Thatcher's 'Big Bang' Free-for-All Led to Bust

Pioneers of British '80s deregulation dismayed at unforeseen 'side effects'

By Rob Quinn, Newser Staff

Posted Mar 31, 2009 6:55 AM CDT

(Newser) – The British regulatory reforms that changed the face of the financial industry in the '80s allowed banks to become bloated giants, two architects of the so-called "Big Bang" changes tell the Wall Street Journal. The deregulation let London's financial sector flourish, the men say, but also allowed banks to become too big for even their managers to properly regulate, setting the stage for today's crisis.

The former officials, both now members of Britain's House of Lords, are skeptical of G20 efforts to expand financial regulation to cover today's complex financial system. A more effective course, they say, would be to split banks into the separate business they used to be, and keep commercial, deposit-taking banking operations apart from the riskier business of securities trading.

[Images (2)]

[Quotes (1)]

Suited City workers walk over London Bridge at the end of their working day in London last week. (AP Photo/Sang Tan)

Office workers walk down a street in London last week. (AP Photo/Sang Tan)

« Prev« Prev | Next »Next » Slideshow

The notion that banks would get as big and as bloated as they did get—that was totally unexpected. - Nigel Lawson, Treasury chief under Prime Minister Margaret Thatcher

« Prev« Prev | Next »Next » Slideshow

To report an error on this story, notify our editors.

More Newser Stories

Beneficiary of All That Banking Hatred? Walmart

Americans turn to MoneyCenters' a la carte services

(NEWSER) - Americans who are mad as hell and not going to take banks' outrageous fees anymore are heading straight to ... that little mom 'n pop shop known as Walmart, reports the New York Times . The retail juggernaut—which four years ago ditched plans to get a banking charter amid an outcry from, well, banks—is now a veritable bargain with a slate of a la carte financial services. Its MoneyCenters, whose services include check-cashing starting at $3, are seeing a run of cash-poor customers and the "unhappily banked," as one Walmart exec put it. More»

Feds Sue Deutsche Bank Over Reckless Mortgage Lies

$1B suit may be first of many

(NEWSER) - The federal government is suing Deutsche Bank for $1 billion over shoddy mortgages that cost taxpayers hundreds of millions of dollars. The suit accuses the lender of lying to the government while arranging federal insurance on mortgages that it had recklessly approved for poor credit risks, reports the Los Angeles Times . Analysts believe the suit may mark the beginning of a major push to punish lenders for their role in the financial crisis. More»

Inquiry Concludes: Financial Crisis Was Avoidable

Report blames mismanagement, poor regulation, excess risk

(NEWSER) - Corporate mismanagement, excessive risk-taking by Wall Street, and inadequate government regulation caused the 2008 financial crisis, according to a 576-page report by the Financial Crisis Inquiry Commission, due to be released today. The report blames policies by both the Clinton and Bush administrations, Fed chairmen Alan Greenspan and Ben Bernanke, and regulators, who the report says lacked "the political will" to hold accountable an industry that spent $2.7 billion on lobbying from 1999 to 2008. Among its other conclusions, as reported by the New York Times : More»

Financial Reform: 'Punks' Take on Plutocrats

GOP argument against reform is upside-down, writes Paul Krugman

(NEWSER) - With financial reform on deck, Senate Republicans are busily figuring out how many "can get away with claiming that war is peace and regulating big banks is doing those big banks a favor," writes Paul Krugman in the New York Times . Alabama's Richard Shelby is portraying efforts to rein in big banks as a bailout, and John Boehner recently urged bankers to stand up to Congress and "not let those little punk staffers take advantage of you." But in this case, Krugman says, it's those "punks" who are looking out for the taxpayer. More»

Banks Blitz Customers to Keep Overdraft Fees Coming

$20B in penalty fees threatened by Fed's new opt-in rule

(NEWSER) - Expect your mailbox to be stuffed in the coming weeks with entreaties from your bank, which desperately wants you to sign up for pricey overdraft fees it used to be able to slip into the small print. Under new Fed rules going into effect July 1, bank customers must opt-in for automatic debit card and ATM overdraft privileges, which rake in an estimated $20 billion in penalties every year, the New York Times reports. Hence the marketing blitz. More»

NEWS FROM OUR PARTNERS

What is Newser?

Face it: there's too much news. At Newser, we choose the most thought-provoking and entertaining stories from hundreds of US and international sources and reduce them to a headline, picture, and two paragraphs. And we do it 24/7—you can come back morning, noon, night (and in between) for something new that matters. Read less, know more.

Learn more »

Partnering with: Slate

View Newser on the mobile website

Thatcher's 'Big Bang' Free-for-All Led to Bust