GLASS-STEAGALL | Anniversary of Northern Rock

Run on Northern Rock, Sept. 14, 2007, first in
UK in 150 years. This is what Glass-Steagall
was design to prevent.

OXFORD, Sept. 14, 2017 – I'm here in Oxford for the annual Oxford Alumni Weekend. 

The lead business story today on BBC News "Business Live" at 8:30 a.m. this morning was the 10th anniversary of "the first run on UK banks in 150 years," i.e., Northern Rock. The bank was nationalized five months laters.

What has happened in the ten years since then? (1) Bank reserves are higher than they were then. (2) Retail banks have been separated from investment arms of the banks. This sounds a lot like what Senator Carter Glass tried to put in place along with Treasury Secretary Will Woodin in 1933. Rep. Henry Steagall from Alabama was pushing through federal deposit insurance for the banks and the Glass part was to protect the taxpayer.

The BBC announcer asked an expert whether the reforms are enough. The expert, a professor, who says no, that there are still too many risks.

The fear here is that the Bank of England will soon respond to good news and possible signs of inflation by raising interest rates. In the UK, that means a rise in the cost of variable-rate mortgages. Some mortgage-holders will be taken by surprise. Defaults may increase and cause insolvency among weaker financial institutions.

At least the new £10 note has Jane Austen on the back. Has the USA ever had the picture of a woman on a greenback? We were supposed to get Harriet Tubman but reports are that Trump has killed that idea.