Alistair Darling vetoed Barclays deal with Lehmans

FORMER Chancellor of the Exchequer Alistair Darling has admitted that he vetoed a deal two years ago for Barclays to buy the troubled US investment bank Lehman Brothers, whose collapse preceded the world financial crisis.

Mr Darling said that he had rejected the Barclays buy-out because he knew Lehman Brothers was in deep financial trouble and he did not ultimately want the British taxpayer to be underwriting an American bank.

The demise of Lehman Brothers in 2008 was widely seen as a tipping-point that triggered the world's biggest economies' descent into recession.

Speaking at the Cheltenham Literature Festival, Mr Darling said: "I am not hostile to British banks taking over American banks or foreign banks, but at the time of this crisis we knew Lehmans was in deep trouble and then I got a call on the Friday afternoon asking what the British reaction would be if Barclays took it over.

"My first reaction was: 'If this is such a good deal how come no American bank is going to go near it?'"

Host Will Hutton asked Mr Darling whether the claims made by Hank Paulson, the former United States Treasury Secretary, last year in a book were true - that he had vetoed the Barclays rescue deal.

"Yeah I did. Imagine if I had said yes to a British bank buying a very large American bank which then collapsed the following week, everybody sitting in this room and your children and your grandchildren and their grandchildren would be paying for years to come," he replied.