Lib Dems plot to break up the banks
By Ian Dunt
The Liberal Democrats are the only party willing to adopt Barack Obama’s stance towards the banking sector in the UK, Vince Cable said today.
The Lib Dem Treasury spokesman reiterate his party’s determination to separate banks’ investment arms from their retail activities.
The policy has been a longstanding one with the Lib Dems, but the party ducked out of the war of words between the Conservatives and Labour in the aftermath of President Obama’s dramatic speech last week.
Today, Mr Cable called for a British version of the Glass Steagall Act, a Depression-era piece of American legislation which separated retail and investment activities until it was abolished by Bill Clinton in the 1990s.
“Now that President Obama has taken on the issue of breaking up the banks on his side of the pond, it is time we do the same in the UK,” he said.
“I see, at present, no evidence that the government or the Conservatives have any vision of banking beyond the immediate crisis.”
Banks underwritten by the taxpayer will be taxed on their profits so they can contribute to their state guarantee, Mr Cable suggested.
He also insisted the Lib Dems were committed to tackling the deficit. Mr Cable supports the government’s ambitions to cut the deficit in half over four years, but he insisted a “calm and rational” approach was needed.
His party had identified an additional £10 billion in net savings beyond what the government had earmarked, Mr Cable said.
“We don’t have to despair,” he said.
“The challenges are enormous but if we are prepared to face up to them we can use the current crisis to refashion our economy so that it serves the country not the just the square mile.
“That means making the sort of radical changes that we propose: a credible plan for bringing the public finances back under control, sorting out and breaking up the banks, building a sustained recovery and creating a fairer tax system.”
The Obama proposals, which have caused a political storm in Wall Street and Washington, would see banks banned from investing in, owning or sponsoring a hedge fund or private equity fund.
They would also be prevented from investing for their own profit rather than that of their customers, known as proprietary trading.
Labour opposes a British version of the plans, saying forcing change onto Britain’s global banks will see them concentrate on overseas activities.
The party has been keen to suggest that their plans for banks are as robust as President Obama’s proposals. Over the weekend chancellor Alistair Darling suggested government plans would control risk.
Shadow chancellor George Osborne backs “Obama-style” regulation but insists a UK version of the Glass-Steagall law is “crude”.
