a chance for a
:02:04. > :02:08.new kind of relationship between the Middle East and the west, the
:02:08. > :02:13.events of the last week have underscored the complex reality of
:02:13. > :02:17.what it has actually brought. Is this the thanks they get? The US
:02:17. > :02:21.consulate in Benghazi, wrecked, a year after America and other
:02:21. > :02:25.western nations did so much to help free Libya from dictatorship. The
:02:25. > :02:31.ambassador, such an enthusiast for Arab democracy, and three other
:02:31. > :02:37.diplomats, murdered. Today, the wave of anti-Americanism
:02:37. > :02:41.rolled on through the region, in Yemen protestors tried to storm the
:02:41. > :02:50.US embassy. In Iraq, they burned the stars and stripes, chanting "no
:02:50. > :02:55.to America, no to Israel". Meanwhile, in Egypt, police fired
:02:55. > :03:02.teargas at demonstrators on the third day of unrest. Apparently
:03:02. > :03:05.sparked by an obscure, amateur American film, said to insult Islam.
:03:06. > :03:09.Democracy in North Africa, supported by the space, gives space
:03:09. > :03:15.to radical anti-western groups, that would have once been
:03:15. > :03:22.suppressed by the ubiquitious security forces. Soon after last
:03:22. > :03:26.year's uprising in Libya, Newsnight visit the liberated town of Derna,
:03:26. > :03:31.famous and notorious for sending an unusually high number of Jihadis to
:03:31. > :03:35.fight the Americans in Iraq. Intelligence sources believed some
:03:35. > :03:39.such former Jihadis returned to the anti-American fight in their own
:03:39. > :03:45.country last year. Joining the revolutionary militias, and keeping
:03:45. > :03:51.the weapons, even after Gadaffi was overgrown. This reformed Libyan
:03:51. > :03:56.Jihadi, once intimate with the Al- Qaeda leader, says he knows the
:03:56. > :04:01.groups influenced by Al-Qaeda, were behind the attack on the US
:04:01. > :04:05.consulate. Al-Qaeda is influencing them, it is, I can say I'm
:04:05. > :04:09.comfortable to say, it is firsthand information, I obtained this
:04:09. > :04:15.information from Al-Zawahiri himself. They believe Libya is
:04:15. > :04:21.stragically can be the hub of a Jihadi struggle or conflict, --
:04:21. > :04:28.can't be the hub of Jihadi struggle or conflict, but it should be used
:04:28. > :04:31.as a back yard, or logistic space for a bigger Jihadi Islamic battle,
:04:31. > :04:35.which is Egypt, Algeria or both of them. America can't reverse the
:04:35. > :04:38.Arab Spring, but the question now for Washington is how to respond to
:04:38. > :04:42.the dangers it throws up. Should it continue, as President Obama has,
:04:42. > :04:47.to be wary of intervention. Should it avoid appearing to tread too
:04:47. > :04:52.heavily in the region, for fear of exacerbating further resentment. Or
:04:52. > :04:55.has it become, as many Republicans feel, too indecisive, and
:04:55. > :05:01.apologetic. America, they feel, needs to make
:05:01. > :05:07.clearer what it stands for. What the United States needs to do is
:05:07. > :05:11.take the kind of leadership that will organise the international
:05:11. > :05:16.community to address these crises, it doesn't appear that is happening
:05:16. > :05:19.in the way that is productive and gets the results we want. Which are
:05:20. > :05:24.basically not to have to enter at the military level. I think it
:05:24. > :05:32.leads to others feeling the kind of power vacuum, and often those that
:05:32. > :05:36.come to fill the power vacuum are radical Islamists.
:05:36. > :05:40.But while America still has widespread support in Libya, shown
:05:40. > :05:44.by today's pro-western demonstration in Benghazi, some
:05:44. > :05:48.think it should help the Libyan Government to track down the
:05:48. > :05:51.ambassador's killers, not try to launch its own strike against the
:05:51. > :05:56.terrorists. If make now is involved again, based on this strategy on
:05:56. > :06:03.tactics, it means all the work done by President Obama's administration,
:06:03. > :06:09.it will disappear, and go like a waste of time, and assets as well.
:06:09. > :06:14.I believe America, to a certain extent, has been successful, it
:06:14. > :06:18.managed to pull itself out of the "war against terror", that is very
:06:18. > :06:24.important of the future for relations for America and the Arab
:06:24. > :06:29.world. It is a balancing act, not just for America, but also new Arab
:06:29. > :06:33.leader, like Egypt's Islamist, Mohammed Morsi, in Europe this week
:06:33. > :06:39.to seek western financial help for his country. TRANSLATION: We never
:06:39. > :06:47.accept, we can't agree, we stand against anyone who harbours these
:06:47. > :06:52.false slogans or calls this hatred among the people, or insensitivites.
:06:52. > :06:56.We cannot accept that there is such empty or aggression against
:06:56. > :07:02.embassies, consulates, origins people, or the killing of anybody
:07:02. > :07:06.no matter how. This evening clashing resumed in
:07:07. > :07:10.Cairo, despite an attempt by Google to calm the anger by blocking
:07:10. > :07:15.Egyptian access to the controversial film. Tomorrow, plans
:07:15. > :07:20.for an even larger demonstration will further test the increasingly
:07:20. > :07:24.ambiguous relations between America and the new Arab democracies.
:07:24. > :07:29.Let's discuss this with the former British ambassador to the United
:07:29. > :07:32.Nations, Sir Jeremy Greenstock, in the studio, and from Washington,
:07:32. > :07:36.the former US secretary of defence, Paul Wolfowitz. Thank you very much
:07:36. > :07:40.for joining me. Jeremy Greenstock, are you surprised by how much this
:07:40. > :07:45.has spread, do you think the film itself had anything to do with it,
:07:45. > :07:49.or is that symbolic of something else? The film is definitely the
:07:49. > :07:55.immediate approximate cause, but there are people on a spring out
:07:55. > :08:00.there, waiting to show their anger, or to express their resentment at
:08:00. > :08:03.any insult they see coming their way. Remember, that the most
:08:03. > :08:07.significant feature of the whole Arab Spring, country by country, it
:08:08. > :08:14.is the same everywhere, and it goes beyond the Arab world, is that the
:08:14. > :08:17.voice of the people is now more powerful political phenomenon. And
:08:17. > :08:20.there are different parts of the voice of the people, they can
:08:20. > :08:28.express themselves now. The security forces aren't able to deal
:08:28. > :08:33.with all the emnations of that. you think it is spontaneous, and
:08:34. > :08:38.one paper here in the UK is suggesting this was the result of a
:08:38. > :08:41.serious security breach, and the whole thing was planned, and secure
:08:41. > :08:44.documents have now gone missing from the embassy in Libya. Do you
:08:44. > :08:48.know anything about that, would that surprise you? Look, I think
:08:48. > :08:51.there is a lot we still don't know about who organised the
:08:51. > :08:56.demonstration, how they happened. They are probably different in each
:08:56. > :09:01.place. What took place in Benghazi was not a spontaneous outburst of
:09:01. > :09:09.popular anger, it was a nightime attack, with mortars and heavy
:09:09. > :09:11.machine guns, by probably a rather small armed group. I think There
:09:11. > :09:15.are issues between the United States and the Arab world, and we
:09:15. > :09:18.shouldn't expect them to be solved any time soon, this is a huge
:09:18. > :09:23.upheaval. But what we are seeing, as much as anything, is a fight
:09:23. > :09:26.within the Arab world, in July the Libyans had a remarkably peaceful
:09:26. > :09:30.election, in which the Muslim Brotherhood came in a distant
:09:30. > :09:35.second, and these extremists barely showed. The Libyan people really
:09:35. > :09:38.voted for a very religiously conservative, but moderate approach
:09:38. > :09:42.to politics. But the people with the guns have a different view of
:09:42. > :09:47.things, this was done with guns. None the less, it was your
:09:47. > :09:50.ambassador that was targeted o killed, it is the US embassies in
:09:50. > :09:55.other cities that have been targeted, this is about making the
:09:56. > :09:59.US the external enemy, once again, isn't it? Well, it's also about
:09:59. > :10:02.terrorising people, about saying that if you stand up for reasonable
:10:02. > :10:06.positions you can be killed. I think it's very important to stand
:10:06. > :10:11.up to this kind of terror. It is, at least in the case of Libya, we
:10:11. > :10:15.are really talking about armed extremists. Unfortunately, as much
:10:15. > :10:19.as Libya owes its freedom to the United States and your country, and
:10:19. > :10:24.France and others who came to their assistance, the people who did the
:10:24. > :10:27.arming and training of the Libyan militias were very heavily
:10:27. > :10:34.dominated by extremists, we are seeing one of the results of that.
:10:34. > :10:39.It is very interesting, that line about owing your freedom, the sort
:10:39. > :10:43.of Kalaban line comes in, you talk my language, and my prophet is, I
:10:43. > :10:46.can curse you with it, as a paraphrase, a lot of people will
:10:46. > :10:51.look at what happened in the Arab Spring and say, this is what you
:10:51. > :10:55.get? I think when a space opens up, with a new political arrangement,
:10:55. > :10:59.things can get worse before they get better. You can't look for a
:10:59. > :11:03.steady graph of improvement, it is going to be a very jagged curve.
:11:04. > :11:08.You could say things have got worse, in the sense that, this wouldn't
:11:08. > :11:14.have happened under a Gadaffi, this wouldn't have happened under a
:11:14. > :11:17.dictatorship? Yes, but this is a horrid period, and a horrid
:11:17. > :11:21.incident against American diplomats and citizens. But, it's not going
:11:21. > :11:25.to be the only thing that counts on the score of whether this was
:11:25. > :11:29.worthwhile or not. It's going to be a long process. It will be a
:11:29. > :11:32.generational process. Some bad things are going to happen.
:11:32. > :11:37.American Embassy was attacked under Gadaffi, to be clear, except we
:11:37. > :11:41.knew who was behind it. It was very clear then. What we reasonably know
:11:41. > :11:45.now, it is very important to say this, is this is not a popular move
:11:45. > :11:49.by the Libyan people. The Libyan people, are, for the most part, I
:11:49. > :11:52.believe, we haven't taken opinion poll, shocked and disgusted by what
:11:52. > :11:57.was done to somebody who was deeply committed to the future of their
:11:57. > :12:01.country. And they know it. Now the question is, can that sentiment be
:12:01. > :12:05.mobilised to an effective reaction against these extremists, and to
:12:05. > :12:09.talk about some obscure film is a distraction in that case. What
:12:09. > :12:13.would you make of Mitt Romney today, when he said American leadership is
:12:13. > :12:17.still sorely needed, and American leadership is made necessary by
:12:17. > :12:22.this. Do you agree with this, or is it time to take a back seat?
:12:22. > :12:26.think the back seat is part of the reason we got into this situation
:12:26. > :12:31.in Lybia, where the people with guns are not connected to the
:12:31. > :12:34.United States. We would have been in a stronger position if they had
:12:34. > :12:39.been armed and trained by the United States and the NATO allies.
:12:39. > :12:46.The strategic point here, is you have 1.5 million people in the
:12:46. > :12:51.Muslim world -- 1.5 billion world, I would say the high end of it, 10-
:12:51. > :12:55.20% share these views. The other 80% are in danger of being
:12:55. > :12:58.terrorised it into silence or some kind of complicity. It depends on
:12:58. > :13:01.how you define leadership. Those people hope for the United States
:13:01. > :13:05.to be there to help them, not just the United States, but Europe as
:13:05. > :13:08.well. What do you make of this idea that they should have been armed?
:13:08. > :13:11.The diplomats should have been armed? No, when he was talking
:13:11. > :13:16.about part of that uprising and the intervention? The fact that arms
:13:16. > :13:23.are awash amongst the people is extremely serious. It makes it that
:13:23. > :13:26.much more difficult to defend yourselves. You need, against this
:13:26. > :13:30.potential disaster, a day you can't predict, you need very large
:13:30. > :13:34.security forces around an embassy then. This idea of leadingship,
:13:34. > :13:38.that you can go in and change the character of what's happening in
:13:38. > :13:43.the Arab Spring, is misplaced, in my view. It is the people who are
:13:43. > :13:46.speaking, and it is going to go wrong in certain aspects. But we
:13:47. > :13:51.can't intervene from outside. It is not taste of the leadership of
:13:51. > :13:55.outside people. Last word to you, Paul Wolfowitz? The people weren't
:13:55. > :13:59.speak anything Benghazi, it was a handful of harmed extremists, we
:13:59. > :14:02.were told if we arm the Libyan opposition, then the country would
:14:02. > :14:05.be awash in weapons, so we didn't arm them, it is awash in weapons,
:14:06. > :14:09.but they are weapons in the hands of people that are not particularly
:14:09. > :14:14.friendly to us, and are not friendly to the majority of the
:14:14. > :14:19.Libyan people. I think that point, look maybe leadership is the wrong
:14:20. > :14:24.word, but very strong supportership, the people in Libya who are
:14:24. > :14:28.embattled now, need our help. agree. Five years ago today, the
:14:28. > :14:33.BBC learned of a crisis at Northern Rock bank, what happened that
:14:33. > :14:37.evening, and over the days to come, signalled the start of the worst
:14:37. > :14:42.credit crisis this country has ever seen. The run on Northern Rock, the
:14:42. > :14:45.eventual nationalisation of it and other banks, was something no-one
:14:45. > :14:48.saw coming. We revisit the decisions made during that crucial
:14:48. > :14:52.period, and ask if they were the right ones, and what precedent they
:14:52. > :14:56.set to deal with economic crisis in the future. At the moment we speak
:14:56. > :15:03.to the architect of the bank bail outs, former Chancellor, Alistair
:15:03. > :15:06.Darling. First, Paul Mason's reflections.
:15:07. > :15:09.I can announce today, following discussions with the Governor of
:15:09. > :15:12.the Bank of England, and the chairman of the FSA, should it be
:15:12. > :15:16.necessary, we, and the Bank of England, would put in place
:15:16. > :15:20.arrangements that would guarantee all the existing deposits in the
:15:21. > :15:24.Northern Rock bank. Of this the day Alistair Darling finally guaranteed
:15:24. > :15:28.the deposits of Northern Rock savers, outside a Northern Rock
:15:28. > :15:32.branch in Golders Green, it was the day a decade of political spin
:15:32. > :15:37.collided with Labour's reputation on economic management. I'm quite
:15:37. > :15:43.sure in the 50s or the 60s, if Chancellor stood up and said, "your
:15:43. > :15:47.money is safe", that woobt end of the conversation. Here, in 2007,
:15:47. > :15:52.nobody believes the Chancellor. not? Because Mr Blair has told too
:15:52. > :16:02.many lies. If you look at the cuttings from 2007, not many
:16:02. > :16:15.
:16:15. > :16:20.predicted there would be a crash. Now who wrote that? Well, me. So,
:16:21. > :16:28.why, six months later, was I surprised when Northern Rock went
:16:28. > :16:31.bust? I covered the dotcom boom in the 1990s, I became convinced the
:16:31. > :16:35.technology-driven upsurge it provided was real. And banks are
:16:35. > :16:40.opaque, you are not supposed to know bank is going bust until it
:16:40. > :16:45.does. The FSA said its supervision of Northern Rock was, basically, a
:16:45. > :16:48.fiasco. It involved, "a level of engagment and oversight by
:16:48. > :16:54.supervisory line management below the standard we would expect for a
:16:54. > :16:57.high-impact firm". By the time RBS was going bust, one
:16:57. > :17:02.year later, things had become more fluid. I was getting calls three
:17:02. > :17:06.days before the event, saying RBS can't meet its overnight
:17:06. > :17:10.commitments, but you can't report rumour, and they were
:17:10. > :17:14.unsubstantiated. Even a year later, when Lehman Brothers went burst, if
:17:14. > :17:19.I think back to what was in my head, I did not grasp the catastrophe
:17:19. > :17:25.that was to come. By August 2008, I had people telling me a major bank
:17:26. > :17:34.was going bust. I blogged this was being rumoured, and was greeted
:17:34. > :17:40.with a storm of amuse, told to repeat fact not comment. In they
:17:40. > :17:45.arey, the loss of Lehmans, on top of Meryl, and on top of fanny and
:17:45. > :17:48.Freddie, and bail outs there, should provide the basis of
:17:48. > :17:53.recapitalising the banking system, and in one or two years, the easing
:17:53. > :17:57.of credit crunch. That is the they arey, we don't know how many big
:17:57. > :18:01.nasty possibilities there are out there. Why, on the day Lehman
:18:01. > :18:05.Brothers went bust, did I think we would avoid the crash? Thinking
:18:05. > :18:09.back, because the experts tell you there is a technical fix that won't
:18:09. > :18:12.stop a investigation, but will stop a crash, you tend to assume the
:18:12. > :18:16.politicians and the regulators will do it. But they didn't.
:18:16. > :18:20.We know a lot more now than then about the structural problems we
:18:21. > :18:26.face. But for me, the past five years have come to seem less like a
:18:26. > :18:29.deep crisis of capitalism, more like a fiasco of politics and
:18:29. > :18:32.regulation. That's what the people outside
:18:32. > :18:38.Northern Rock were worried about on that fateful day, and they might
:18:38. > :18:42.have been right. The former Chancellor, Alistair
:18:42. > :18:46.Darling, once described his life as a couple of decades in politics,
:18:46. > :18:50.followed by four years as bank management. He oversaw the Northern
:18:50. > :18:55.Rock crisis and he's with me now. When you revisit and see the queues
:18:55. > :18:58.outside Northern Rock, the branches on Friday morning, that would have
:18:58. > :19:03.been tomorrow morning, five years ago, it must have been a heart-
:19:03. > :19:06.stopping moment for you and the Government. It was, you see these
:19:06. > :19:09.scenes in different parts of the world, you think, someone should do
:19:09. > :19:13.something about T I suddenly thought, that's me, I have to do
:19:13. > :19:16.something about this, because we don't stop this then people will
:19:16. > :19:19.rapidly lose faith in the Government, they will start to
:19:19. > :19:22.panic. People honestly believed they ought to get their money out.
:19:22. > :19:27.And the days when a politician can stand up and say, I'm a politician,
:19:27. > :19:30.trust me, your money is safe, I think, are gone. We had the 24-hour
:19:30. > :19:34.televise, which compounds the problem, people see the same thing
:19:34. > :19:38.coming up on the screen, and think there are more and more people
:19:38. > :19:43.queuing up, even though it might not necessarily be the case. We had
:19:43. > :19:47.to stop it. In some ways it had to run its course, but on the Monday
:19:47. > :19:53.we stopped it, when we had to guarantee every penny in Northern
:19:53. > :19:56.Rock. Something unthinkable a few days earlier. Did the enormity of
:19:56. > :20:00.what was happening then get to you at the time? No, that became more
:20:00. > :20:02.apparent in the following year, 20008. You have to remember that
:20:02. > :20:07.Northern Rock was a symptom of what was going very wrongment here you
:20:07. > :20:10.had had a small bank that got above itself, you had had a very
:20:11. > :20:15.aggressive policy for expanding market share. There wasn't enough
:20:15. > :20:20.savers' money to lend to people taking out loan, what did they do?
:20:20. > :20:23.They went to the American wholesale markets, largely funded by dodgy
:20:23. > :20:27.financial instruments at that time. When people panicked in the summer
:20:27. > :20:31.of 2007, Northern Rock ran out of money, and it was the first symptom
:20:31. > :20:35.of a much larger problem that hit, not just us, but other countries,
:20:35. > :20:39.the following year. The decisions that you made at that moment, that
:20:39. > :20:44.you made the Bank of England the lender of last resort, it stepped
:20:44. > :20:48.in. That moment set a precedent, a proto-type for what would happen
:20:48. > :20:50.from there on? The Bank of England has always been the lender of last
:20:50. > :20:54.resort, this was the first time announcing that the Bank of England
:20:54. > :21:00.would step in, far from reassuring people, provoked sheer panic. What
:21:00. > :21:03.it did do, and I have said this before, it made Gordon Brown and
:21:03. > :21:07.myself determined it would never happened again, so when, 12 months
:21:07. > :21:11.later, I was rung up by RBS and told they had two or three hours
:21:11. > :21:15.worth of money left before they had to shut the doors, we had a plan.
:21:15. > :21:18.Keith to it, we did far more than people expected and more quickly.
:21:18. > :21:21.Something that today's European people should understand. From that
:21:21. > :21:24.point you had decided that banks couldn't fail, because there
:21:24. > :21:28.couldn't be a survival of the fitness strategy, you had to be
:21:28. > :21:33.there, and prop up and intervene? The idea in the time of a panic,
:21:33. > :21:37.that you can let any bank fail, even a small bank, and another, was
:21:37. > :21:40.small in the international scheme of things. That was no longer
:21:40. > :21:44.possible. Even a small bank going down, the contagion would have
:21:45. > :21:47.spread. Even today, in the eurozone, where you are seeing the precise
:21:47. > :21:51.opposite, where they are not doing what is necessary, you are getting
:21:52. > :21:57.that panic. The only way to stop it, as I say, is learn the lessons of
:21:57. > :22:00.what happened in 2008, theing year with RBS and HBOS, you do more than
:22:00. > :22:04.people were expecting and immediately. I want to bring you
:22:04. > :22:07.back to some of the comments, Mervyn King in 2008 said, he didn't
:22:07. > :22:11.believe in a year's time people will look back and say there was
:22:11. > :22:14.lasting damage to the banking system! I'm sure lots of people
:22:14. > :22:19.said things at the time that doesn't look so great five years
:22:19. > :22:24.later. The banking system...They Have a lot of power now, they have
:22:24. > :22:27.been invested with more power, not less? There were mistakes made at
:22:27. > :22:33.Government, regulatory level, the Bank of England was slow off the
:22:33. > :22:35.mark, and yet 12 months later it had recovered slightly. I think the
:22:35. > :22:39.idea that simply replacing the present system and putting the Bank
:22:39. > :22:43.of England in charge, will automatically mean everything will
:22:43. > :22:47.be fine, that is fanciful. I just hope that regulators have learned
:22:48. > :22:51.their lesson, unfortunately, if you look athe channel, there is not too
:22:52. > :22:58.much evidence they have. -- If you look across the channel, there is
:22:58. > :23:06.not much evidence that they have. What about now, George Osborne
:23:06. > :23:11.could break your rule on GDP to ratio, will he break the rules
:23:11. > :23:15.there? Does he ring you up for advice? He said his current rules
:23:16. > :23:19.are a golden standard of fiscal rules, that is something people
:23:19. > :23:22.jump on and off for the last few years. The real problem in the
:23:22. > :23:26.country, it isn't just banking crisis s you have to look at the
:23:26. > :23:34.other side of things, we have a real problem in relation to the
:23:34. > :23:40.economy, austerity alone won't work, it is not working in Spain or here.
:23:40. > :23:44.What the Government announced in the autumn won't work. Isn't it
:23:44. > :23:48.lack of trust for people in banks, institutions and politicians, that
:23:48. > :23:51.is very prevalent now? Yeah, there is a problem in relation to that.
:23:51. > :23:55.It is also, if you look here and other parts of the world, what is
:23:55. > :23:57.really lacking is confidence. You can't be surprised that an
:23:57. > :24:02.individual looking at today's landscape, or someone in business,
:24:02. > :24:05.says I won't spend my money, I won't invest, because I actually
:24:05. > :24:09.think the economy isn't going to recover. And the problem is, the
:24:09. > :24:12.longer you leave this, the more you have to do. Frankly, I don't
:24:12. > :24:16.believe that building conservatories is the road to
:24:16. > :24:20.salvation of the economy of this country. The Chancellor will have
:24:20. > :24:24.to announce something significant f he's going to put a firewall under
:24:24. > :24:28.the problem that is growing now. You are seeing growth beginning to
:24:28. > :24:31.evaporate, the borrowing rising and maybe the debt too. Before you go,
:24:31. > :24:34.top job at the Bank of England, we will know tomorrow, who would you
:24:35. > :24:38.put in the job? I think there are some good UK candidates. I would
:24:38. > :24:42.ask the Government to make sure they look around the world. This is
:24:43. > :24:47.a very big job. It will require someone with superhuman abilities.
:24:47. > :24:50.Someone from outside the UK? Yes, people have been mentioned in other
:24:51. > :24:54.parts of the world. I know there are good candidates in other parts
:24:54. > :24:59.of the world. We need the very best. Because, frankly, there will be a
:24:59. > :25:03.huge job, not just here, but if you look at what's going on with the
:25:03. > :25:10.new European banking system, this will require something of a
:25:10. > :25:15.superhuman, I'm not sure we have that many in this country.
:25:15. > :25:19.We discuss this further with Claire Perry, adviser to George Osborne,
:25:19. > :25:26.Shadow Chancellor at the time of the Northern Rock crisis. Nigel
:25:26. > :25:33.Wolf is a member of the Vickers Commission on banking, Johanna
:25:33. > :25:39.Kyrklund, and Giles Fraser, a parish priest in south London and
:25:39. > :25:44.former canon at St Paul's. Martin, five years on, we're fighting the
:25:44. > :25:50.same battle and we are not sure what we have cured, are we? I think
:25:50. > :25:54.what's become very obvious in the passage of five years, is a crisis
:25:54. > :25:59.was a symptom of something deeper, which was, in essence, that the
:25:59. > :26:02.whole western world, we were part of that, went on a huge debt binge.
:26:02. > :26:06.The financial sector grew enormously as part of that. There
:26:06. > :26:10.was a colossal increase in debt in households in particular, we are
:26:11. > :26:16.now on the other side of this hill. It is going down. Every year credit
:26:16. > :26:18.shrinks, the economy, as a result, the private sector economy is
:26:18. > :26:22.essentially flat, as Alistair Darling described T the same is
:26:22. > :26:25.happening in the US, there is no demand growth. That is the core of
:26:25. > :26:30.it. This is the process we have seen in Japan, if you don't stop
:26:30. > :26:34.that, that can go on for decades. If you put that as a morality issue,
:26:34. > :26:38.do you think we have learned anything from it t do you think?
:26:38. > :26:41.The main thing everybody has learned is we should have never let
:26:42. > :26:45.it happen in the first place. That is irrelevant, it did. This is not
:26:45. > :26:49.something we will do for decades, we have learned our lesson.
:26:49. > :26:52.Unfortunately it has left us with an enormous headache, which is how
:26:52. > :26:55.do you get the private sector really growing again, spending,
:26:55. > :26:59.when the banks don't want to lend, and lots of people don't want to
:26:59. > :27:04.borrow, and don't dare to borrow. You see this, it is not just
:27:04. > :27:12.Britain, basically, the lending machine of the western financial
:27:12. > :27:16.system has frozen. Giles Fraser, what was led to the Occupy movement,
:27:16. > :27:20.in your back yard at St Paul's. Do you think the banks have a social
:27:20. > :27:25.conscience about any of this? think they got caught up in this,
:27:25. > :27:32.particularly Northern Rock, got caught up tpwh this hugely
:27:32. > :27:37.overoptimistic -- in this hugely overoptimistic, you have
:27:37. > :27:41.demutualising the same team that D- reamis singing about things getting
:27:41. > :27:44.better. Things will always get better, and you can borrow off the
:27:44. > :27:48.future because things will be bigger. The idea is the hub bris
:27:48. > :27:54.that is there, it got us into a huge amount of trouble, where the
:27:54. > :28:02.bank became so big, so arrogant, a small bank on the wholesale markets,
:28:02. > :28:05.hugely overleveraged itself. Then it was too big to fail. What
:28:06. > :28:10.happens when it fails, it is welfare state for the rich, they
:28:10. > :28:15.make their profits if they are private, and then the public
:28:15. > :28:21.responsibility. �21 billion we are left with. You are nodeing to the
:28:21. > :28:24.idea of hubris -- nodding along to the idea of hubris, just after
:28:24. > :28:30.George Osborne went on to the Conservative Party Conference and
:28:30. > :28:34.talked about inheritance tax. He completely failed to recognise the
:28:34. > :28:38.crisis? I was a banker many years ago, I was sanatised by motherhood.
:28:38. > :28:42.It was this sense that common sense went out the window. At the time
:28:42. > :28:46.you were an advise Tory George Osborne, was there a sense that the
:28:47. > :28:51.Conservatives had completely -- adviser to George Osborne, was
:28:51. > :28:55.there a service that the Conservatives had completely got it
:28:55. > :29:00.wrong? The regulatory regime was put in place to make sure this sort
:29:00. > :29:03.of thing happened. Northern Rock was too good to be true, it was a
:29:03. > :29:08.small constitution that -- institution that grew rapidly, it
:29:08. > :29:11.had a business model that should have been flagged up as risky.
:29:11. > :29:18.Alistair Darling, one of the few members of the last Government to
:29:18. > :29:22.come out with reputation intact, when the crisis hit nobody knew who
:29:22. > :29:24.was going to be in rpblg cha, there is criticism of that. One of the
:29:24. > :29:28.things we have said is banking is an important thing, there is still
:29:28. > :29:31.a huge need for banking services across the world, it is a very
:29:31. > :29:34.important industry for Britain t has to be regulated better. There
:29:34. > :29:38.has to be somebody in charge who is prepared to stand up and take
:29:38. > :29:43.responsibility. We think it should be the Bank of England. That will
:29:43. > :29:46.be done relatively soon when the legislation changes. Have we seen
:29:46. > :29:49.that? This sense of better regulation for the banks, I know
:29:49. > :29:59.your bank wasn't one that was bailed out, do you think there has
:29:59. > :30:04.been a structural change for banks? Schroders is an Asset Management
:30:04. > :30:07.bank, we invest money for a long- term pension scheme. From our
:30:07. > :30:10.perspective, regulation is to be welcomed. Ultimately we want
:30:10. > :30:15.sustainable growth. That works for people who are trying to allocate
:30:15. > :30:18.capital over the long-term. If I pull you away, not just about your
:30:18. > :30:21.own investment house itself, but this idea, as we heard from
:30:21. > :30:25.Alistair Darling, that actually, there was no question, the banks
:30:25. > :30:28.would be bailed out by the Government. At some point the City
:30:28. > :30:32.has to decide whether the Government is a help or hindrance.
:30:32. > :30:36.Whether they like having the Government on their back or not,
:30:36. > :30:39.right? From our perspective, we think that there should have been
:30:39. > :30:43.greater regulation, particularly it wasn't just a matter of
:30:43. > :30:49.overoptimisim. The problem was that this classic problem of greed was
:30:49. > :30:53.combined with the modern problem of excessive leverage and complexty.
:30:53. > :30:57.The problem started in the United States. You had the repackaging of
:30:57. > :31:00.mortgage debt into mortgage-backed securities. The complexity of the
:31:01. > :31:05.system increased significantly, what seemed like a small change in
:31:05. > :31:12.the default rate on mortgage debt in the United States, mult mitly
:31:12. > :31:19.had catastrophic consequences. All the areas should have been done,
:31:19. > :31:21.and we would prefer a smaller system. Do you think things have
:31:22. > :31:27.fundamentally changed? We wouldn't have made a difference to Northern
:31:27. > :31:31.Rock. Banks could fail in many ways, there was clear compensatory
:31:31. > :31:34.failure. I don't think it was a structural system, it was an
:31:34. > :31:41.intellectual point, we thought banks were safe and they couldn't,
:31:41. > :31:44.and they couldn't manage themselves. It was a fundamental mistake. We
:31:44. > :31:49.think some of the problems with the big universal banks, it is a fact
:31:49. > :31:54.that RBS went down. That a bank of that stage goes down, Citigroup,
:31:54. > :31:58.monstrous banks went down. Those were the real threat. Northern Rock
:31:58. > :32:02.was quite manageable by comparison. We think we have a way of reducing
:32:02. > :32:07.that problem significantly, and by the way the Government agrees with
:32:07. > :32:10.us. The collapse of the rock has had a profound impact on the north-
:32:10. > :32:14.east of England and the people who live there. We will talk to the
:32:14. > :32:22.panel a little further about the psychological impact it had, we
:32:22. > :32:27.went to listen to their stories. Newcastle as many symbols of which
:32:27. > :32:32.it is very proud, including its Football Club and its brown ale,
:32:32. > :32:36.Northern Rock was also one of the symbols. That is why most of the
:32:36. > :32:42.queues outside branches to get money, were not to be found this in
:32:42. > :32:48.Newcastle. In short, Northern Rock, was more than just a bank.
:32:48. > :32:51.Susan Tron took out one of Northern Rock's infamous 125% "together"
:32:51. > :32:57.mortgage, it seems almost laughable now that someone will be offered a
:32:57. > :33:03.lon worth way more than the home they wished to bie. But financial
:33:03. > :33:07.logic was a -- wished today buy. But financial logic was very
:33:07. > :33:13.different now. It was Pennies From Heaven, it was a mortgage, with
:33:13. > :33:18.pennies to buy things and pay your debts off. Once I got it I realised
:33:18. > :33:23.it wasn't wonderful, receipt payments were massive. Like many in
:33:23. > :33:30.the north-east, her inskrutable appearance belies a warm humanty.
:33:30. > :33:33.She has dedicated her entire life to Stepney Banks stables, it
:33:33. > :33:37.supports disadvantaged children in the area. It comes from the
:33:37. > :33:43.Northern Rock Foundation. Since the demise of the bank, the charity has
:33:43. > :33:48.scaled back dramatically. Susan has been told she's being made
:33:48. > :33:51.redundant. I haven't come to terms with it, it is like bereavement,
:33:51. > :33:55.you are in complete shock, I feel flat, I haven't really thought
:33:56. > :34:01.through what the future holds. I'm sure I will feel cross, excited
:34:01. > :34:05.about new doors opening. But mostly, I just feel incredibly sad. Despite
:34:06. > :34:11.facing her own jobless future, Susan's thoughts turn to those in
:34:11. > :34:15.the I can't remember less well off than her? I get a sense of people -
:34:15. > :34:20.- in the area less well off than her? I get a sense of people
:34:20. > :34:24.desperately trying to reinvent themselves and fight back. I do
:34:25. > :34:34.feel there is a sense of incredible sadness, many talent, skills, staff,
:34:35. > :34:37.
:34:37. > :34:42.volunteer, lost forever. A few miles way in leafier parts,
:34:42. > :34:52.Silva Murphy enjoys her retirement on the golf course. She wanted more
:34:52. > :34:56.
:34:56. > :35:01.money to spend in her dotage, and she would have had, because of the
:35:01. > :35:06.speed of Northern Rock's collapse. I couldn't believe it was going to
:35:06. > :35:10.collapse. Susan got a thousand shares from Northern Rock, when it
:35:10. > :35:16.transformed from a boring building society into bank. The shares, once
:35:16. > :35:23.valued at �12,500, are now worthless, she blames the former
:35:23. > :35:26.Prime Minister and his Chancellor. Richard branson put an offer in for
:35:26. > :35:36.the bank before it was nationalised. Really Gordon Brown and Alistair
:35:36. > :35:43.Darling stole my shares. There's a big gap, and areas of
:35:43. > :35:48.immense despair, immense isolation from the national economy, really.
:35:48. > :35:53.Before being the Bishop of Durham, justice used to be a derivatives
:35:53. > :35:58.trader, he will need both skills for the new parliamentary Select
:35:58. > :36:01.Committee on banking scandal. banks were a new thing, I
:36:01. > :36:05.associated them with the United States, but we are seeing
:36:05. > :36:15.significant demand on food banks all over my diocese, all over this
:36:15. > :36:19.area. Particularly in the last 18 months with a sharp increase for
:36:19. > :36:23.foodbanks. One of the things we are increasingly seeing is demand from
:36:23. > :36:26.people who are working, but not earning enough to actually feetd
:36:26. > :36:31.the family right the way through -- feed the family, right the way
:36:31. > :36:39.through the month. We are back with the panel again.
:36:40. > :36:43.If I can start with you, Giles Fraser, the phrase "financial
:36:43. > :36:47.logic" it was daven country, the days where you borrowed seven-times
:36:47. > :36:51.your salary with nothing to show for it. This idea of progress that
:36:51. > :36:57.our children would be better off than we are, doesn't exist any more,
:36:57. > :37:01.for a lot of both people? No, and yet people are still, I still think
:37:01. > :37:04.that optimisim, and that sort of rather gung ho thing is still about
:37:04. > :37:08.in the City. I think that is a dangerous thing. When I was asked
:37:08. > :37:12.to come on the programme, it was five years ago, I said is it really
:37:12. > :37:16.five years it happened, it seemed so recent, because the problems
:37:16. > :37:20.seem exactly the same. I think the problems are, this is as a non-
:37:20. > :37:23.economist, I'm not a specialist. But for people like me, we want the
:37:23. > :37:28.banks rooted in some practical reality, Northern Rock was rooted
:37:28. > :37:32.in the north-east, a building site mutual, you understood T then it
:37:32. > :37:36.becomes something virtual, part of the reason there were so many
:37:36. > :37:41.queues outside Northern Rock s there weren't many branches. There
:37:41. > :37:49.wasn't much bricks and mortar to it. This idea of progress, does your
:37:49. > :37:51.Government recognise that the next generation will be worse off?
:37:51. > :37:54.are important policy choices we have to make. Going back to
:37:54. > :37:59.Northern Rock, where was the common sense in the Government and
:37:59. > :38:04.regulators that said mortgages of 125% of somebody's asset are not
:38:04. > :38:08.sensible. How did the policies fit with what is the reality now?
:38:08. > :38:12.Listening to Mr Darling talking about the fact that wouldn't it be
:38:12. > :38:18.lovely if we spent more money on fiscal stimulus, where does the
:38:18. > :38:26.money come from. Martin is going to disagree, he always does. Is it
:38:26. > :38:30.right to burden this generation with the last generation's mess.
:38:30. > :38:33.Because Because of the policy decisions of Gordon Brown and
:38:33. > :38:40.Alistair Darling, because the coffers were empty. We have to make
:38:40. > :38:44.sure the banking industry is safe and regulated, and those who have
:38:44. > :38:48.mis-sold pensions or fiddled the Libor rate, which can't happen in
:38:48. > :38:53.the current system, that would be of benefit to us. We could be
:38:53. > :38:57.sitting here in five years time and say we are only half way through?
:38:57. > :38:59.We can grow again, underlying technology should allow to us to
:38:59. > :39:05.grow again. I don't believe this generation is definitely going to
:39:05. > :39:10.be poorer than the last one. It might, but that will be the result
:39:10. > :39:14.of mistake policy conditions. Very bad mistakes! My view, very
:39:14. > :39:19.strongly, is one of the mistake, in this situation, when it was clear
:39:19. > :39:22.that the private sector of going to retrench, is the public sector
:39:22. > :39:26.doesn't. Where will the money come from, the Government can borrow at
:39:26. > :39:30.the lowest rates of the entire history of the UK, and you are
:39:30. > :39:40.telling me it cannot borrow, it is completely mad. You would borrow to
:39:40. > :39:41.
:39:41. > :39:45.invest in productive assets. I would borrow to show more.
:39:45. > :39:49.If yesterday was about vindication for the Hillsborough families,
:39:49. > :39:52.today marked the fresh start in the hunt for criminal justice. The
:39:52. > :39:56.Chief Constable of South Yorkshire Police told Newsnight last night
:39:56. > :40:04.that prosecutions would happen if allegations were proven. One of the
:40:04. > :40:07.sources behind the Sun's ill-judged coverage said he was Sorosy, Peter
:40:07. > :40:11.marshall, who was in Liverpool at the time of the tragedy sent this
:40:11. > :40:15.report. Now the world knows the truth, the families renew their
:40:15. > :40:20.quest for justice. Margaret Aspinall was 18, James Roberts just
:40:20. > :40:25.six years older. His sister and Jamesd's mum help run the bereaved
:40:25. > :40:30.Families Support Group, they are pressing for new inquests, and they
:40:30. > :40:33.are convinced there must be criminal prosecution over the
:40:34. > :40:38.allegations. If you look, everything that went against them
:40:38. > :40:43.yesterday, it was perverting the course of justice, for a start. We
:40:43. > :40:51.could never get all that evidence, it was withheld. To actually get
:40:51. > :40:57.them to change their statement, it is an absolute disgrace. The South
:40:57. > :41:01.Yorkshire force altered 115 of their own officers' statements,
:41:01. > :41:11.deleting the mismanagement of the crowd. This passage, was removed
:41:11. > :41:25.
:41:25. > :41:29.Amid all the anger over the altered statements and elaborate cover-up,
:41:29. > :41:34.questions are being asked about the role of one of the country's most
:41:34. > :41:42.senior police chiefs. He's now Chief Constable of West Yorkshire,
:41:42. > :41:46.23 years ago, Sir Norman Bettison, was a Chief Inspector, rise to go
:41:46. > :41:52.superintendant of the south force. He was a key member of the unit set
:41:53. > :41:56.up by the force, to handle the bills ror row fall-out. Sir Norman
:41:56. > :41:59.Bettison said his duties never involved taking or opening
:41:59. > :42:05.statements, Newsnight has no reason to doubt that. We found some
:42:05. > :42:09.statements did pass through his hands at some point. Here are his
:42:09. > :42:12.initials confirming that, there was notes suggesting he was in receipt
:42:12. > :42:15.of statement. First Norman Bettison further angered Hillsborough
:42:15. > :42:25.families, with his comments in a statement of his own, issued this
:42:25. > :42:53.
:42:53. > :42:55.Norman Bettison, we just can't believe what he's come out with and
:42:55. > :43:01.said today. Totally gone against what it said in the report
:43:01. > :43:06.yesterday. Why is he still trying to justify himself. Why can't he
:43:06. > :43:10.just apologise. We want his resignation, now.
:43:10. > :43:16.But Norman Bettison has faced doin calls from the families to re--
:43:16. > :43:21.down calls from the families to step down, he left south Yorkshire
:43:21. > :43:25.and had got an and promotion on this occasion. He had become Chief
:43:25. > :43:29.Constable of Merseyside. Today the families say they know Norman
:43:30. > :43:34.Bettison, and he just doesn't get it. He doesn't get it at all, he
:43:34. > :43:39.played he only played a peripheral road, he didn't give any order for
:43:39. > :43:43.any statements to be ordered, then in that case, why were they altered,
:43:43. > :43:48.he must have seen when they were looking at them that they had been
:43:48. > :43:52.altered in some shape, way or form. Whilst Sir Norman Bettison is
:43:52. > :43:56.adamant he did not wrong and has nothing to hide. A former
:43:56. > :44:02.Conservative MP tonight issued a statement, apologising to the
:44:02. > :44:06.bereaved, for adding to their pain and suffering. Sir Patrick pat was
:44:06. > :44:10.revealed yesterday to be a key source behind newspaper -- Sir
:44:10. > :44:14.Irvine Patnick revealed yesterday to be a key source behind the
:44:14. > :44:21.newspaper. He says he wants to put on record how appalled and shocked
:44:21. > :44:25.he was, to discover the extent of the cover-up. He says he accepts
:44:25. > :44:28.responsibility of passing on such information, without asking further
:44:28. > :44:31.questions. The Hillsborough families plan to meet this weekend
:44:31. > :44:38.to discuss legal advice on their next steps. They want fresh
:44:38. > :44:48.inquests and they want prosecutions. Now the front pages of tomorrow's
:44:48. > :44:48.
:44:48. > :45:46.Apology for the loss of subtitles for 57 seconds
:45:46. > :45:56.That's all from Newsnight tonight, Gavin is back in the chair tomorrow.
:45:56. > :46:18.
:46:18. > :46:21.Gavin is back in the chair tomorrow. Hello, getting quite windy
:46:21. > :46:25.overnight tonight, it means it won't be anything like as cold
:46:25. > :46:30.first thing in the morning. It won't feel all that ples qant with
:46:30. > :46:34.the strong winds, -- pleasant winds blowing lively gusts across
:46:34. > :46:38.Scotland and England. The winds slowing down over the afternoon,
:46:38. > :46:43.looking pleasant then, sunny spells, it will feel fresh in the breeze,
:46:43. > :46:46.but temperatures getting up to 19- 20. It will brighten up after a
:46:46. > :46:50.grey start across south-west England, sunny spells here for the
:46:50. > :46:53.afternoon, the same goes across much of Wales. Maybe one or two
:46:53. > :46:57.scattered showers across North Wales early in the day. Overall dry
:46:57. > :47:01.and bright, don't forget about the wind. The wind will be particularly
:47:01. > :47:06.lively across northern England and Scotland, also for Northern Ireland,
:47:06. > :47:10.gusty conditions, especially early in the day. The strongest winds
:47:10. > :47:14.across North West Scotland, 60 miles an hour here. That is mostly
:47:14. > :47:18.by the morning, it is still a blustery day. For Saturday the
:47:18. > :47:22.winds are lighter, although there will be lots of cloud in western
:47:22. > :47:25.areas, generally it is dry and fine with sunny spells. Further south
:47:25. > :47:30.there will be sunny spells across the east, more cloud at times