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 in Manchester, northwest England, today. He blamed excessive borrowing by the previous Labour government, the creation of the euro and bankers’ risktaking 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. The British Bankers Association did not immediately return a call for comment.
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