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Today I watched Gordon Brown in answer to a question by Nick Clegg state that breaking the Banks up into separate Retail and Wholesale businesses wouldn’t work because “Northern Rock was a retail bank and had to be saved…” What a total fool Brown is, clearly he cannot tell his arse from his elbow, we all know that NR was doing the one thing no Bank should ever do, borrow short and lend long.

To be fair to the LibDems, they have come up with this before but what reignited it was that last night, the Governor of the Bank of England, Mervyn King made some very robust comments. He described the regulatory system created by Gordon Brown in 1997 as “inadequate”. Then went on to say that wrongly motivated bankers had been “playing with fire”, and further that a central assumptions of the Financial Services Authority’s new approach was a “delusion”.

Well Said Mervyn

The man is right, there must be a clear separation between “Retail-High Street Banking” and “Investment or Wholesale Banking” activities and internal “Chinese Walls” just won’t do, the big 4 have to be broken up.

There will be a price to be paid for this which will not be popular but the end of “free” banking and credit cards must be a certainty which may mean consumers paying anything from £2-5 per month for having the facilities. The point is that the retail banking sector must be able to make a profit from its standalone retail operations. Besides which, there is nothing that is free anyway, we pay for it in one way or another already, let’s put it upfront.

The recent experiences should encourage us to be prepared for this, it will be a relatively small price to pay to ensure that the retail banking system is properly policed and operates within strict capital reserve ratios, let the wide boys speculate as they will but, let us ensure that they can go bust without destroying the rest of the system.

Some Blame Deregulation

For those who cite the Deregulation of the 80s as the root cause of the current problems, I would disagree because the main problem was the insane desire of Banks to become ever bigger, Goodwin “beat” Barclays to buy a Dutch Bank and in doing so, destroyed RBS, Barclays had a lucky escape.

The real problem is “Too Big”, “Too Much Ego”, and not enough common sense and it just doesn’t apply to banking, any one industry that comes to dominate the economy of any country, has the potential to destroy it too whether that is financial services, making motor cars or selling Gas and Oil, economic and industrial diversity is the answer particularly for a densely populated such as the UK.

Fair is Fair, an Update:

Whilst I think Robert Peston of the BBC is nothing more than a “failed Thespian” and rather boring for that, he did a BBC Blog which for balance, is worth a look:

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/10/bank_reform_the_radical_way.html

I am still not convinced but and all that said, it is complex and the natural tendency is to want to believe the “experts” but frankly, I don’t any more. As a voter, if these people were my Accountants I would check and demand an explanation for every line, my “trust” has long since gone out the window.

That said, it is a different view, take your pick…