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Tag Archives: Glass-Steagall

“While we will always put America’s interests first, we will get on with all other nations that want to get on with us. We’ll have great relationships, we will seek common ground not hostility, partnership not conflict”.

So Donald Trump during the small hours of Wednesday morning, as part of his acceptance speech. These emollient words, and the praise he heaped on Hillary Clinton after months of campaign-trail bile, changed the mood on global markets.

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The “destruction” of Halifax-Bank of Scotland was the fault of up to 10 former executives who could now be banned from working in the City. At some time in the future. Maybe.

That was the conclusion of last week’s long-awaited report from the Financial Conduct Authority into the failure of what was the UK’s biggest mortgage lender during the 2008 financial crisis.

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When I think about global stock markets these days, the image that springs to mind is the final scene of The Italian Job – the iconic 1969 original, not the tacky 2003 remake. “Hang on a minute, lads,” says Charlie Crocker, Michael Caine’s heistmaster-in-chief, as he and his rogue brethren balance precariously in a bus loaded with gold on the edge of an Alpine cliff. “I’ve got a great idea”.

The film ends ambiguously, of course. As the credits roll, viewers are left guessing as to whether the gang gets the loot and to safety, or plunges into the depths of a rocky ravine. Well, I’m similarly ambiguous about the state of global markets and the related prospects for the world’s large economies, not least the UK. It strikes me, in fact, that the whole economic shebang is balanced on a knife-edge.
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Barclays is to shed around 14,000 jobs in 2014, we learnt last week, more than half of them in the UK. These head-count cuts are largely about the on-going process of humdrum branch closures – not only in Britain, but also in Spain, Italy, Portugal and France. Such job losses are sadly inevitable, given the rise of mobile and on-line banking.

This Barclays announcement, though, was spun rather differently. Rather than discussions about banks’ reduced presence on the High Street, our airwaves were instead filled with tales of Barclays’ “courage”, as it distanced itself from “casino banking” in a “decisive break with the past”.
Some 2,000 of this year’s job cuts are in Barclays’ 26,000-strong investment banking division. More such posts are to go, the bank tells us, in 2015 and 2016.
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The European Central Bank took no decisive action last Thursday either to lower Eurozone interest rates or launch its own programme of “quantitative easing”. It was made clear, though, that the ECB may soon follow the US Federal Reserve and Bank of England by firing up Frankfurt’s virtual printing press and creating, ex nihilo, hundreds of billions of euros.

The council was “unanimous”, said ECB boss Mario Draghi, a hint of steel entering his voice, in its commitment to “unconventional instruments”. In case that wasn’t crystal, he spelt it out. “All instruments within our mandate are part of this statement,” he told the world. “There was, in fact, during the discussion we had today, a discussion of QE”.
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Last Friday, the debate on UK bank reform burst into life, after Ed Miliband boomed that British banks have been “an incredibly poor servant of the real economy”. Labour, the party’s youthful leader told us, will “turn the tide”.

The UK’s five largest banks are “too powerful” and should be forced to give up “significant numbers” of branches, said Mililand. He’s right, given that the big-five still hold 85pc of personal accounts. “On day one” of the next Labour government, Miliband promised, steps would be taken to create two new “Challenger” banks to take on the existing “big five” and boost competition on the High Street.

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Early last week, the financial headlines were dominated by the trials and tribulations of a man called Paul Flowers. Later, the news flow switched, as the Bank of England and Treasury modified the controversial Funding for Lending scheme. The story of Flowers, the former Chairman of the Co-op bank, could have some bearing on the future of the UK banking industry. The government’s move to cool the UK’s rocketing mortgage market is also pretty important.

Yet, when it comes to this country’s future trajectory, both episodes pale into insignificance when compared to a little-noticed debate in the House of Lords. The government’s banking bill, debated by peers last week, is this country’s main response to the sub-prime crisis. Whether or not we avoid another cataclysmic financial collapse, with all the related economic fall-out and human misery, depends largely on the measures in that bill.
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This coming Wednesday, the House of Lords debates the second reading of the government’s banking reform bill. Now we’re in the holiday season, and the sun is shining, the prospect of an ermined discussion about bank regulation may strike you as deadly dull. But you’d be wrong.

This draft legislation forms the centre-piece of the UK’s response to the sub-prime collapse, the related banking meltdown and the resulting economic damage meted-out to millions of British workers. It’s unfortunate that such vital measures are being considered by the Upper House only at the fag-end of the Parliamentary year, when the Commons has already risen and media scrutiny of Westminster is on go-slow.
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There’s been so much in the news that a UK-based economist could be forgiven for fretting over what to write about this weekend. Inflation rose by 2.7pc in May, we learnt last Tuesday, up from 2.4pc the month before. Then there were the recommendations from the G8 summit in Fermanagh.

We’ve also seen policy fireworks across the Atlantic, too. Just a hint from Federal Reserve Chairman Ben Bernanke that the US could soon “taper” its turbo-charged money printing was enough to throw global stock markets into a rout.

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America is on the mend. Or is it? The world’s largest economy is certainly generating some upbeat headlines. The US housing market is at its most buoyant for seven years, with real estate prices up 10.9pc in March. That’s helped drive consumer sentiment to a five-year high. Unemployment, too, is now 7.3pc – still painful, but its lowest level since December 2008.

Having said all that, official data last week showed America’s GDP expanding by 2.4pc in the first quarter of 2013. While strong compared to a moribund Western Europe, this was a downgrade on previous government estimates and still well below the pre-Lehman trend.
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