Bruce Anderson: Yes, the Tories should blame Brown

The consequences will be much graver because of our poor fiscal position

There is one headline which nobody ever expected to see: "Economic crisis – good news for the government." But the global banking degringolade has taken the pressure off Gordon Brown. He has two advantages. First, his body language is good in a crisis. Second, no one blames him for causing it. The voters do not understand what is happening – who does? – but inasmuch as they hold anyone responsible, it is greedy, bonus-swilling bankers. When bankers are in the dock of public opinion, the terms of political trade move in the left's favour. Think how much worse it would be for the Tories if they were in power.

Opposition can be a frustrating business: never more so than in current circumstances. Today, no one is interested in what David Cameron has to say. All attention is focused on the markets, and the politicians who are trying to arrest the panic. Those who can do things are in the spotlight. Those who can merely say things struggle for a hearing.

Yet this will not last. It might seem strange to cite Epicurus, the philosopher least appropriate in straitened times, but he correctly observed that no prolonged pain is intense, and no intense pain is prolonged. The markets will calm down, if only because they have no further to fall, and the weight of G8 intervention will begin to tell. Equally, when the indexes do seem to have hit bottom, we are likely to see a sharp rally.

For the past few weeks, an old stockbroking adage has been much quoted: "never try to catch a falling knife". At the same time, however, a great deal of cash has been piling up, waiting for a home. All the world's money has not suddenly evaporated; some private equity funds are awash with the stuff. There has been a lot of talk about "vulture funds'; the term is self-explanatory. The markets' distress has created a large amount of enticing carrion. This will not help to endear the capitalist system to an indignant populace, but the rich and bold will prosper in a market where cash is king.

The Tory party will keep well away from the vultures. But as the financial system returns to a subdued version of normal, there is bound to be an inquest. That should not be a short-term affair. As this is the worst crisis to hit the international financial system since 1945, it may be time for a fundamental re-examination of the economic order, on the scale of Bretton Woods. The theoreticians ought to be involved. Credit is like fire: splendid when under control – otherwise, devastating. So how do we measure and constrain the growth of credit so that it stimulates the economy, without scorching it?

If the Tories are wise, they will play a full part in the UK end of the reassessment, avoiding shrill denunciations and expressing themselves with the seriousness which the situation demands. They must also ensure that false and damaging explanations do not take root. These problems were not created by short-selling and bonuses. Excessive benevolence is much more to blame than excessive greed.

In the late 1990s, a Democrat-controlled Congress virtually compelled US banks to advance mortgages irrespective of the applicants' financial status. Racial factors played a role in this; a large percentage of sub-prime borrowers were Black or Hispanic. But everything was underpinned by economic optimism. The assumption was that the economy would just keep on growing, so that even the poorest families could have their stake in the American dream.

Greed did kick in. Higher lending did boost bankers' incomes, otherwise they might have protested more about being locked in to imprudent practices, and there was a further factor. Over the years, banks had come to assume that any inter-bank transaction was gold-plated: that all bank assets were secure. That should not have applied to the market in sub-prime loans.

When I was a boy, stamp dealers would sell packages of unsorted stamps, which provided hours of fun searching for non-existent rarities. That is a harmless outlet for small stamp-collectors' pocket-money; it is an absurd way to trade mortgages. Equally, one set of persons, on both sides of the Atlantic, should have been immune to both greed and political pressure, and should have spotted the dangers: the regulators. From the time when Alan Greenspan warned of the risks of "irrational exuberance" onwards, central bakers have been worried about the growth in asset prices, especially house prices. But nothing like enough was done to bring those anxieties to bear on monetary policy.

In Britain, however, the regulators were operating at a disadvantage, which is Gordon Brown's fault. Back in 1997, when Labour were still in opposition, Tony Blair decided that the Bank of England ought to be independent, giving it the power to set interest rates and manage monetary policy. But he had the greatest difficulty in persuading Gordon Brown. In the years since, Mr Brown has been happy to take the credit for that decision; at the time, he had to have his arm forced up his back. He was disgruntled, for an obvious reason. He did not want to abrogate any of the Chancellor's powers.

He lost on independence, but did exact a quid pro quo. The Bank of England's power to regulate the financial system was reduced, which provoked the then Governor, Eddie George, to the point of resignation. Henceforth, the Bank's former responsibilities were shared with the Treasury and the Financial Services Authority: a terrible idea. When complex demarcation lines interfere with a hitherto simple process, there is a predictable consequence. The new arrangements malfunction.

There, Mr Brown can be held accountable and the same applies to government expenditure. The recent emergency was not caused by the British government's failure to control public spending. But in the UK, the consequences will be much graver because of our poor fiscal position. Chancellor Brown was no wiser than the banker in Boondocks County, who decided that is was OK to lend to all those sub-prime characters, because the good times would just keep rolling along. When the waves subside, the Tories should be able to expose Gordon Brown's culpability.

Irrational pessimism will prove less long-lasting than irrational exuberance. Well before Christmas, the banking system will be out of intensive care. In politics, acute illness will have subsided into chronic grumbling. That will be bad news for Mr Brown.