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Liam Halligan: It’s Glass-Steagall Now or Another Banking Bust

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There is growing support for the imposition of complete bank separation among top levels of finance in the UK, that is, a new Glass-Steagall-style split between merchant and retail banks, to the point that it is becoming "conventional wisdom," writes the Sunday Telegraph’s banking columnist Liam Halligan. "What should definitely depress us—and even make us angry," Halligan continues, "is that rapacious banks are assisted in their defence of the indefensible by the Chancellor of the Exchequer and the leading candidates to become the next Governor of the Bank of England."

Halligan goes on to make the case for Glass-Steagall, quoting from some of its numerous supporters in England, such as Sir Peter Hambro, yet "the UK is about to sleep walk towards another devastating banking collapse in a few years time."

Why is this the case? Because Chancellor of the Exchequer George Osborne is trying to force the Parliament to ram through the reforms proposed by the Independent Commission on Banking, chaired by Sir John Vickers. Vickers was among those who gave testimony to a Parliamentary commission, chaired by Tory MP Andrew Tyrie, this past week, on behalf of his "ring fencing" proposal. Deputy Bank of England Governor Paul Tucker, among those favored to replace current Bank Governor Mervyn King, agreed with Vickers, saying that the government should implement the "ring fence" without delay. Ring fencing, separating banking and speculation but keeping them under one roof, is not Glass-Steagall, as King himself warned the commission. He said there was a "clear risk" that the bankers would be able to "pull the wool" over the eyes of the watchdogs. Halligan documents that the real concern of Osborne, Vickers, and Tucker is to keep the big banks together.

"Tyrie and his colleagues should recommend, loud and clear, with a welter of evidence and expert opinion behind them, that the Vickers measures don’t go nearly far enough," Halligan concludes.