Britain To Break Up Biggest Banks

The WSJ reports (on-line): “The U.K.’s top treasury official Sunday said the government is starting a process to rebuild the country’s banking system, likely pressing major divestments from institutions and trying to attract new retail banks to the market.”  The British style is typically understated and policymakers always like to play down radical departures, but this is huge news.

Pressure from the EU has apparently had major impact – worries about unfair competition through subsidizing “too big to fail” banks are very real within the European market place.  Also, strong voices from within the Bank of England have helped to move the consensus.

The US position on protecting everything about our largest banks is starting to look increasingly isolated and out of step with best practice in other industrialized countries.  Time to start planning for the break-up of Citigroup.

By Simon Johnson

13 responses to “Britain To Break Up Biggest Banks

  1. You mean Nemo and I will have to eat our hats??? Oh my. Don’t take this the wrong way, because it’s a positive feature of your character Professor Johnson, but you still don’t understand America yet. The break-up of Citigroup will never happen.

  2. once broken up, are any of the UK retail banks going to be small enough to fail?

    I don’t see how asking them to sell their insurance arms, and so forth, changes anything fundamental.

    Were Lloyds and TSB small enough to fail, before they became LloydsTSB? Halifax and Bank of Scotland? Northern Rock wasn’t really so big, and it had to be rescued.

  3. cordon sanitaire

    It was clear from the outset that pressure for US reform had to come from the outside world because our corrupt bipartsan collusion is too far gone. It’s possible that nothing will happen here without coordinated multilateral sanctions or prudential regulations that discourage transactions with US banks.

  4. I suppose I should be happy abotu what’s happening in the UK (without the bank breakup, its only partly relevant what THIS bailout will cost us).

    Nevertheless, as a taxpayer first and public sector worker second, its hard to feel enthusiastic as another £40 billion of our money is given to the corporation that posted the largest loss in history last year

    http://www.google.com/hostednews/afp/article/ALeqM5i-PH_7hxSCxeKot5h2n5kOC9amuw

    And who’s multi-millionaire boss refused to hand back even a few million of his pension, which he would have forfeited if RBS had been allowed to go bankrupt.

    Still, SOME action, AND Simon wrote about the UK at last… who’da thought it??

    A “good” day….

  5. Once again America will be the rogue nation.

    (And so much for the lie that breaking up TBTF would incur some mythical competitive disadvantage. OTC, TBTF is American corporatism’s attempt to prop up its own unfair advantage.)

  6. Does that mean that the U.S. finally gets rid of Geithner???

    Far OVERDUE!!!

  7. Why get rid of a stupid little tax cheat?

  8. Don’t underestimate how fast US politicians will toss any special interest under the bus if it might mean losing an election…

  9. Yep, that’s what I already said some days ago that this would happen after the ING in Holland. Hopefully all them traders and investment banksters will flee to Wall Cheat and ruin the lot there, good riddance.

  10. Does WSJ still have a bureau in London??? I thought that section of the paper had been reassigned to taking dictation for Rush Limbaugh???

  11. I can’t imagine that this news will impact our coopted Congress. There is no chance, unless somehow Tim Geithner and Ben Bernanke find their testacles. Sorry, but it ain’t happenin’ here.

    My jaw would drop off my face if that happened.

  12. I’m all for breaking up too-big-to-fail banks–but not for breaking up too-small-to-need-segmenting blog posts. Why did I have to click through to read the final four sentences of this brief posting?

  13. that is the one nice thing about politicians.