100 signatures reached
To: The Parliament and the Government
Break up The City’s mega-banks: pass Glass-Steagall!
Replace the impotent “ring-fencing” policy adopted in the Financial Services (Banking Reform) Act 2013, with Glass-Steagall legislation to fully separate the UK’s Too-Big-To-Fail banks into two types: normal commercial banks, which service the real economy and are backed by the government, and “investment banks”, which are invariably speculative and will be left to sink or swim on their own.
Why is this important?
The IMF, the Bank for International Settlements, and many financial experts are warning of a new global financial crash far worse than 2008, caused by the same forces: the unbridled speculation in derivatives, and outright criminal activity, of City of London and Wall Street megabanks. Under current policy and legislation, government bailouts and “bail-ins” (the confiscation of assets and even individual bank deposits to prop up failing banks) will be used to attempt to save the financial system yet again.
The City of London and Wall Street Too-Big-To-Fail (TBTF) banks have received US$19 trillion in bailouts since 2008, even as brutal austerity has been applied in the UK, USA and other nations. The TBTF banks are now 40% larger than in 2008. They remain heavily invested in derivatives, the world trading centre for which is London. Derivatives, such as the infamous mortgage-backed securities at the heart of the 2008 crash, now total US$1.2 quadrillion, compared with a global GDP of only US$50 trillion. While not lending to the real economy, the London/Wall Street banks have engaged in drug money laundering, financing terrorism, tax evasion, mortgage fraud and outright theft from their customers, for which they have been fined tens of billions of dollars. The UK’s National Crime Agency reported in May 2015, “We assess that hundreds of billions of U.S. dollars almost certainly continue to be laundered through UK banks, including their subsidiaries, each year.”
Late 2016 stress tests conducted by the Bank of England showed that the major UK banks are woefully undercapitalised. Their derivatives holdings, aptly termed by Business Insider “unexploded nuclear bombs nestling deep in the financial system”, dwarf their assets (lending) and deposits. In the inevitable next crisis, major banks would likely collapse, triggering a meltdown of the trans-Atlantic financial system.
The UK Parliament passed the Financial Services (Banking Reform) Act 2013. It, however, merely provided for “ring-fencing”—separating “investment” and commercial banking within each bank, but, unlike Glass-Steagall, allowing them to remain under the same roof and be done by the same company. This “solution” was denounced by knowledgeable members of both the House of Commons and Lords as simply window dressing which would allow the present, wildly speculative practices of the TBTF to continue.
Why full Glass-Steagall separation?
The USA’s 1933 Glass-Steagall Act strictly separated deposit-taking commercial banks from the “investment” banks whose wild speculation had caused the Great Depression. Glass-Steagall operated for 66 years and made systemic banking crises impossible. But the City of London’s 1986 “Big Bang” financial deregulation, followed by the repeal of Glass-Steagall in 1999, which both London and Wall Street had demanded, led to the 2008 crash.
Support for full-scale Glass-Steagall is non-partisan: In the USA, both the Democratic and Republican Parties adopted it in their 2016 platforms, and the AFL-CIO (the central labour federation) has endorsed it. In the UK, 445 MPs and Lords from all parties voted for it in 2013, many of them warning that ring-fencing would not work. The late Labour MP and former cabinet member Michael Meacher said, “It must be obvious to everyone that this device [ring-fencing] will be breached in no time by regulatory arbitrage in the City of London where all the big banks employ armies of lawyers and accountants for just this purpose.”
Conservative MP Sir Peter Tapsell, a former member of Margaret Thatcher’s cabinet and “Father of the House of Commons” until he retired in 2015, said, “What I mean by a complete return to Glass-Steagall is that we should have none of this nonsense of ring-fencing, which used to be called Chinese walls. It never works. Chinese walls turned out to be papier-mâché. I worked in the City for 40 years and I promise Members that it is impossible to make that work.” He was echoed by Lord Nigel Lawson, who as Chancellor of the Exchequer had supervised the “Big Bang”, but in the 2013 debate and ever since has acknowledged that the repeal of Glass-Steagall was a dreadful mistake.
In the Guardian of 11 August 2015, Shadow Chancellor John McDonnell wrote that “the Corbyn campaign is advocating a fundamental reform of our economic system”, to “include the introduction of an effective regulatory regime for our banks and financial sector”, and “a full-blown Glass-Steagall system to separate day-to-day and investment banking” (emphasis added).
Only an aroused, mobilised population can ensure that Glass-Steagall is adopted now, before the TBTF banks crash.
The City of London and Wall Street Too-Big-To-Fail (TBTF) banks have received US$19 trillion in bailouts since 2008, even as brutal austerity has been applied in the UK, USA and other nations. The TBTF banks are now 40% larger than in 2008. They remain heavily invested in derivatives, the world trading centre for which is London. Derivatives, such as the infamous mortgage-backed securities at the heart of the 2008 crash, now total US$1.2 quadrillion, compared with a global GDP of only US$50 trillion. While not lending to the real economy, the London/Wall Street banks have engaged in drug money laundering, financing terrorism, tax evasion, mortgage fraud and outright theft from their customers, for which they have been fined tens of billions of dollars. The UK’s National Crime Agency reported in May 2015, “We assess that hundreds of billions of U.S. dollars almost certainly continue to be laundered through UK banks, including their subsidiaries, each year.”
Late 2016 stress tests conducted by the Bank of England showed that the major UK banks are woefully undercapitalised. Their derivatives holdings, aptly termed by Business Insider “unexploded nuclear bombs nestling deep in the financial system”, dwarf their assets (lending) and deposits. In the inevitable next crisis, major banks would likely collapse, triggering a meltdown of the trans-Atlantic financial system.
The UK Parliament passed the Financial Services (Banking Reform) Act 2013. It, however, merely provided for “ring-fencing”—separating “investment” and commercial banking within each bank, but, unlike Glass-Steagall, allowing them to remain under the same roof and be done by the same company. This “solution” was denounced by knowledgeable members of both the House of Commons and Lords as simply window dressing which would allow the present, wildly speculative practices of the TBTF to continue.
Why full Glass-Steagall separation?
The USA’s 1933 Glass-Steagall Act strictly separated deposit-taking commercial banks from the “investment” banks whose wild speculation had caused the Great Depression. Glass-Steagall operated for 66 years and made systemic banking crises impossible. But the City of London’s 1986 “Big Bang” financial deregulation, followed by the repeal of Glass-Steagall in 1999, which both London and Wall Street had demanded, led to the 2008 crash.
Support for full-scale Glass-Steagall is non-partisan: In the USA, both the Democratic and Republican Parties adopted it in their 2016 platforms, and the AFL-CIO (the central labour federation) has endorsed it. In the UK, 445 MPs and Lords from all parties voted for it in 2013, many of them warning that ring-fencing would not work. The late Labour MP and former cabinet member Michael Meacher said, “It must be obvious to everyone that this device [ring-fencing] will be breached in no time by regulatory arbitrage in the City of London where all the big banks employ armies of lawyers and accountants for just this purpose.”
Conservative MP Sir Peter Tapsell, a former member of Margaret Thatcher’s cabinet and “Father of the House of Commons” until he retired in 2015, said, “What I mean by a complete return to Glass-Steagall is that we should have none of this nonsense of ring-fencing, which used to be called Chinese walls. It never works. Chinese walls turned out to be papier-mâché. I worked in the City for 40 years and I promise Members that it is impossible to make that work.” He was echoed by Lord Nigel Lawson, who as Chancellor of the Exchequer had supervised the “Big Bang”, but in the 2013 debate and ever since has acknowledged that the repeal of Glass-Steagall was a dreadful mistake.
In the Guardian of 11 August 2015, Shadow Chancellor John McDonnell wrote that “the Corbyn campaign is advocating a fundamental reform of our economic system”, to “include the introduction of an effective regulatory regime for our banks and financial sector”, and “a full-blown Glass-Steagall system to separate day-to-day and investment banking” (emphasis added).
Only an aroused, mobilised population can ensure that Glass-Steagall is adopted now, before the TBTF banks crash.
