Britain’s finance minister expressed scepticism Sunday at proposed US banking reforms, saying they would not have prevented the financial crisis and warning they risk undermining the global consensus.
President Barack Obama announced plans last week to limit the size and scope of US banks and financial firms, saying they would “never again” get so big that taxpayers have to bail them out or risk the economy.
The plans aim to limit “excessive” risk taking and to “protect” taxpayers by preventing banks or financial institutions from owning, investing in or sponsoring hedge fund or private equity funds.
But Chancellor of the Exchequer Alistair Darling told the Sunday Times: “It is always difficult to say ex ante that you would never intervene to save a particular sort of bank.
“In Lehman (Brothers), for example, there wasn?t a single retail deposit, but the then American administration allowed it to go down and that brought the rest of the system down on the back of it.”
He said dividing up institutions to make them separate legal entities “isn’t the point. The point is the connectivity between them in relation to their financial transactions”.
“Equally, the large-small thing doesn?t run. (Bailed out British bank) Northern Rock was very small in global terms but systemically it was quite important when it got into trouble,” he added.
Darling said Britain would continue to work with the United States on financial reform, but said any proposals must be “workable and deliverable” — and insisted any action had to be international.
“If everyone does their own thing it will achieve absolutely nothing,” the finance minister said.
“The banks are global — they are quite capable of organising themselves in such a way that if the regime is difficult in one country they will go to another one, and that doesn?t do anyone any good.”