Wednesday, November 21, 2012

Lord Lawson vs George Osborne: Glass-Steagall failure or suceess?

Lord Lawson picked up on something UK Chancellor of the Exchequer George Osborne said this morning at the Parliamentary Commission on Banking Standards. George Osborne had said that the US Glass-Steagall Act (part) repeal in the 1990s was because it had 'failed'. Lord Lawson, before starting his questions to the Chancellor put Osborne right about his 'failed'. He said that President Clinton was pressured to repeal the G-S because it was so 'successful' in doing was it was intended to do and keep dangerous banking activities from infecting ordinary banking. The banking lobby pressure cleared the decks, with S-G  out of the way, to  'reflect changes in the world's financial system' (see Wikipedia, et al) . The repeal is alleged to have allowed the financial system to blow up into the 2007 crisis, and so on, to this day. George Osborne joked that ex-Pres. Clinton should call in to the Committee to explain. Lord Lawson: 'No need, you can take my word for it.' 

There is now a similar discussion. There are those who want to have a complete separation of retail from investment banking. Briefly the argument is about a ring fence around the bits to be kept safe and protected for the public, and keeping out the rest. But where to place the ring fence? GO said there is a consensus about where the ringfence should be and told the Committee to beware of 'unpicking' the consensus. But big questions are unresolved: which bits to include in the safe bit? how do you define them? who defines them? what about people who 'tunnel  under the ring fence'. GO and Greg Clark the Financial Secretary to the Treasury sought to pacify the Committee members that all would be carefully looked at over the next year of legislation. 

The Vickers proposals (the consensus) rejects full separation into 'narrow banking' from the rest. The members pointed out the pressure and wealth of the banking lobby to get their own way. GO rejected a rejection by the Committee of the Vickers Commission after so much work.  It seems obvious that George Osborne is more on the side of the banks than the Committee is. 

Whilst archane points are debated on in the next few months about ring fence location, anti-tunnelling devices; the compilation of glorious ragbags of regulations, etc, one wonders that no-one is mentioning alternative money creation systems using government agencies rather than banks to create credit. The system is clearly broken and such crises as we are now experiencing will recur unless we do something to get rational and civilised thought about the dangers of money creation. See this video interview with Prof Richard Werner (Univ. of  Southampton) Debt free and Interest Free Money.lot of problems would just not arise if the ideas of the book Creating New Money  were followed, see it here: Free e-book download James Robertson and Joseph Huber
posted by Charles Bazlinton who quotes Creating new Money in the book: The Free Lunch-Fairness with Freedom 

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