13/09/2012 Newsnight


13/09/2012

The YouTube film that's bringing violent protest to the Muslim world. The Northern rock rescue 5 years on. And police re-open the Hillsborough files.


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This trailer was barely noticed when it first appeared on YouTube,

:00:15.:00:18.

now the American film, it seems, is creating turmoil across the Muslim

:00:18.:00:24.

world. After the Libya killings, more

:00:24.:00:28.

violent protests rock Egypt, Yemen, Tunisia and Bangladesh. Thousands

:00:28.:00:35.

take to the streets to condemn its portrayal of Islam. We ask if the

:00:35.:00:37.

Arab Spring has changed relations between the Middle East and the

:00:37.:00:40.

west. Remember this, it is five years to the day since panic broke

:00:40.:00:44.

out at Northern Rock, marking the start of five years of gloom.

:00:44.:00:48.

quite sure in the 50s or 60s, if a Chancellor stood up and said your

:00:48.:00:52.

money is safe, that would be the end of the conversation. Here in

:00:52.:00:55.

2007, nobody believes the Chancellor. The Chancellor of the

:00:55.:01:00.

time is with us here. We ask if he is convinced his decisions were the

:01:00.:01:06.

right ones. We ask our panel what lesson it is taught us about crisis

:01:06.:01:12.

management and fairness. The Hillsborough families waited 23

:01:12.:01:17.

years for truth, has the day of reckoning come.

:01:17.:01:21.

Serious questions have been asked today in Liverpool today, about a

:01:21.:01:27.

role played by a man who is now one of the country's most senior police

:01:27.:01:34.

chiefs. Good evening. When a 40-minute --

:01:34.:01:40.

14-minute trailer of it was posted on YouTube in June, not many people

:01:40.:01:47.

noticed. Now the Muslim world is in turmoil, over a film they believe

:01:47.:01:52.

denigrates the Prophet Mohammed and Islam. In Cairo heavy clashes with

:01:52.:01:56.

police, in Bangladesh, a thousand demonstrator gathered to burn the

:01:56.:02:01.

American flag. If the Arab Spring looked like offering a chance for a

:02:01.:02:04.

new kind of relationship between the Middle East and the west, the

:02:04.:02:08.

events of the last week have underscored the complex reality of

:02:08.:02:13.

what it has actually brought. Is this the thanks they get? The US

:02:13.:02:17.

consulate in Benghazi, wrecked, a year after America and other

:02:17.:02:21.

western nations did so much to help free Libya from dictatorship. The

:02:21.:02:25.

ambassador, such an enthusiast for Arab democracy, and three other

:02:25.:02:31.

diplomats, murdered. Today, the wave of anti-Americanism

:02:31.:02:37.

rolled on through the region, in Yemen protestors tried to storm the

:02:37.:02:41.

US embassy. In Iraq, they burned the stars and stripes, chanting "no

:02:41.:02:50.

to America, no to Israel". Meanwhile, in Egypt, police fired

:02:50.:02:55.

teargas at demonstrators on the third day of unrest. Apparently

:02:55.:03:02.

sparked by an obscure, amateur American film, said to insult Islam.

:03:02.:03:05.

Democracy in North Africa, supported by the space, gives space

:03:06.:03:09.

to radical anti-western groups, that would have once been

:03:09.:03:15.

suppressed by the ubiquitious security forces. Soon after last

:03:15.:03:22.

year's uprising in Libya, Newsnight visit the liberated town of Derna,

:03:22.:03:26.

famous and notorious for sending an unusually high number of Jihadis to

:03:26.:03:31.

fight the Americans in Iraq. Intelligence sources believed some

:03:31.:03:35.

such former Jihadis returned to the anti-American fight in their own

:03:35.:03:39.

country last year. Joining the revolutionary militias, and keeping

:03:39.:03:45.

the weapons, even after Gadaffi was overgrown. This reformed Libyan

:03:45.:03:51.

Jihadi, once intimate with the Al- Qaeda leader, says he knows the

:03:51.:03:56.

groups influenced by Al-Qaeda, were behind the attack on the US

:03:56.:04:01.

consulate. Al-Qaeda is influencing them, it is, I can say I'm

:04:01.:04:05.

comfortable to say, it is firsthand information, I obtained this

:04:05.:04:09.

information from Al-Zawahiri himself. They believe Libya is

:04:09.:04:15.

stragically can be the hub of a Jihadi struggle or conflict, --

:04:15.:04:21.

can't be the hub of Jihadi struggle or conflict, but it should be used

:04:21.:04:28.

as a back yard, or logistic space for a bigger Jihadi Islamic battle,

:04:28.:04:31.

which is Egypt, Algeria or both of them. America can't reverse the

:04:31.:04:35.

Arab Spring, but the question now for Washington is how to respond to

:04:35.:04:38.

the dangers it throws up. Should it continue, as President Obama has,

:04:38.:04:42.

to be wary of intervention. Should it avoid appearing to tread too

:04:42.:04:47.

heavily in the region, for fear of exacerbating further resentment. Or

:04:47.:04:52.

has it become, as many Republicans feel, too indecisive, and

:04:52.:04:55.

apologetic. America, they feel, needs to make

:04:55.:05:01.

clearer what it stands for. What the United States needs to do is

:05:01.:05:07.

take the kind of leadership that will organise the international

:05:07.:05:11.

community to address these crises, it doesn't appear that is happening

:05:11.:05:16.

in the way that is productive and gets the results we want. Which are

:05:16.:05:19.

basically not to have to enter at the military level. I think it

:05:20.:05:24.

leads to others feeling the kind of power vacuum, and often those that

:05:24.:05:32.

come to fill the power vacuum are radical Islamists.

:05:32.:05:36.

But while America still has widespread support in Libya, shown

:05:36.:05:40.

by today's pro-western demonstration in Benghazi, some

:05:40.:05:44.

think it should help the Libyan Government to track down the

:05:44.:05:48.

ambassador's killers, not try to launch its own strike against the

:05:48.:05:51.

terrorists. If make now is involved again, based on this strategy on

:05:51.:05:56.

tactics, it means all the work done by President Obama's administration,

:05:56.:06:03.

it will disappear, and go like a waste of time, and assets as well.

:06:03.:06:09.

I believe America, to a certain extent, has been successful, it

:06:09.:06:14.

managed to pull itself out of the "war against terror", that is very

:06:14.:06:18.

important of the future for relations for America and the Arab

:06:18.:06:24.

world. It is a balancing act, not just for America, but also new Arab

:06:24.:06:29.

leader, like Egypt's Islamist, Mohammed Morsi, in Europe this week

:06:29.:06:33.

to seek western financial help for his country. TRANSLATION: We never

:06:33.:06:39.

accept, we can't agree, we stand against anyone who harbours these

:06:39.:06:47.

false slogans or calls this hatred among the people, or insensitivites.

:06:47.:06:52.

We cannot accept that there is such empty or aggression against

:06:52.:06:56.

embassies, consulates, origins people, or the killing of anybody

:06:56.:07:02.

no matter how. This evening clashing resumed in

:07:02.:07:06.

Cairo, despite an attempt by Google to calm the anger by blocking

:07:07.:07:10.

Egyptian access to the controversial film. Tomorrow, plans

:07:10.:07:15.

for an even larger demonstration will further test the increasingly

:07:15.:07:20.

ambiguous relations between America and the new Arab democracies.

:07:20.:07:24.

Let's discuss this with the former British ambassador to the United

:07:24.:07:29.

Nations, Sir Jeremy Greenstock, in the studio, and from Washington,

:07:29.:07:32.

the former US secretary of defence, Paul Wolfowitz. Thank you very much

:07:32.:07:36.

for joining me. Jeremy Greenstock, are you surprised by how much this

:07:36.:07:40.

has spread, do you think the film itself had anything to do with it,

:07:40.:07:45.

or is that symbolic of something else? The film is definitely the

:07:45.:07:49.

immediate approximate cause, but there are people on a spring out

:07:49.:07:55.

there, waiting to show their anger, or to express their resentment at

:07:55.:08:00.

any insult they see coming their way. Remember, that the most

:08:00.:08:03.

significant feature of the whole Arab Spring, country by country, it

:08:03.:08:07.

is the same everywhere, and it goes beyond the Arab world, is that the

:08:08.:08:14.

voice of the people is now more powerful political phenomenon. And

:08:14.:08:17.

there are different parts of the voice of the people, they can

:08:17.:08:20.

express themselves now. The security forces aren't able to deal

:08:20.:08:28.

with all the emnations of that. you think it is spontaneous, and

:08:28.:08:33.

one paper here in the UK is suggesting this was the result of a

:08:34.:08:38.

serious security breach, and the whole thing was planned, and secure

:08:38.:08:41.

documents have now gone missing from the embassy in Libya. Do you

:08:41.:08:44.

know anything about that, would that surprise you? Look, I think

:08:44.:08:48.

there is a lot we still don't know about who organised the

:08:48.:08:51.

demonstration, how they happened. They are probably different in each

:08:51.:08:56.

place. What took place in Benghazi was not a spontaneous outburst of

:08:56.:09:01.

popular anger, it was a nightime attack, with mortars and heavy

:09:01.:09:09.

machine guns, by probably a rather small armed group. I think There

:09:09.:09:11.

are issues between the United States and the Arab world, and we

:09:11.:09:15.

shouldn't expect them to be solved any time soon, this is a huge

:09:15.:09:18.

upheaval. But what we are seeing, as much as anything, is a fight

:09:18.:09:23.

within the Arab world, in July the Libyans had a remarkably peaceful

:09:23.:09:26.

election, in which the Muslim Brotherhood came in a distant

:09:26.:09:30.

second, and these extremists barely showed. The Libyan people really

:09:30.:09:35.

voted for a very religiously conservative, but moderate approach

:09:35.:09:38.

to politics. But the people with the guns have a different view of

:09:38.:09:42.

things, this was done with guns. None the less, it was your

:09:42.:09:47.

ambassador that was targeted o killed, it is the US embassies in

:09:47.:09:50.

other cities that have been targeted, this is about making the

:09:50.:09:55.

US the external enemy, once again, isn't it? Well, it's also about

:09:56.:09:59.

terrorising people, about saying that if you stand up for reasonable

:09:59.:10:02.

positions you can be killed. I think it's very important to stand

:10:02.:10:06.

up to this kind of terror. It is, at least in the case of Libya, we

:10:06.:10:11.

are really talking about armed extremists. Unfortunately, as much

:10:11.:10:15.

as Libya owes its freedom to the United States and your country, and

:10:15.:10:19.

France and others who came to their assistance, the people who did the

:10:19.:10:24.

arming and training of the Libyan militias were very heavily

:10:24.:10:27.

dominated by extremists, we are seeing one of the results of that.

:10:27.:10:34.

It is very interesting, that line about owing your freedom, the sort

:10:34.:10:39.

of Kalaban line comes in, you talk my language, and my prophet is, I

:10:39.:10:43.

can curse you with it, as a paraphrase, a lot of people will

:10:43.:10:46.

look at what happened in the Arab Spring and say, this is what you

:10:46.:10:51.

get? I think when a space opens up, with a new political arrangement,

:10:51.:10:55.

things can get worse before they get better. You can't look for a

:10:55.:10:59.

steady graph of improvement, it is going to be a very jagged curve.

:10:59.:11:03.

You could say things have got worse, in the sense that, this wouldn't

:11:04.:11:08.

have happened under a Gadaffi, this wouldn't have happened under a

:11:08.:11:14.

dictatorship? Yes, but this is a horrid period, and a horrid

:11:14.:11:17.

incident against American diplomats and citizens. But, it's not going

:11:17.:11:21.

to be the only thing that counts on the score of whether this was

:11:21.:11:25.

worthwhile or not. It's going to be a long process. It will be a

:11:25.:11:29.

generational process. Some bad things are going to happen.

:11:29.:11:32.

American Embassy was attacked under Gadaffi, to be clear, except we

:11:32.:11:37.

knew who was behind it. It was very clear then. What we reasonably know

:11:37.:11:41.

now, it is very important to say this, is this is not a popular move

:11:41.:11:45.

by the Libyan people. The Libyan people, are, for the most part, I

:11:45.:11:49.

believe, we haven't taken opinion poll, shocked and disgusted by what

:11:49.:11:52.

was done to somebody who was deeply committed to the future of their

:11:52.:11:57.

country. And they know it. Now the question is, can that sentiment be

:11:57.:12:01.

mobilised to an effective reaction against these extremists, and to

:12:01.:12:05.

talk about some obscure film is a distraction in that case. What

:12:05.:12:09.

would you make of Mitt Romney today, when he said American leadership is

:12:09.:12:13.

still sorely needed, and American leadership is made necessary by

:12:13.:12:17.

this. Do you agree with this, or is it time to take a back seat?

:12:17.:12:22.

think the back seat is part of the reason we got into this situation

:12:22.:12:26.

in Lybia, where the people with guns are not connected to the

:12:26.:12:31.

United States. We would have been in a stronger position if they had

:12:31.:12:34.

been armed and trained by the United States and the NATO allies.

:12:34.:12:39.

The strategic point here, is you have 1.5 million people in the

:12:39.:12:46.

Muslim world -- 1.5 billion world, I would say the high end of it, 10-

:12:46.:12:51.

20% share these views. The other 80% are in danger of being

:12:51.:12:55.

terrorised it into silence or some kind of complicity. It depends on

:12:55.:12:58.

how you define leadership. Those people hope for the United States

:12:58.:13:01.

to be there to help them, not just the United States, but Europe as

:13:01.:13:05.

well. What do you make of this idea that they should have been armed?

:13:05.:13:08.

The diplomats should have been armed? No, when he was talking

:13:08.:13:11.

about part of that uprising and the intervention? The fact that arms

:13:11.:13:16.

are awash amongst the people is extremely serious. It makes it that

:13:16.:13:23.

much more difficult to defend yourselves. You need, against this

:13:23.:13:26.

potential disaster, a day you can't predict, you need very large

:13:26.:13:30.

security forces around an embassy then. This idea of leadingship,

:13:30.:13:34.

that you can go in and change the character of what's happening in

:13:34.:13:38.

the Arab Spring, is misplaced, in my view. It is the people who are

:13:38.:13:43.

speaking, and it is going to go wrong in certain aspects. But we

:13:43.:13:46.

can't intervene from outside. It is not taste of the leadership of

:13:47.:13:51.

outside people. Last word to you, Paul Wolfowitz? The people weren't

:13:51.:13:55.

speak anything Benghazi, it was a handful of harmed extremists, we

:13:55.:13:59.

were told if we arm the Libyan opposition, then the country would

:13:59.:14:02.

be awash in weapons, so we didn't arm them, it is awash in weapons,

:14:02.:14:05.

but they are weapons in the hands of people that are not particularly

:14:06.:14:09.

friendly to us, and are not friendly to the majority of the

:14:09.:14:14.

Libyan people. I think that point, look maybe leadership is the wrong

:14:14.:14:19.

word, but very strong supportership, the people in Libya who are

:14:20.:14:24.

embattled now, need our help. agree. Five years ago today, the

:14:24.:14:28.

BBC learned of a crisis at Northern Rock bank, what happened that

:14:28.:14:33.

evening, and over the days to come, signalled the start of the worst

:14:33.:14:37.

credit crisis this country has ever seen. The run on Northern Rock, the

:14:37.:14:42.

eventual nationalisation of it and other banks, was something no-one

:14:42.:14:45.

saw coming. We revisit the decisions made during that crucial

:14:45.:14:48.

period, and ask if they were the right ones, and what precedent they

:14:48.:14:52.

set to deal with economic crisis in the future. At the moment we speak

:14:52.:14:56.

to the architect of the bank bail outs, former Chancellor, Alistair

:14:56.:15:03.

Darling. First, Paul Mason's reflections.

:15:03.:15:06.

I can announce today, following discussions with the Governor of

:15:07.:15:09.

the Bank of England, and the chairman of the FSA, should it be

:15:09.:15:12.

necessary, we, and the Bank of England, would put in place

:15:12.:15:16.

arrangements that would guarantee all the existing deposits in the

:15:16.:15:20.

Northern Rock bank. Of this the day Alistair Darling finally guaranteed

:15:21.:15:24.

the deposits of Northern Rock savers, outside a Northern Rock

:15:24.:15:28.

branch in Golders Green, it was the day a decade of political spin

:15:28.:15:32.

collided with Labour's reputation on economic management. I'm quite

:15:32.:15:37.

sure in the 50s or the 60s, if Chancellor stood up and said, "your

:15:37.:15:43.

money is safe", that woobt end of the conversation. Here, in 2007,

:15:43.:15:47.

nobody believes the Chancellor. not? Because Mr Blair has told too

:15:47.:15:52.

many lies. If you look at the cuttings from 2007, not many

:15:52.:16:02.
:16:02.:16:15.

predicted there would be a crash. Now who wrote that? Well, me. So,

:16:15.:16:20.

why, six months later, was I surprised when Northern Rock went

:16:21.:16:28.

bust? I covered the dotcom boom in the 1990s, I became convinced the

:16:28.:16:31.

technology-driven upsurge it provided was real. And banks are

:16:31.:16:35.

opaque, you are not supposed to know bank is going bust until it

:16:35.:16:40.

does. The FSA said its supervision of Northern Rock was, basically, a

:16:40.:16:45.

fiasco. It involved, "a level of engagment and oversight by

:16:45.:16:48.

supervisory line management below the standard we would expect for a

:16:48.:16:54.

high-impact firm". By the time RBS was going bust, one

:16:54.:16:57.

year later, things had become more fluid. I was getting calls three

:16:57.:17:02.

days before the event, saying RBS can't meet its overnight

:17:02.:17:06.

commitments, but you can't report rumour, and they were

:17:06.:17:10.

unsubstantiated. Even a year later, when Lehman Brothers went burst, if

:17:10.:17:14.

I think back to what was in my head, I did not grasp the catastrophe

:17:14.:17:19.

that was to come. By August 2008, I had people telling me a major bank

:17:19.:17:25.

was going bust. I blogged this was being rumoured, and was greeted

:17:26.:17:34.

with a storm of amuse, told to repeat fact not comment. In they

:17:34.:17:40.

arey, the loss of Lehmans, on top of Meryl, and on top of fanny and

:17:40.:17:45.

Freddie, and bail outs there, should provide the basis of

:17:45.:17:48.

recapitalising the banking system, and in one or two years, the easing

:17:48.:17:53.

of credit crunch. That is the they arey, we don't know how many big

:17:53.:17:57.

nasty possibilities there are out there. Why, on the day Lehman

:17:57.:18:01.

Brothers went bust, did I think we would avoid the crash? Thinking

:18:01.:18:05.

back, because the experts tell you there is a technical fix that won't

:18:05.:18:09.

stop a investigation, but will stop a crash, you tend to assume the

:18:09.:18:12.

politicians and the regulators will do it. But they didn't.

:18:12.:18:16.

We know a lot more now than then about the structural problems we

:18:16.:18:20.

face. But for me, the past five years have come to seem less like a

:18:21.:18:26.

deep crisis of capitalism, more like a fiasco of politics and

:18:26.:18:29.

regulation. That's what the people outside

:18:29.:18:32.

Northern Rock were worried about on that fateful day, and they might

:18:32.:18:38.

have been right. The former Chancellor, Alistair

:18:38.:18:42.

Darling, once described his life as a couple of decades in politics,

:18:42.:18:46.

followed by four years as bank management. He oversaw the Northern

:18:46.:18:50.

Rock crisis and he's with me now. When you revisit and see the queues

:18:50.:18:55.

outside Northern Rock, the branches on Friday morning, that would have

:18:55.:18:58.

been tomorrow morning, five years ago, it must have been a heart-

:18:58.:19:03.

stopping moment for you and the Government. It was, you see these

:19:03.:19:06.

scenes in different parts of the world, you think, someone should do

:19:06.:19:09.

something about T I suddenly thought, that's me, I have to do

:19:09.:19:13.

something about this, because we don't stop this then people will

:19:13.:19:16.

rapidly lose faith in the Government, they will start to

:19:16.:19:19.

panic. People honestly believed they ought to get their money out.

:19:19.:19:22.

And the days when a politician can stand up and say, I'm a politician,

:19:22.:19:27.

trust me, your money is safe, I think, are gone. We had the 24-hour

:19:27.:19:30.

televise, which compounds the problem, people see the same thing

:19:30.:19:34.

coming up on the screen, and think there are more and more people

:19:34.:19:38.

queuing up, even though it might not necessarily be the case. We had

:19:38.:19:43.

to stop it. In some ways it had to run its course, but on the Monday

:19:43.:19:47.

we stopped it, when we had to guarantee every penny in Northern

:19:47.:19:53.

Rock. Something unthinkable a few days earlier. Did the enormity of

:19:53.:19:56.

what was happening then get to you at the time? No, that became more

:19:56.:20:00.

apparent in the following year, 20008. You have to remember that

:20:00.:20:02.

Northern Rock was a symptom of what was going very wrongment here you

:20:02.:20:07.

had had a small bank that got above itself, you had had a very

:20:07.:20:10.

aggressive policy for expanding market share. There wasn't enough

:20:11.:20:15.

savers' money to lend to people taking out loan, what did they do?

:20:15.:20:20.

They went to the American wholesale markets, largely funded by dodgy

:20:20.:20:23.

financial instruments at that time. When people panicked in the summer

:20:23.:20:27.

of 2007, Northern Rock ran out of money, and it was the first symptom

:20:27.:20:31.

of a much larger problem that hit, not just us, but other countries,

:20:31.:20:35.

the following year. The decisions that you made at that moment, that

:20:35.:20:39.

you made the Bank of England the lender of last resort, it stepped

:20:39.:20:44.

in. That moment set a precedent, a proto-type for what would happen

:20:44.:20:48.

from there on? The Bank of England has always been the lender of last

:20:48.:20:50.

resort, this was the first time announcing that the Bank of England

:20:50.:20:54.

would step in, far from reassuring people, provoked sheer panic. What

:20:54.:21:00.

it did do, and I have said this before, it made Gordon Brown and

:21:00.:21:03.

myself determined it would never happened again, so when, 12 months

:21:03.:21:07.

later, I was rung up by RBS and told they had two or three hours

:21:07.:21:11.

worth of money left before they had to shut the doors, we had a plan.

:21:11.:21:15.

Keith to it, we did far more than people expected and more quickly.

:21:15.:21:18.

Something that today's European people should understand. From that

:21:18.:21:21.

point you had decided that banks couldn't fail, because there

:21:21.:21:24.

couldn't be a survival of the fitness strategy, you had to be

:21:24.:21:28.

there, and prop up and intervene? The idea in the time of a panic,

:21:28.:21:33.

that you can let any bank fail, even a small bank, and another, was

:21:33.:21:37.

small in the international scheme of things. That was no longer

:21:37.:21:40.

possible. Even a small bank going down, the contagion would have

:21:40.:21:44.

spread. Even today, in the eurozone, where you are seeing the precise

:21:45.:21:47.

opposite, where they are not doing what is necessary, you are getting

:21:47.:21:51.

that panic. The only way to stop it, as I say, is learn the lessons of

:21:52.:21:57.

what happened in 2008, theing year with RBS and HBOS, you do more than

:21:57.:22:00.

people were expecting and immediately. I want to bring you

:22:00.:22:04.

back to some of the comments, Mervyn King in 2008 said, he didn't

:22:04.:22:07.

believe in a year's time people will look back and say there was

:22:07.:22:11.

lasting damage to the banking system! I'm sure lots of people

:22:11.:22:14.

said things at the time that doesn't look so great five years

:22:14.:22:19.

later. The banking system...They Have a lot of power now, they have

:22:19.:22:24.

been invested with more power, not less? There were mistakes made at

:22:24.:22:27.

Government, regulatory level, the Bank of England was slow off the

:22:27.:22:33.

mark, and yet 12 months later it had recovered slightly. I think the

:22:33.:22:35.

idea that simply replacing the present system and putting the Bank

:22:35.:22:39.

of England in charge, will automatically mean everything will

:22:39.:22:43.

be fine, that is fanciful. I just hope that regulators have learned

:22:43.:22:47.

their lesson, unfortunately, if you look athe channel, there is not too

:22:48.:22:51.

much evidence they have. -- If you look across the channel, there is

:22:52.:22:58.

not much evidence that they have. What about now, George Osborne

:22:58.:23:06.

could break your rule on GDP to ratio, will he break the rules

:23:06.:23:11.

there? Does he ring you up for advice? He said his current rules

:23:11.:23:15.

are a golden standard of fiscal rules, that is something people

:23:16.:23:19.

jump on and off for the last few years. The real problem in the

:23:19.:23:22.

country, it isn't just banking crisis s you have to look at the

:23:22.:23:26.

other side of things, we have a real problem in relation to the

:23:26.:23:34.

economy, austerity alone won't work, it is not working in Spain or here.

:23:34.:23:40.

What the Government announced in the autumn won't work. Isn't it

:23:40.:23:44.

lack of trust for people in banks, institutions and politicians, that

:23:44.:23:48.

is very prevalent now? Yeah, there is a problem in relation to that.

:23:48.:23:51.

It is also, if you look here and other parts of the world, what is

:23:51.:23:55.

really lacking is confidence. You can't be surprised that an

:23:55.:23:57.

individual looking at today's landscape, or someone in business,

:23:57.:24:02.

says I won't spend my money, I won't invest, because I actually

:24:02.:24:05.

think the economy isn't going to recover. And the problem is, the

:24:05.:24:09.

longer you leave this, the more you have to do. Frankly, I don't

:24:09.:24:12.

believe that building conservatories is the road to

:24:12.:24:16.

salvation of the economy of this country. The Chancellor will have

:24:16.:24:20.

to announce something significant f he's going to put a firewall under

:24:20.:24:24.

the problem that is growing now. You are seeing growth beginning to

:24:24.:24:28.

evaporate, the borrowing rising and maybe the debt too. Before you go,

:24:28.:24:31.

top job at the Bank of England, we will know tomorrow, who would you

:24:31.:24:34.

put in the job? I think there are some good UK candidates. I would

:24:35.:24:38.

ask the Government to make sure they look around the world. This is

:24:38.:24:42.

a very big job. It will require someone with superhuman abilities.

:24:43.:24:47.

Someone from outside the UK? Yes, people have been mentioned in other

:24:47.:24:50.

parts of the world. I know there are good candidates in other parts

:24:51.:24:54.

of the world. We need the very best. Because, frankly, there will be a

:24:54.:24:59.

huge job, not just here, but if you look at what's going on with the

:24:59.:25:03.

new European banking system, this will require something of a

:25:03.:25:10.

superhuman, I'm not sure we have that many in this country.

:25:10.:25:15.

We discuss this further with Claire Perry, adviser to George Osborne,

:25:15.:25:19.

Shadow Chancellor at the time of the Northern Rock crisis. Nigel

:25:19.:25:26.

Wolf is a member of the Vickers Commission on banking, Johanna

:25:26.:25:33.

Kyrklund, and Giles Fraser, a parish priest in south London and

:25:33.:25:39.

former canon at St Paul's. Martin, five years on, we're fighting the

:25:39.:25:44.

same battle and we are not sure what we have cured, are we? I think

:25:44.:25:50.

what's become very obvious in the passage of five years, is a crisis

:25:50.:25:54.

was a symptom of something deeper, which was, in essence, that the

:25:54.:25:59.

whole western world, we were part of that, went on a huge debt binge.

:25:59.:26:02.

The financial sector grew enormously as part of that. There

:26:02.:26:06.

was a colossal increase in debt in households in particular, we are

:26:06.:26:10.

now on the other side of this hill. It is going down. Every year credit

:26:11.:26:16.

shrinks, the economy, as a result, the private sector economy is

:26:16.:26:18.

essentially flat, as Alistair Darling described T the same is

:26:18.:26:22.

happening in the US, there is no demand growth. That is the core of

:26:22.:26:25.

it. This is the process we have seen in Japan, if you don't stop

:26:25.:26:30.

that, that can go on for decades. If you put that as a morality issue,

:26:30.:26:34.

do you think we have learned anything from it t do you think?

:26:34.:26:38.

The main thing everybody has learned is we should have never let

:26:38.:26:41.

it happen in the first place. That is irrelevant, it did. This is not

:26:42.:26:45.

something we will do for decades, we have learned our lesson.

:26:45.:26:49.

Unfortunately it has left us with an enormous headache, which is how

:26:49.:26:52.

do you get the private sector really growing again, spending,

:26:52.:26:55.

when the banks don't want to lend, and lots of people don't want to

:26:55.:26:59.

borrow, and don't dare to borrow. You see this, it is not just

:26:59.:27:04.

Britain, basically, the lending machine of the western financial

:27:04.:27:12.

system has frozen. Giles Fraser, what was led to the Occupy movement,

:27:12.:27:16.

in your back yard at St Paul's. Do you think the banks have a social

:27:16.:27:20.

conscience about any of this? think they got caught up in this,

:27:20.:27:25.

particularly Northern Rock, got caught up tpwh this hugely

:27:25.:27:32.

overoptimistic -- in this hugely overoptimistic, you have

:27:32.:27:37.

demutualising the same team that D- reamis singing about things getting

:27:37.:27:41.

better. Things will always get better, and you can borrow off the

:27:41.:27:44.

future because things will be bigger. The idea is the hub bris

:27:44.:27:48.

that is there, it got us into a huge amount of trouble, where the

:27:48.:27:54.

bank became so big, so arrogant, a small bank on the wholesale markets,

:27:54.:28:02.

hugely overleveraged itself. Then it was too big to fail. What

:28:02.:28:05.

happens when it fails, it is welfare state for the rich, they

:28:06.:28:10.

make their profits if they are private, and then the public

:28:10.:28:15.

responsibility. �21 billion we are left with. You are nodeing to the

:28:15.:28:21.

idea of hubris -- nodding along to the idea of hubris, just after

:28:21.:28:24.

George Osborne went on to the Conservative Party Conference and

:28:24.:28:30.

talked about inheritance tax. He completely failed to recognise the

:28:30.:28:34.

crisis? I was a banker many years ago, I was sanatised by motherhood.

:28:34.:28:38.

It was this sense that common sense went out the window. At the time

:28:38.:28:42.

you were an advise Tory George Osborne, was there a sense that the

:28:42.:28:46.

Conservatives had completely -- adviser to George Osborne, was

:28:47.:28:51.

there a service that the Conservatives had completely got it

:28:51.:28:55.

wrong? The regulatory regime was put in place to make sure this sort

:28:55.:29:00.

of thing happened. Northern Rock was too good to be true, it was a

:29:00.:29:03.

small constitution that -- institution that grew rapidly, it

:29:03.:29:08.

had a business model that should have been flagged up as risky.

:29:08.:29:11.

Alistair Darling, one of the few members of the last Government to

:29:11.:29:18.

come out with reputation intact, when the crisis hit nobody knew who

:29:18.:29:22.

was going to be in rpblg cha, there is criticism of that. One of the

:29:22.:29:24.

things we have said is banking is an important thing, there is still

:29:24.:29:28.

a huge need for banking services across the world, it is a very

:29:28.:29:31.

important industry for Britain t has to be regulated better. There

:29:31.:29:34.

has to be somebody in charge who is prepared to stand up and take

:29:34.:29:38.

responsibility. We think it should be the Bank of England. That will

:29:38.:29:43.

be done relatively soon when the legislation changes. Have we seen

:29:43.:29:46.

that? This sense of better regulation for the banks, I know

:29:46.:29:49.

your bank wasn't one that was bailed out, do you think there has

:29:49.:29:59.

been a structural change for banks? Schroders is an Asset Management

:29:59.:30:04.

bank, we invest money for a long- term pension scheme. From our

:30:04.:30:07.

perspective, regulation is to be welcomed. Ultimately we want

:30:07.:30:10.

sustainable growth. That works for people who are trying to allocate

:30:10.:30:15.

capital over the long-term. If I pull you away, not just about your

:30:15.:30:18.

own investment house itself, but this idea, as we heard from

:30:18.:30:21.

Alistair Darling, that actually, there was no question, the banks

:30:21.:30:25.

would be bailed out by the Government. At some point the City

:30:25.:30:28.

has to decide whether the Government is a help or hindrance.

:30:28.:30:32.

Whether they like having the Government on their back or not,

:30:32.:30:36.

right? From our perspective, we think that there should have been

:30:36.:30:39.

greater regulation, particularly it wasn't just a matter of

:30:39.:30:43.

overoptimisim. The problem was that this classic problem of greed was

:30:43.:30:49.

combined with the modern problem of excessive leverage and complexty.

:30:49.:30:53.

The problem started in the United States. You had the repackaging of

:30:53.:30:57.

mortgage debt into mortgage-backed securities. The complexity of the

:30:57.:31:00.

system increased significantly, what seemed like a small change in

:31:01.:31:05.

the default rate on mortgage debt in the United States, mult mitly

:31:05.:31:12.

had catastrophic consequences. All the areas should have been done,

:31:12.:31:19.

and we would prefer a smaller system. Do you think things have

:31:19.:31:21.

fundamentally changed? We wouldn't have made a difference to Northern

:31:22.:31:27.

Rock. Banks could fail in many ways, there was clear compensatory

:31:27.:31:31.

failure. I don't think it was a structural system, it was an

:31:31.:31:34.

intellectual point, we thought banks were safe and they couldn't,

:31:34.:31:41.

and they couldn't manage themselves. It was a fundamental mistake. We

:31:41.:31:44.

think some of the problems with the big universal banks, it is a fact

:31:44.:31:49.

that RBS went down. That a bank of that stage goes down, Citigroup,

:31:49.:31:54.

monstrous banks went down. Those were the real threat. Northern Rock

:31:54.:31:58.

was quite manageable by comparison. We think we have a way of reducing

:31:58.:32:02.

that problem significantly, and by the way the Government agrees with

:32:02.:32:07.

us. The collapse of the rock has had a profound impact on the north-

:32:07.:32:10.

east of England and the people who live there. We will talk to the

:32:10.:32:14.

panel a little further about the psychological impact it had, we

:32:14.:32:22.

went to listen to their stories. Newcastle as many symbols of which

:32:22.:32:27.

it is very proud, including its Football Club and its brown ale,

:32:27.:32:32.

Northern Rock was also one of the symbols. That is why most of the

:32:32.:32:36.

queues outside branches to get money, were not to be found this in

:32:36.:32:42.

Newcastle. In short, Northern Rock, was more than just a bank.

:32:42.:32:48.

Susan Tron took out one of Northern Rock's infamous 125% "together"

:32:48.:32:51.

mortgage, it seems almost laughable now that someone will be offered a

:32:51.:32:57.

lon worth way more than the home they wished to bie. But financial

:32:57.:33:03.

logic was a -- wished today buy. But financial logic was very

:33:03.:33:07.

different now. It was Pennies From Heaven, it was a mortgage, with

:33:07.:33:13.

pennies to buy things and pay your debts off. Once I got it I realised

:33:13.:33:18.

it wasn't wonderful, receipt payments were massive. Like many in

:33:18.:33:23.

the north-east, her inskrutable appearance belies a warm humanty.

:33:23.:33:30.

She has dedicated her entire life to Stepney Banks stables, it

:33:30.:33:33.

supports disadvantaged children in the area. It comes from the

:33:33.:33:37.

Northern Rock Foundation. Since the demise of the bank, the charity has

:33:37.:33:43.

scaled back dramatically. Susan has been told she's being made

:33:43.:33:48.

redundant. I haven't come to terms with it, it is like bereavement,

:33:48.:33:51.

you are in complete shock, I feel flat, I haven't really thought

:33:51.:33:55.

through what the future holds. I'm sure I will feel cross, excited

:33:56.:34:01.

about new doors opening. But mostly, I just feel incredibly sad. Despite

:34:01.:34:05.

facing her own jobless future, Susan's thoughts turn to those in

:34:06.:34:11.

the I can't remember less well off than her? I get a sense of people -

:34:11.:34:15.

- in the area less well off than her? I get a sense of people

:34:15.:34:20.

desperately trying to reinvent themselves and fight back. I do

:34:20.:34:24.

feel there is a sense of incredible sadness, many talent, skills, staff,

:34:25.:34:34.
:34:35.:34:37.

volunteer, lost forever. A few miles way in leafier parts,

:34:37.:34:42.

Silva Murphy enjoys her retirement on the golf course. She wanted more

:34:42.:34:52.
:34:52.:34:56.

money to spend in her dotage, and she would have had, because of the

:34:56.:35:01.

speed of Northern Rock's collapse. I couldn't believe it was going to

:35:01.:35:06.

collapse. Susan got a thousand shares from Northern Rock, when it

:35:06.:35:10.

transformed from a boring building society into bank. The shares, once

:35:10.:35:16.

valued at �12,500, are now worthless, she blames the former

:35:16.:35:23.

Prime Minister and his Chancellor. Richard branson put an offer in for

:35:23.:35:26.

the bank before it was nationalised. Really Gordon Brown and Alistair

:35:26.:35:36.

Darling stole my shares. There's a big gap, and areas of

:35:36.:35:43.

immense despair, immense isolation from the national economy, really.

:35:43.:35:48.

Before being the Bishop of Durham, justice used to be a derivatives

:35:48.:35:53.

trader, he will need both skills for the new parliamentary Select

:35:53.:35:58.

Committee on banking scandal. banks were a new thing, I

:35:58.:36:01.

associated them with the United States, but we are seeing

:36:01.:36:05.

significant demand on food banks all over my diocese, all over this

:36:05.:36:15.

area. Particularly in the last 18 months with a sharp increase for

:36:15.:36:19.

foodbanks. One of the things we are increasingly seeing is demand from

:36:19.:36:23.

people who are working, but not earning enough to actually feetd

:36:23.:36:26.

the family right the way through -- feed the family, right the way

:36:26.:36:31.

through the month. We are back with the panel again.

:36:31.:36:39.

If I can start with you, Giles Fraser, the phrase "financial

:36:40.:36:43.

logic" it was daven country, the days where you borrowed seven-times

:36:43.:36:47.

your salary with nothing to show for it. This idea of progress that

:36:47.:36:51.

our children would be better off than we are, doesn't exist any more,

:36:51.:36:57.

for a lot of both people? No, and yet people are still, I still think

:36:57.:37:01.

that optimisim, and that sort of rather gung ho thing is still about

:37:01.:37:04.

in the City. I think that is a dangerous thing. When I was asked

:37:04.:37:08.

to come on the programme, it was five years ago, I said is it really

:37:08.:37:12.

five years it happened, it seemed so recent, because the problems

:37:12.:37:16.

seem exactly the same. I think the problems are, this is as a non-

:37:16.:37:20.

economist, I'm not a specialist. But for people like me, we want the

:37:20.:37:23.

banks rooted in some practical reality, Northern Rock was rooted

:37:23.:37:28.

in the north-east, a building site mutual, you understood T then it

:37:28.:37:32.

becomes something virtual, part of the reason there were so many

:37:32.:37:36.

queues outside Northern Rock s there weren't many branches. There

:37:36.:37:41.

wasn't much bricks and mortar to it. This idea of progress, does your

:37:41.:37:49.

Government recognise that the next generation will be worse off?

:37:49.:37:51.

are important policy choices we have to make. Going back to

:37:51.:37:54.

Northern Rock, where was the common sense in the Government and

:37:54.:37:59.

regulators that said mortgages of 125% of somebody's asset are not

:37:59.:38:04.

sensible. How did the policies fit with what is the reality now?

:38:04.:38:08.

Listening to Mr Darling talking about the fact that wouldn't it be

:38:08.:38:12.

lovely if we spent more money on fiscal stimulus, where does the

:38:12.:38:18.

money come from. Martin is going to disagree, he always does. Is it

:38:18.:38:26.

right to burden this generation with the last generation's mess.

:38:26.:38:30.

Because Because of the policy decisions of Gordon Brown and

:38:30.:38:33.

Alistair Darling, because the coffers were empty. We have to make

:38:33.:38:40.

sure the banking industry is safe and regulated, and those who have

:38:40.:38:44.

mis-sold pensions or fiddled the Libor rate, which can't happen in

:38:44.:38:48.

the current system, that would be of benefit to us. We could be

:38:48.:38:53.

sitting here in five years time and say we are only half way through?

:38:53.:38:57.

We can grow again, underlying technology should allow to us to

:38:57.:38:59.

grow again. I don't believe this generation is definitely going to

:38:59.:39:05.

be poorer than the last one. It might, but that will be the result

:39:05.:39:10.

of mistake policy conditions. Very bad mistakes! My view, very

:39:10.:39:14.

strongly, is one of the mistake, in this situation, when it was clear

:39:14.:39:19.

that the private sector of going to retrench, is the public sector

:39:19.:39:22.

doesn't. Where will the money come from, the Government can borrow at

:39:22.:39:26.

the lowest rates of the entire history of the UK, and you are

:39:26.:39:30.

telling me it cannot borrow, it is completely mad. You would borrow to

:39:30.:39:40.
:39:40.:39:41.

invest in productive assets. I would borrow to show more.

:39:41.:39:45.

If yesterday was about vindication for the Hillsborough families,

:39:45.:39:49.

today marked the fresh start in the hunt for criminal justice. The

:39:49.:39:52.

Chief Constable of South Yorkshire Police told Newsnight last night

:39:52.:39:56.

that prosecutions would happen if allegations were proven. One of the

:39:56.:40:04.

sources behind the Sun's ill-judged coverage said he was Sorosy, Peter

:40:04.:40:07.

marshall, who was in Liverpool at the time of the tragedy sent this

:40:07.:40:11.

report. Now the world knows the truth, the families renew their

:40:11.:40:15.

quest for justice. Margaret Aspinall was 18, James Roberts just

:40:15.:40:20.

six years older. His sister and Jamesd's mum help run the bereaved

:40:20.:40:25.

Families Support Group, they are pressing for new inquests, and they

:40:25.:40:30.

are convinced there must be criminal prosecution over the

:40:30.:40:33.

allegations. If you look, everything that went against them

:40:34.:40:38.

yesterday, it was perverting the course of justice, for a start. We

:40:38.:40:43.

could never get all that evidence, it was withheld. To actually get

:40:43.:40:51.

them to change their statement, it is an absolute disgrace. The South

:40:51.:40:57.

Yorkshire force altered 115 of their own officers' statements,

:40:57.:41:01.

deleting the mismanagement of the crowd. This passage, was removed

:41:01.:41:11.
:41:11.:41:25.

Amid all the anger over the altered statements and elaborate cover-up,

:41:25.:41:29.

questions are being asked about the role of one of the country's most

:41:29.:41:34.

senior police chiefs. He's now Chief Constable of West Yorkshire,

:41:34.:41:42.

23 years ago, Sir Norman Bettison, was a Chief Inspector, rise to go

:41:42.:41:46.

superintendant of the south force. He was a key member of the unit set

:41:46.:41:52.

up by the force, to handle the bills ror row fall-out. Sir Norman

:41:53.:41:56.

Bettison said his duties never involved taking or opening

:41:56.:41:59.

statements, Newsnight has no reason to doubt that. We found some

:41:59.:42:05.

statements did pass through his hands at some point. Here are his

:42:05.:42:09.

initials confirming that, there was notes suggesting he was in receipt

:42:09.:42:12.

of statement. First Norman Bettison further angered Hillsborough

:42:12.:42:15.

families, with his comments in a statement of his own, issued this

:42:15.:42:25.
:42:25.:42:53.

Norman Bettison, we just can't believe what he's come out with and

:42:53.:42:55.

said today. Totally gone against what it said in the report

:42:55.:43:01.

yesterday. Why is he still trying to justify himself. Why can't he

:43:01.:43:06.

just apologise. We want his resignation, now.

:43:06.:43:10.

But Norman Bettison has faced doin calls from the families to re--

:43:10.:43:16.

down calls from the families to step down, he left south Yorkshire

:43:16.:43:21.

and had got an and promotion on this occasion. He had become Chief

:43:21.:43:25.

Constable of Merseyside. Today the families say they know Norman

:43:25.:43:29.

Bettison, and he just doesn't get it. He doesn't get it at all, he

:43:30.:43:34.

played he only played a peripheral road, he didn't give any order for

:43:34.:43:39.

any statements to be ordered, then in that case, why were they altered,

:43:39.:43:43.

he must have seen when they were looking at them that they had been

:43:43.:43:48.

altered in some shape, way or form. Whilst Sir Norman Bettison is

:43:48.:43:52.

adamant he did not wrong and has nothing to hide. A former

:43:52.:43:56.

Conservative MP tonight issued a statement, apologising to the

:43:56.:44:02.

bereaved, for adding to their pain and suffering. Sir Patrick pat was

:44:02.:44:06.

revealed yesterday to be a key source behind newspaper -- Sir

:44:06.:44:10.

Irvine Patnick revealed yesterday to be a key source behind the

:44:10.:44:14.

newspaper. He says he wants to put on record how appalled and shocked

:44:14.:44:21.

he was, to discover the extent of the cover-up. He says he accepts

:44:21.:44:25.

responsibility of passing on such information, without asking further

:44:25.:44:28.

questions. The Hillsborough families plan to meet this weekend

:44:28.:44:31.

to discuss legal advice on their next steps. They want fresh

:44:31.:44:38.

inquests and they want prosecutions. Now the front pages of tomorrow's

:44:38.:44:48.
:44:48.:44:48.

Apology for the loss of subtitles for 57 seconds

:44:48.:45:46.

That's all from Newsnight tonight, Gavin is back in the chair tomorrow.

:45:46.:45:56.
:45:56.:46:18.

Gavin is back in the chair tomorrow. Hello, getting quite windy

:46:18.:46:21.

overnight tonight, it means it won't be anything like as cold

:46:21.:46:25.

first thing in the morning. It won't feel all that ples qant with

:46:25.:46:30.

the strong winds, -- pleasant winds blowing lively gusts across

:46:30.:46:34.

Scotland and England. The winds slowing down over the afternoon,

:46:34.:46:38.

looking pleasant then, sunny spells, it will feel fresh in the breeze,

:46:38.:46:43.

but temperatures getting up to 19- 20. It will brighten up after a

:46:43.:46:46.

grey start across south-west England, sunny spells here for the

:46:46.:46:50.

afternoon, the same goes across much of Wales. Maybe one or two

:46:50.:46:53.

scattered showers across North Wales early in the day. Overall dry

:46:53.:46:57.

and bright, don't forget about the wind. The wind will be particularly

:46:57.:47:01.

lively across northern England and Scotland, also for Northern Ireland,

:47:01.:47:06.

gusty conditions, especially early in the day. The strongest winds

:47:06.:47:10.

across North West Scotland, 60 miles an hour here. That is mostly

:47:10.:47:14.

by the morning, it is still a blustery day. For Saturday the

:47:14.:47:18.

winds are lighter, although there will be lots of cloud in western

:47:18.:47:22.

areas, generally it is dry and fine with sunny spells. Further south

:47:22.:47:25.

there will be sunny spells across the east, more cloud at times

:47:25.:47:30.

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