In one of its three leading editorials, Tuesday's Financial Times criticized Labour Party leader Ed Miliband's policy statement in reaction to the LIBOR scandal, clearly stating, "Sadly Mr. Miliband remains too vague on one of the biggest questions: Whether to force an outright Glass-Steagall type separation of retail from investment banking. This would go further than what was advocated by the Vickers Commission and has been adopted by the government. It is now clear that ringfencing is not enough.
"The LIBOR scandal demonstrates that Britain needs a cultural as well as a policy revolution in banking. After a week of skirmishing Britain's leading parties should show they have understood what is at stake."
In his statement Miliband said that the Vickers Commission and its ringfencing was only the starting point of Labour's bank reform policy and mentioned nothing about Glass-Steagall. In fact, Ed Balls, Labour's shadow finance minister, when asked about Glass-Steagall, expressed reservations about a "forced split," adding that "there are lots of risks and complications and perverse outcomes."
Meanwhile Roger Bootle of Capital Economics, a regular commentator in the Daily Telegraph, penned a piece on July 8 in which he states that the ringfencing of the Vickers Commission goes to the question of separating retail from investment banking, "but not far enough," and continues, "I suspect Vickers will prove to be only a staging post. What we need is the complete separation of institutions, thereby enshrining different cultures, in other words, the resurrection of the separation which was enforced in America by the Glass-Steagall Act." He then says we have to go further and repeal some of the "Big Bang" reforms, referring to the stock market deregulation of October 1986; one of the most important of these was ending the "single capacity" which was the legal separation between stock brokers, who bought stocks for clients and did not take positions, and so- called stock "jobbers," who could not directly deal with clients. This minimized conflicts of interest.
It should be noted that Roger Bootle just won the £250,000 Wolfson Economics Prize on July 5, for a paper on how a country can withdraw from the euro, "Leaving the Euro: A Practical Guide."