Brown slams King’s call to split banks
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Prime Minister Gordon Brown has hit back at calls from Bank of England governor Mervyn King for banks to split their retail and investment activities.
King wants to separate the riskier elements of banks from their core activities and says banks should not be allowed to become ‘too important to fail’.
But speaking in parliament today, Brown says the difference between a retail and an investment bank is not the cause of the sector’s problems.
Responding to King’s comments, he says: “He has got to remember that Northern Rock was effectively a retail bank and it collapsed. Lehman Brothers was effectively an investment bank without a retail bank and it collapsed.”
He says the cause of the problem is that banks have been insufficiently regulated at a global level and we have got to set the standards for that for the future.
Chancellor Alistair Darling also warned today that although the world has prevented the global recession sliding into a prolonged depression, the UK is not out of the woods yet.
He says: “We must support the economy until we’re sure the recession is over. Some are tempted to think the crisis is over but it’s not. Banks all over the world are still dependent on government support.
“There are signs that the action taken by governments around the world has prevented the global recession sliding into a prolonged depression. But it’s too early to sit back and relax.”
He adds: “The situation in the world economy remains fragile. We need to continue to support our economies – helping those struggling to deal with the impact of the downturn until they are able to stand on their own again.”
Readers' comments (3)
Alan Townley | 21 Oct 2009 5:22 pm
Hmmm! If prolonged depression was the result of not propping up the banks then so be it! Sorry to sound crass but it is clear that the last 40 years in financial terms should not have happened. If that is the case then let it die out naturally.
Alternatively we can carry on with the "regulation and more regulation" ethos and make those banks "responsible lenders" which in turn costs everyone more so they can carry on just as before! Please Mr Brown..Mr King really does have a point!
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Bill Wells | 22 Oct 2009 9:30 am
If Brown the Moron thinks splitting the investment side from core business is a bad idea then we had better do it - FAST.
Brown has been a disaster for this country - and he and his profligate, incompetent and faudulent government will continue to dig the hole we are in until his last day in office.
He is as Messianic as the mass murderer who is now vying for the Presidency of Europe - blood on his hands Blair. God Help us All !
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Chris Mayor | 22 Oct 2009 10:25 am
As usual, Brown is being a politician and being deliberately obtuse.
Northern Rocks business was not just retail, it bought tranches of funds, packaged them in mortgage form to the public, then sold them on. It had no second plan. Thus, that is putting your eggs in one investment basket. In simple terms! Lehmans etc., can be looked at in a similar way. The problem, is as one of the banking system and its value. We had years of paying massive bonus', for doing the job. If all did not pay, there are no other places thay could earn the money. People leave and take the accounts and the chase is on! Market share, market share and dont spare the profit horse!
So predictable. Was it not Mr Brown who gloating about our position in the early part of this century said other countries should not restrict their bankers? How smug was he?
It has come home to Roost.Trust us we have the experience, he says. If it was an election between him and Donald Duck. I'd vote for the duck, as he could not possibly do worse. He was Chancellor through this. He really is to blame.
Mr Brown, we will never forget you. It will take that long to pay off the money you have spent on our behalf. I am 49, so I will not manage to pay back " my share" before I die. Take it out of my pension.........oh no, another thing?
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