U.K. Chancellor Jeremy Hunt To Revisit the 2008 Financial Crash

Dec. 11, 2022 (EIRNS)—U.K. Schiller Institute correspondent Bernie Holland reported that Chancellor of the Exchequer Jeremy Hunt has announced new banking reforms designed primarily to enable the failing institutions of City of London to compete more effectively with their European counterparts.

Let us go back to the 2008 financial crash, at the center of which was the scandal of the Royal Bank of Scotland. It was the biggest financial time-bomb in history and it needed to be defused. When Steven Hester took over as chief executive of Royal Bank of Scotland (RBS) in October 2008, and as £45 billion of taxpayer money was being pumped into the business, the once-proud Edinburgh-based bank was on the brink of an implosion that could have brought down the U.K. economy with it.

Its assets were £2.2 trillion—more than double the size of the economy—and it was running out of cash. Unlike the queues that formed outside Northern Rock branches a year before, this was a less visible bank run: Major banks and companies were withdrawing money from RBS at a ruinous pace. It ended in the biggest bank bailout in history and a massive restructuring.

Evidence has since emerged of a government agency’s role in the Royal Bank of Scotland’s controversial Global Restructuring Group (GRG). The U.K. Asset Protection Agency influenced GRG’s strategy including decisions that determined business customers’ fortunes. More than 16,000 small business customers were transferred to RBS’s Global Restructuring Group. GRG was found in a leaked official report for the Financial Conduct Authority to have mistreated thousands of business customers. Perfectly viable businesses had their assets effectively confiscated under this fraudulent restructuring scheme.

After the 2008 crash, a number of reforms were initiated to push back against the culture of speculative “casino” banking. One was the “Senior Managers’ Regime” which was implemented to bring about more responsible behavior by those working within the investment banking sector. Banking practices were ring-fenced to protect the interests of smaller investors and customers.

But on Dec. 8, Chancellor Jeremy Hunt announced that, in the interests of increasing “liquidity” to compete with the European financial markets post-Brexit, these regulations are to be loosened once again. One of his so-called “banking reforms” is to remove the cap on bankers’ bonuses. Along with the removal of “ring-fencing” and a general loosening of regulatory instruments, this will create the potential for cronyism, corruption and fraud.

Many years ago Lyndon LaRouche warned of the consequences of engaging in risky financial practices such as are being proposed by Jeremy Hunt. Furthermore, Helga Zepp-LaRouche has advocated the reinstatement of the Glass-Steagall arrangements which separate investment banking for productive economic activity, from the highly speculative adventurism of those, which, by engaging in a “free for all” in the short term, jeopardize long-term economic security.

Financial experts who are critical of Jeremy Hunt’s proposals in the U.K. have warned that if they are implemented, it is likely that the country will face an even bigger financial crash next year, and the current trend towards recession and economic decline will only get worse over the next five years.

From Brazil, the editor of Monitor Mercantil, Marcos de Oliveira, warned on Dec. 9 that Hunt’s 30-point “Edinburgh reforms” could be a pre-announcement of a new global financial crisis.

All of this is an indication that now, more than ever, is the time to establish the new financial security architecture that was laid out clearly in the proposals originally proposed by Lyndon LaRouche.