Sunday, December 18, 2011

A step in the right direction

The British government has decided to accept the recommendations of the Vickers report on banking. Apparently they get the concept of "too big to fail" meaning "too big to exist". It is not a complete seperation, but it does acknowledge the problem.
The U.K. will force banks to separate their investment and consumer businesses as part of its acceptance of the findings of the John Vickers-led Independent Commission on Banking, business secretary Vince Cable said.

“Tomorrow, the government is going to launch this initiative on the banks, accepting in full the Vickers commission,” he told BBC television today. “We’re going to proceed with the separation of the banks, the casinos and the business lending parts of the banks.”

Former Bank of England Chief Economist Vickers recommended in a Sept. 12 report that banks build fire breaks between their consumer and investment banks and boost the amount of loss- absorbing equity and debt they hold to between 17 percent and 20 percent. Since 2007, the government has had to spend, pledge and loan 850 billion pounds ($1.3 trillion) to rescue British banks.

“These are vital reforms to protect taxpayers and consumers in the future, which the government must get on and legislate for rapidly,” lawmaker Chris Leslie, who speaks for the opposition Labour party on financial matters, said in an e- mailed statement. “The independent commission should be asked to publish a report in 12 months on what progress has been made in implementing and legislating for these reforms.”
But if this succeeds, we can expect it to be ignored in this country. No one in Washington has yet noticed that austerity is the exact wrong thing to do in a recession.

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