Flash: Britain's Ring-Fencing is NOT Glass-Steagall
June 14, 2012 • 4:05PM

by John Hoefle

On June 14, 2012 her Majesty's Treasury issued a white paper called Banking Reform: Delivering Stability and Supporting a Sustainable Economy, detailing their plan to separate retail banking from investment banking, following the guidelines laid out by the Independent Commission on Banking (ICB). While some may mistake this for a return to the Glass-Steagall Act, and therefore fall right into Britain's trap, we must remind you that the British financial oligarchy is still the enemy and the very reason we're in an economic meltdown in the first place. What they propose may sound like Glass-Steagall, but it is NOT Glass-Steagall.

Glass-Steagall would prohibit corporations from owning both commercial banks and investment banks. Under FDR's Glass-Steagall, for example, JP Morgan & Co. chose to remain a commercial bank and therefore was forced to spin off its investment banking arm as Morgan Stanley, a completely separate company. JPM was not permitted to simply create a holding company owning both its commercial bank and its investment bank as separate entities. If you owned a commercial bank, you could not own an investment bank. Simple, clear and absolute.

The British "ring-fencing" proposal would allow a single entity to own both commercial banks and investment banks, as long as the "ring-fenced banks were "genuinely independent from other parts of the group." The white paper on banking reform makes this clear (emphasis mine):

A robust ring fence, separating investment banking and related activities from more traditional personal and business lending, is vital to reduce structural complexity and to make banks easier to resolve in crisis, where speed of execution is vital. Ring-fenced banks must be genuinely independent from other parts of the group. The ring-fenced bank should not carry out any activities through non-EEA subsidiaries or branches. A separate risk committee should be set up in the ring-fenced bank, whose risk management function should introduce additional safeguards, over and above what the ICB recommended.

Not only could the giant bank holding companies own a commercial bank and an investment bank, but the commercial bank should also be able to "offer simple hedging products" (emphasis mine):

But, in order to provide the UK’s SMEs with essential banking services, ring-fenced banks should be able to offer simple hedging products, subject to the necessary safeguards. Recent EU and international reforms to derivatives mitigate the risk that these derivatives pose a barrier to resolution. The Government is committed to legislating to require banks to implement the ring-fence in this Parliament.

Which suggests that the "ring-fenced" commercial banking subsidiaries would be allowed to engage in derivatives speculation.

I have been following this debate for some time. This British ring-fencing proposal is part of a pattern which emerged during the Panic of 2008, in which the British has attempted to "lead the way" on banking reform via proposals that are intended either to block genuine reforms or to otherwise advance the goals of the British Empire.

Keep in mind that the empire itself is planning a major restructuring of global banking, and will do this, as always, under the guise of "reform" and "modernization." And it will do it in ways that increases its domination over the system and weakens its rivals. That means that many of the world's banks, hedge funds, and other financial institutions will either be eaten or will fail, including some which are currently considered too big to fail.

We are caught in a reverse-leverage derivatives blowout, and the current phase of "governments bailing out banks " is but a passing phase of the collapse. As assets vaporize and the volume of financial business declines, the ability of the system to support the existing financial superstructure also collapses. Put simply, there is not enough business to go around, and that will get worse. At the same time, we still have basically the same financial system capacity we had during the height of the bubble—it has only begun to adjust to the post-crash reality.

Assuming for a moment that the empire could actually pull off reducing global population to some one billion people operating at a far lower technological level, the level of financial capacity to run such a world would be far less than what we have today. Thus the clear intent of the empire is a dramatic reduction in the overall financial system. How many of today's banks, insurers, pension funds, hedge funds, etc. will make the cut? Not many.

Ring-fencing is therefore a cover for imperial genocide and dictatorship. It is, therefore, the opposite of Glass-Steagall.

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