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Cut the banks down to size
Just two months ago, the Treasury announced it was looking at the scope for further public sector asset sales.
They certainly appointed the right man. Gerry Grimstone, chairman of life insurer Standard Life, was from 1982 to 1986 Treasury mandarin in charge of privatisation policy, overseeing the sale of 20 such businesses.
Back then, of course, he would have been denounced as a Thatcherite hit man by those who now hope he can root out any hitherto overlooked family silver to boost the public finances.
In the same vein, one has to wonder what the youthful selves of today's Ministers would have made of the open-ended support that has been offered this year to banks as they reel from the results of their reckless lending.
In April, the Bank of England made available liquidity - what the rest of us call money - in huge quantities in return for flaky 'collateral'. How much liquidity? Oh, £50bn or so for starters. The Bank will get back to us on that one next month.
In return for this generosity, we get...what, exactly? After all, in previous State bail-outs there was usually a quid pro quo: guaranteed job levels, for example.
Here, we get a negative benefit - a non-collapse of the banking system. After decades of mergers, all waved through on the grounds of efficiency, synergies and the need for 'world-class players', our main banks are now 'too big to fail'.
So as the great October reckoning approaches, here is one suggestion of the price that could be extracted for continued State support: all-round demerger. If airport operator BAA is too big to be allowed to carry on, then the banks certainly are. At least BAA is not always demanding liquidity, merely favourable planning decisions.
In place of a few banks that are too big to fail, we would have a larger selection of institutions, any one of which could go under without crashing the system. Customers would be taken care of, shareholders would lose their shirts and the remains would be discreetly tidied away.
As we have found in the past year, mega banks make mega mistakes. Nor is there anything that radical about such demergers - US phone giant AT&T was forcibly broken up in 1984, during the presidency of archconservative Ronald Reagan.
They want liquidity? We want human-scale institutions that do not threaten the whole economy.
And for those of a wistful bent, it will be good to welcome back Westminster Bank, Glyn Mills & Co, Williams Deacon's Bank and the Abbey Road Building Society, among many others.
So bigger ain't better after all
What are we waiting for?
Just two months ago, the Treasury announced it was looking at the scope for further public sector asset sales.
They certainly appointed the right man. Gerry Grimstone, chairman of life insurer Standard Life, was from 1982 to 1986 Treasury mandarin in charge of privatisation policy, overseeing the sale of 20 such businesses.
Back then, of course, he would have been denounced as a Thatcherite hit man by those who now hope he can root out any hitherto overlooked family silver to boost the public finances.
In the same vein, one has to wonder what the youthful selves of today's Ministers would have made of the open-ended support that has been offered this year to banks as they reel from the results of their reckless lending.
In April, the Bank of England made available liquidity - what the rest of us call money - in huge quantities in return for flaky 'collateral'. How much liquidity? Oh, £50bn or so for starters. The Bank will get back to us on that one next month.
In return for this generosity, we get...what, exactly? After all, in previous State bail-outs there was usually a quid pro quo: guaranteed job levels, for example.
Here, we get a negative benefit - a non-collapse of the banking system. After decades of mergers, all waved through on the grounds of efficiency, synergies and the need for 'world-class players', our main banks are now 'too big to fail'.
So as the great October reckoning approaches, here is one suggestion of the price that could be extracted for continued State support: all-round demerger. If airport operator BAA is too big to be allowed to carry on, then the banks certainly are. At least BAA is not always demanding liquidity, merely favourable planning decisions.
In place of a few banks that are too big to fail, we would have a larger selection of institutions, any one of which could go under without crashing the system. Customers would be taken care of, shareholders would lose their shirts and the remains would be discreetly tidied away.
As we have found in the past year, mega banks make mega mistakes. Nor is there anything that radical about such demergers - US phone giant AT&T was forcibly broken up in 1984, during the presidency of archconservative Ronald Reagan.
They want liquidity? We want human-scale institutions that do not threaten the whole economy.
And for those of a wistful bent, it will be good to welcome back Westminster Bank, Glyn Mills & Co, Williams Deacon's Bank and the Abbey Road Building Society, among many others.
So bigger ain't better after all
What are we waiting for?
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