That’s the right spirit – Ed Miliband proposes an updated Glass-Steagall Act

30 September, 2012 at 20:43 | Posted in Economics | Leave a comment

In an interview with the Observer, the Labour leader Ed Miliband says he will confront the City of London with what is seen as the nuclear option for reform if the banks fail to separate their “casino” investment operations from services to account holders, savers and businesses …

In terms that will anger the investment banking industry, Miliband tells the Observer a Labour government, as one of its first acts, would push through a modern-day equivalent of the 1933 Glass-Steagall Act, which split the commercial and investment operations of US banks after the 1929 stock market crash …

Speaking ahead of Labour’s annual conference, which opens in Manchester on Sunday, Miliband says banks must concentrate on core functions such as lending to small businesses “rather than playing the international money markets”. Such behaviour puts ordinary customers at risk of having to share the consequences of failed investments.

Echoing concerns expressed last month by Sir Mervyn King, governor of the Bank of England, who believes that reforms proposed last year by Sir John Vickers are being “watered down” after lobbying by the banks, Miliband says it is time to stop backsliding, and to change banking culture for good. The recent Libor scandal involving the fiddling of inter-bank interest rates and the £10bn scandal over mis-selling of payment protection insurance showed the culture was still rotten …

“The banks and the government can change direction and say they are going to implement the spirit and principle of Vickers to the full. That means the hard ringfence between retail and investment banking. We need real separation, real culture change. Or we will legislate.”

The Guardian

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