Finally! Glass-Steagall like plan coming to the UK

The WSJ is running a story saying the UK Treasury is going to announce a plan to force banks to separate their risk taking side (investment houses) from their safe and sound deposit (banking) side.  This dear reader, is good news!

Of course, you might be saying – “wow that seems like a really good idea, why didn’t that rule exist before”?  In fact, it is a really good idea and it did exist before.  For it was from the very hard learned lessons of the Great Depression that such a good idea was born. An idea that helped keep our banking system safe, secure and sound for 80+ years.  That is of course, until it was repealed!

Here are some highlights of what this will mean in the UK:

“The goal of ring-fencing is to insulate risky activities, such as trading, so that deposits won’t be put at risk by banks’ investment-banking operations. Proponents say it could also make a failing bank easier to unwind in a crisis. In backing ring-fencing, the British government is going much further than its counterparts in the U.S. and Europe.”

[sarcasm] Well that’s just crazy! Why on earth should deposit-taking banks that we trust to keep the foundation of the economy running (savings, checking, payroll, mortgages, ATMs, etc.) be prevented from making risky Vegas style bets on with our money?

“Mr. Osborne is also expected to reveal that he will require deposit-taking banks to hold additional capital, which could signal that the U.K. will go beyond tough new global rules on the amount of capital banks must hold to protect against losses—another example of how the U.K. wants to position itself as a leader on financial reform.”

[sarcasm] Again, this is just nuts!  Do we really want our risk-adverse deposit-taking banks be on solid and sound financial footing?

If you are not familiar with the Glass-Steagall Act you should beWe desperately need this act reinstated here in the US.

 

Plan to Rope Off Bank Peril | The Wall Street Journal

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