One Law For Them

Michael Meacher takes the criminal Banksters to task on Left Futures here: “The banks are getting away with it again, and this time with potentially very serious consequences for the world economy. The 2008/9 financial collapse occurred, as everyone knows, because all the world’s major banks had been peddling toxic mortgage-backed securities based on sub-prime properties and trading them very profitably on a colossal scale across the world.

When inevitably the scam imploded, triggering a worldwide recession that still continues, it was judged that these banks were too big, and too enmeshed in underpinning the broader economy, to be allowed to fail. But that meant rescuing, not just those components of the bank engaged in supporting the domestic economy (the good bank), but also the trading arms of the bank that had speculated across the world in risky ventures (the bad bank) of which the board of the bank had little understanding and even less control.

The blindingly obvious solution for the future was to separate off the bad, toxic and dangerous part of the bank from the good, retail industry-supporting part. and to make it clear that the latter would be supported by the government/taxpayer in the event of any future collapse, but the former most certainly would not be. But this hasn’t happened, and it is important to understand why.

The Glass-Steagall Act inaugurated after the Wall Street crash of 1929 enforced this separation. It worked: between 1933 when it came into force until 1996 when it was repealed 63 years later (on the grounds that it wasn’t necessary because the markets were now ‘safe’), there was no major financial crash. Just 11 years after its repeal the biggest financial crash since 1929 occurred which, it can safely be said, would not have occurred had Glass-Steagall still been in force.

Having made that catastrophic error 17 years ago, it seems obvious beyond argument that the equivalent of Glass-Steagall should now be put immediately in place without further ado. Not a bit of it. The major banks, now immeasurably stronger and bigger under conditions of completely deregulated financial markets, lobbied powerfully, persistently and threateningly against it:

  1. Under that pressure the Vickers Commission backed away from full separation. They favoured rather setting up so-called Chinese Walls between the retail and trading arms of banks – a flimsy alternative which the City, experts in regulatory arbitrage, will get round in no time.
  2. The parliamentary Tyrie Commission didn’t press for full separation either.
  3. Now the European Commission has now decided that separation will no longer be necessary, contrary to the recommendations of the 2012 Liikanen report to the EU on the structure of banking. Instead national supervisors are to be given wide discretion in applying reforms. But the lobbying machine of the big banks will continue to churn away relentlessly.

So there we have it: reform of the banks which is vital to national well-being is being steadily and remorselessly ground into ineffectiveness, while reform of social security, immigration rules and public services, which is profoundly harmful and unjust, is being tightened endlessly.” (http://www.leftfutures.org/2014/01/one-law-for-the-banks-and-another-for-everyone-else/)

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