Alistair Darling warns Barack Obama over banking reforms

[FarCenter]

David Smith and Iain Dey - January 24, 2010

Alistair Darling warns today that President Barack Obama’s proposals for shaking up the banks would not have prevented the crisis and risk undermining the international consensus on reforming the financial system.

In an interview with The Sunday Times, the chancellor made clear that he saw serious shortcomings in the American approach.

“It is always difficult to say ex ante that you would never intervene to save a particular sort of bank,” he said. “In Lehman, for example, there wasn’t a single retail deposit, but the then American administration allowed it to go down and that brought the rest of the system down on the back of it.

“You could end up dividing institutions and making them separate legal entities but that isn’t the point. The point is the connectivity between them in relation to their financial transactions.

“Equally, the large-small thing doesn’t run. Northern Rock was very small in global terms but systemically it was quite important when it got into trouble.”

The chancellor said Britain would continue to work with America on financial reform but that any proposals would have to be “workable and deliverable” and that he would not do anything to “disadvantage London relative to the rest of the world”.

Darling’s big worry is that Obama’s bombshell proposals, based on ideas set out last year by Paul Volcker, former chairman of the Federal Reserve Board, will shatter the consensus within the G20 nations on banking reform.

<SNIP>http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6999771.ece

[MannyGoldstein]

1. We Had Glass-Steagall For About 70 Years, It Worked Fine

We got rid of it, then all hell broke lose.

Pretty simple stuff, really.

[BlueIdaho]

3. Bingo!

Bringing back G-S would be a huge step in the right direction.

[OHdem10]

4. Absolutely it worked. until well into the 90s. Then the seious

gambling began. They had the Taxpayers money with which to
gamble. This is what made the bailout imperative. They
had to stop the hemmoraging and salvage what they could
for Main Street. By at least bringing back some of the
principles of Glass-Stegall, Taxpayers are Separated from
Investors (Hedgers etc). If the Investment Bank fails,
the Commercial Banks are OK. The Investment Bank fails
will therefore no bail out in the future.

[Selatius]

5. I'd rather follow FDR's advice over Alistair's any day of the week.

And FDR had something to show for it at the end.

[Liberal In Texas]

6. Agreed. You said it as well as I could have. n/t

[Grand Taurean]

2. Britain along with Switzerland have some

shady third-world style banking practices.
I am not concerned about "New Labour's" love of right wing freidmanism.