Wednesday, October 21, 2009
Gee, you'd think that, having brought the late, great U.K. housing bubble back to life, Prime Minister Gordon Brown and Bank of England Governor Mervyn King would be patting each other on the back. Apparently not.
Here's Mervyn King in a sobering speech from last night where he rails against "too big to fail" and the dangerous mix of commercial banks and investment banks under the same roof.
King describes the basic problem as "Never in the field of financial endeavor has so much money been owed by so few to so many", a condition that also exists in the U.S.
Gordon Brown doesn't seem to see things the same way in a dangerous, Larry Summers sort of way as detailed in this story in the Telegraph.
Mr Brown told MPs that "the difference between having a retail and investment bank is not the cause of the problem."Mr. King has an ally in Paul Volcker, however, neither seems to be having much success spurring legislators to action, outgunned by lobbyists, on this side of the Atlantic at least.
The Prime Minister added that "the cause of the problem is that banks have been insufficiently regulated at a global level."
Governments in the UK and US have tacitly ruled out splitting up the biggest banks and opted instead to scrutinise them more actively.
In a speech in Edinburgh, the Governor said "It is in our collective interest to reduce the dependence of so many households and businesses on so few institutions that engage in so many risky activities. The case for a serious review of how the banking industry is structured and regulated is strong."
George Osborne, the shadow chancellor, described Mr King's analysis as "powerful and persuasive”.