U.K. Chancellor of the Exchequer George Osborne said British bank practices before 2008 resembled “Ponzi schemes,” contributing to the market crash.
The crisis was caused “by the mistakes of human beings,” Osborne told delegates at the Conservative Party’s annual conference today in Manchester, northwest England. He blamed excessive borrowing by the previous Labour government, the creation of the euro and bankers’ risk-taking for the economic problems the U.K. faces.
“The banks and those regulating them believed that the bubble would never stop growing, that markets were always self-correcting, that greed was always good, that their Ponzi schemes would never collapse, and that none of the debts would ever turn bad,” Osborne said. “They let down their customers, they let down their shareholders, and they let down their country.”
A Ponzi scheme is a fraudulent financial arrangement under which investors are paid high returns from the deposits of subsequent investors. Bernard Madoff was jailed for 150 years in June 2009 for masterminding the largest ever U.S. Ponzi scheme.
No U.K. banks have been prosecuted for running a similar operation.
Brian Mairs, a spokesman for the British Bankers Association, a London-based industry lobby group representing 200 banks, said the organization does not comment on political speeches made at party conferences. The body may take up the allegation with the chancellor in private, he said in a telephone interview.