U.K. Moves Could Point Way in U.S. on 'Too Big'

By Landy, Heather | American Banker, November 4, 2009 | Go to article overview

U.K. Moves Could Point Way in U.S. on 'Too Big'


Landy, Heather, American Banker


Byline: Heather Landy

First Of Three Parts

The push to dismantle big U.S. banks gathered fresh momentum Tuesday as the British government forced the breakup of two institutions as a condition of their continued support by taxpayers.

Though it may be too early to declare Paul Volcker vindicated, the planned divestitures agreed to by Royal Bank of Scotland Group PLC and Lloyds Banking Group PLC provide a blueprint for downsizing bailed-out firms. And they make the European Union's recently announced breakup of ING Group NV look less like an isolated case and more like the start of a trend.

But it remains unclear how the U.S. government will approach institutions currently considered "too big to fail," and whether regulators actually are interested in ridding the system of firms deemed as such.

Even within the bust-'em-up camp there is a debate over whether the lines ought to be drawn on size or on scope. Volcker, the former Federal Reserve Board chairman, wants commercial banks out of the investment banking business, with rules resembling the old Glass-Steagall Act. Others, like Simon Johnson, the former International Monetary Fund chief economist, say it is the concentration of credit risk in any form, not the mixing of lending and trading, that makes big banks a threat to the system.

Two weeks ago, neither view appeared to be getting much traction in Washington. Volcker, who heads President Obama's Economic Recovery Advisory Board, reportedly had been sidelined on policy matters as others in the administration asserted a more charitable view of full-service banks. And advice from the likes of Johnson, now a professor at the Massachusetts Institute of Technology's Sloan School of Management, seemed to run counter to the crisis-time decisions of regulators, who in arranging rescues of troubled banks effectively increased the size of companies already considered "too big to fail."

But the winds have shifted. In what is sure to be seen as a landmark speech on the topic, Mervyn King, head of the Bank of England, told a group of Scottish business leaders on Oct. 20 that there are only two logical ways of solving the problem posed by big banks: either accept that some institutions are "too big to fail," and apply regulatory discipline to make their failures less likely; or figure out how to resolve big-bank failures at minimal cost to society. He left little doubt as to his preference.

"There are those who claim" that proposals to restrict government guarantees for utility banking firms "are impractical," King said. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

U.K. Moves Could Point Way in U.S. on 'Too Big'
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.