Britain's Banks: Too Big To Save?

[Neil Foxlee]

If you can put up with Robert Peston's intonation, this lifted at least some of the lid on the giant can of worms that is the Western banking system: http://www.bbc.co.uk/programmes/b00xwsl5 .

See Peston's related blog post The Broken Heart of Capitalism: http://www.bbc.co.uk/blogs/thereporters ... alism.html .

David Malone's comments here: http://golemxiv-credo.blogspot.com/2011 ... again.html .

[Neil Foxlee]

Peston's blog post quotes the deputy governor of the Bank of England:

"If we have a system where banks take the upside but the taxpayer takes the downside something has gone wrong with capitalism, with the very heart of capitalism, and we need to repair this".

And:

"Capitalism can't work unless these financial firms at the centre of the heart of capitalism can be subject to orderly failure. The rules of capitalism need to apply to them just as they do to non-financial companies."

The only way to do that under the current system, it seems to me, is to:

a) split retail from investment banks, making the retail banks boring but safe by very tight regulation, and let market forces take care of investment banks (that's capitalism, isn't it?);

b) put a cap on the size of banks, breaking them up further if need be, to ensure that the failure of one doesn't threaten the entire system.

One banker in the programme argued that you needed big banks to service big global companies. Break up the companies, then - global mega-corporations are hardly a force for good either. The US has anti-trust laws to prevent monopolies - apply the same principles to corporations that get too big and powerful.

All this assumes finding politicians who will stand up to the financial and economic interests involved, of course...