Guest Post: George Osborne And Big Banks

Tyler Durden's picture

Submitted by John Aziz of Azizonomics blog,

The Telegraph reports that George Osborne thinks big banks are good for society:

The Chancellor warned that “aggressively” breaking up banks would do little to benefit the UK and insisted the Government’s plans to put in place a so-called “ring fence” to force banks to isolate their riskier, investment banking businesses from their retail arm was the right way to make the financial system safer.


“If we aggressively broke up all of our big banks, I am not sure that, as a society, we would benefit from it,” he said. “We don’t have a huge number of banks, sadly, large banks. I would like to see more.


His comments came as he gave evidence to the parliamentary commission on banking standards where he was accused of attempting to pressure members into supporting his ring-fencing reforms.


“That work has been accepted, as far as I’m aware, by all the major political parties. We are now on the verge of getting on with it,” he said.


Several members of the Commission have argued in favour of breaking up large banks, including former Chancellor, Lord Lawson.


This is really disappointing.

Why would Osborne want to see more of something which requires government bailouts to subsist?

Because that is the reality of a large, interconnective banking system filled with large, powerful interconnected banks.

The 2008 crisis illustrates the problem with a large interconnective banking system. Big banks develop large, diversified and interconnected balance sheets as a sort of shock absorber. Under ordinary circumstances, if a negative shock (say, the failure of a hedge fund) happens, and the losses incurred are shared throughout the system by multiple creditors, then those smaller losses can be more easily absorbed than if the losses were absorbed by a single creditor, who then may be forced to default to other creditors. However, in the case of a very large shock (say, the failure of a megabank like Lehman Brothers or — heaven forbid! — Goldman Sachs) an interconnective network can simply amplify the shock and set the entire system on fire.

As Andrew Haldane wrote in 2009:

Interconnected networks exhibit a knife-edge, or tipping point, property. Within a certain range, connections serve as a shock-absorber. The system acts as a mutual insurance device with disturbances dispersed and dissipated. But beyond a certain range, the system can tip the wrong side of the knife-edge. Interconnections serve as shock-amplifiers, not dampeners, as losses cascade. The system acts not as a mutual insurance device but as a mutual incendiary device.

Daron Acemoglu (et al) formalised this earlier this year:

The presence of dense connections imply that large negative shocks propagate to the entire financial system. In contrast, with weak connections, shocks remain confined to where they originate.

What this means (and what Osborne seems to miss) is that large banks are a systemic risk to a dense and interconnective financial system.

Under a free market system (i.e. no bailouts) the brutal liquidation resulting from the crash of a too-big-to-fail megabank would serve as a warning sign. Large interconnective banks would be tarnished as a risky counterparty. The banking system would either have to self-regulate — prevent banks from getting too interconnected, and provide its own (non-taxpayer funded) liquidity insurance in the case of system risk — or accept the reality of large-scale liquidationary crashes.

In the system we have (and the system Japan has lived with for the last twenty years) bailouts prevent liquidation, there are no real disincentives (after all capitalism without failure is like religion without sin — it doesn’t work), and the bailed-out too-big-to-fail banks become liquidity sucking zombies hooked on bailouts and injections.

Wonderful, right George?

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nmewn's picture

Use the Force Luke.

Oh regional Indian's picture

This is all dis-traction stroy-telling and sound-bite statement making.

Big Banks and Insurance companies (Insurance is the Mother of Banking in it's current form) have a Ring Fence. It's called the City of London.

They are above the Law, doing God's work. This GOd clearly loves Munnnnny!


TwoShortPlanks's picture

If it burned to the ground once it can burn to the ground twice (metaphorically speaking).

Michaelwiseguy's picture

Complete and total self destruction with no failsafe mechanism is what I'm counting on.

Free Youtube movies;

George Orwell (1984) (Republican Vision of the Future)

Aldous Huxley's Brave New World (Democrat Vision of the Future)

Aldous Huxley - Speech at UC Berkeley, The Ultimate Revolution 1962.

Harlequin001's picture

'The banking system would either have to self-regulate — prevent banks from getting too interconnected, and provide its own (non-taxpayer funded) liquidity insurance in the case of system risk — or accept the reality of large-scale liquidationary crashes.'

Yes, that's precisely what the central banking system is supposed to do. But now of course they can print money, which makes a failure inevitable does it not?

GetZeeGold's picture



We are banksters.......we are Borg.

cranky-old-geezer's picture



Having the "world reserve currency", Fed is now backstopping the entire worldwide banking system, not just the American part. 

Fed is the world's bad bank now, where all banks send their worthless trash financial paper to die ...and get full par value for it fees and commissions.  Expect to see Fed buying up worthless trash from every central bank around the world and large TBTF banks around the world. 

Oh yes, Fed's balance sheet is gonna be $100 trillion someday. It might be there now for all we know.  I suspect 90% of it is "off balance sheet".  Maybe 95% of it. 

Our money supply is just $10 trillion?  More like $100 trillion I suspect, most of it tucked away in "reserve accounts" outside the circulating money supply.

Some day I suspect that $90 trillion or so is gonna come out of those reserve accounts and be spent.  On what?  On buying up real assets cheap, like 10 cents on the dollar, when economies really do crash in the years ahead. 


Onehunglo's picture

And if you can rid London of the plague and the stench of sewage once, you can do it again ...

buzzsaw99's picture

We don’t have a huge number of banks, sadly, large banks. I would like to see more.He can have ours.

IamtheREALmario's picture

Osmoron does not really get the concept of "good and evil" and its implication ... or maybe he does and that is more to the point.

kliguy38's picture

Oh...he gets it....The problem is he is fully part of the evil side of the equation.....and his job is to give give it right up the sheeple's arses.......

Acet's picture

+1 For in-theme profile pic

I would give you another +1 if I could for the words.

Global Hunter's picture

He understands very well, he's serving his masters and getting paid off for it. 

Piranhanoia's picture

Poor fellow,  so far gone that he must be a shill for his only meal ticket.  It is about the survival of the real terrorists among us.  The thread must be really close to breaking when the talk is this inane.

t_kAyk's picture

Talk has been inane for a long time, sheep continue to eat the slop. 

Bastiat's picture


BRAVO!  Still a few functioning gonads in Maine.\

Take this job and shove it: Fed-up Bangor TV anchors quit on air

“It’s a culmination of ongoing occurrences that took place the last several years and basically involved upper management practices that we both strongly disagreed with,” she explained. “It’s a little complicated, but we were expected to do somewhat unbalanced news, politically, in general.”

Majere's picture

Right...because we need more banks for more debt for more fraud and more bad loans to bend more people over. 


Pass the gravy please.

LetThemEatRand's picture

"after all capitalism without failure is like religion without sin — it doesn’t work"

Of course, this is the entire model of modern capitalism espoused by the Ayn Rand corporate boardroom worshipping class.  Corporations exist so that management has no risk.  If the company goes down, management takes everyone down but themselves.  If bankers stood to lose the money that they gamble for shareholders, bondholders, investors and depositors (see John Corzine, as one glaring example), they would not gamble in the derivative casino or if they did, they would quickly be found penniless.  But instead they prosper even in defeat.

StychoKiller's picture

Sorry, but Objectivism != Fascism

You would know this if you applied your mind to some study on both philosophies.

lasvegaspersona's picture

"after all capitalism without failure is like religion without sin — it doesn’t work"


try 'without hell'  the quote works better the way Kyle  Bass said it.

GetZeeGold's picture



Kyle Bass taught Chuck Norris everything he knows about karate.

NidStyles's picture

Which is nothing, because Chuck actually doesn't know Karate. He does Tae Kwon Do.

Radical Marijuana's picture

But instead they prosper even in defeat.

They are never defeated where it matters!

They continue to be able to control politics.

Osborne is just another puppet politician, like practically ALL of them are, and have been for a long, long time. One of most important social facts has been that politics was overwhelmingly FUNDED by a tiny fraction of 1% of the population, while the other 99% never paid for anything. Think about that going on and on and on, decade after decade, Century after Century!!!

Furthermore, that same small elite dominated the few enormous mass media corporations, from which the vast majority of people get all their "news."  There is nothing significant outside of that system. The schools maintain the major LIES BY OMISSION. Thus, the real system is a FAKE DEMOCRACY, in which there is a FAKE EDUCATION, wherein the MASS MEDIA have a runaway opportunity to professionally brainwash most people, who never bother to learn anything else outside of the pop culture that was spoon fed to them.

The Internet, probably only temporarily, permits the few people who want to learn more to do some research, however, there is almost NOBODY who has any practical and realistic chance to compete politically with the established systems, which were originally built by those who were the most wealthy being able to rig the game. The long game of politics is tilted to being almost a vertical cliff.  Anyone attempting to compete, by communicating with citizens, is up against an already entrenched mass media, with orders of magnitude more power to overwhelm.

We are all inside of a runaway fascist plutocracy juggernaut, that is going to turn most of the population into road kill. There is NOTHING PRACTICAL that anyone can do about that! The same old puppet politicians win the elections, and nobody else has a hope in hell of competing with them inside of an already almost totally rigged system. Therefore, all the powers of the government ARE controlled by politicians which are puppets of the established systems. The politicians are those people who are the best professional liars, and immaculate hypocrites, whose only job is to communicate to the public in those ways. The politicians appear to be extremely incompetent, because they actually ARE PUPPETS. However, their control strings are now tangled up into a Gordion Knot!

The whole system was set up to be a fake democracy, serving the interests of the fascist plutocracy. There is a vicious spiral between the masses of people being mostly political idiots, and those few people who benefit from that social situation, and who work hard to keep it that way, which is relatively easy for them to do, since they have every possible advantage within the established systems, while any real opposition starts off with every possible disadvantage. Almost the entire so-called "opposition" is controlled, so that, when enough voters finally get fed up with the outrageous current puppet politicians, there is a new crop of puppet politicians ready to take over, but then, they keep doing basically the same things as the previous puppet politicians did.

The plutocracy is NEVER defeated where it matters, and therefore, by controlling politics (by controlling the governing party, and the apparent opposition parties, and the mass media messages) the plutocracy is more and more able to make sure that the situation is ALWAYS heads they win, tails the public loses.

However, that whole system is getting more and more tangled up within itself! There has been a runaway development of the "corporation" as the preferred vehicle for the plutocracy. The vicious spiral was that governments created and allowed organizations which circled around and took control of governments. Corporations cannot vote, but they can dominate everything else in the political sphere indirectly. Bit by bit, for several centuries, there were more and more legalized lies, which were manifested as corporations. Step by step, the common law was destroyed, and gradually replaced by a commercial code based on one layer of legalized lies, on top of another layer, on top of another layer ...

Corporations are nothing but complicated systems of organized lies, operating organized robbery. They were created by governments, and they have returned to become the governments, and the governments collectively now own the corporations.

There is a vast system of abstract numbers, which are controlling society through the decisions of professional money managers, who are following those numbers. BUT, those numbers are nothing but one level of fraud, stacked on more levels of frauds. There is a vast, hyper-complicated incestuous system, which operates itself through an awesome over-achievement of legalized lies, backed up by legalized violence. One of the most important and astonishing of concepts is the ouroboros of incorporated robbery, which is that the collective ownership of all the public corporations, by entities which were mandated by governments, has become the overwhelmingly dominate feature of our total system today. It is old-fashioned to think that wealthy individuals own and control things anymore. Sure in the archaeology of the established systems, wealthy and powerful people played huge roles in making and maintaining what became the current systems. However, today, the vast majority of corporations are owned by entities which were mandated by governments, to have the power to tax, and reinvest those tax funds, and the earnings on their investments, back into more and more ownership of corporations. Sure, there are tens of thousands of very wealthy individuals and families, whose ancestors built the current systems, and which benefit from those systems, and which have some significant say and control over corporations. However, the real situation today is that, collectively, governments own the corporations, while the corporations control the governments.

The vast majority of people theoretically own and control things, because their governments own and control things. However, the REAL system is that tiny minorities actually direct what happens, through professionally lying to people, so that those people vote for puppet politicians, which enable the corporations to effectively control the governments. IF, IF, IF there was a series of political miracles, whereby enough people learned enough, then they would discover that they already collectively own, and could control, the corporations. However, in the real world, the vast majority of the public continue to be political idiots, that are brainwashed into voting for puppets, that are destroying their future.

The future has become a runaway system of legalized lies, backed by legalized violence, which is becoming more and more incestuous and insane. There is a relatively tiny group of professional money managers, who are making decisions based on abstract numbers, which are NUTS. Those decisions are controlling where civilization is going. The only real roles left for politicians now, like Osborne, are to be the puppets, who are incompetent to be anything but puppets. Their only job is to enable the established systems to continue to do more and more of what they were built to do, which is amplify the systems of legalized lies, with more legalized violence, to drive more legalized lies, to drive more legalized violence, around and around and around ...


The fundamental fact is that "We the People" are sufficiently political idiots, and that collectively idiocy is the foundation of the entire ouroboros of incorporated robbery, where the power of "We the People" was used to create corporations, which in turned became almost totally owned by collective governments, and which are operated by a tiny class of professional money managers, who make all their decisions on the basis of abstracted numbers, which have become more and more removed from the real world, because those numbers were historically based on one layer of fraud, on top of another layer of legalized lies, stacked up on more layers of fraud, and legalized lies, into one vast interconnected system of social insanity, headed towards psychotic breakdowns! The paradoxical truth is that this vast interconnective network is a totally tangled up system of legalized lies!!!

Every "solution" to those problems proposed by the puppet politicians is to wrap more layers around that Gordion Knot of entangled legalized lies, and frauds, and to use the power of governments to back those up with more legalized violence, and/or, to NOT use the powers of governments to punish the fringe frauds, that go beyond the already legalized lies.

The only theoretically good solutions are to cut through that Gordion Knot of entangled lies with more radical truth. However, given the degree to which the public are political idiots, already brainwashed to believe in bullshit, that solution appears to be practically impossible. Therefore, we can only expect there to be still more and more layers of legalized lies and frauds, until the end-game must be the psychotic collapse of that whole interconnective network!!!

Sean7k's picture

Take a breath, close your eyes and focus on a peaceful cottage in the country. There you are, tending your small garden and occasionally playing with your children in the backyard. Your lovely wife brings you out a snack and a cold beer as you look around and marvel at the beauty of nature. 

Sounds idyllic, no?

There are many places exactly like it, where people have chosen to forsake what the enemy has given, they have refused to accept the goals of others, they have determined to build lives that have meaning outside the status quo. 

While we cannot totally escape the machinations of the Elites, neither are we powerless. The People constitute the great majority, we ARE the labor class and without us, the Elites must pay very dearly, for every person that would grovel for the morsels that fall from their tables.

We are fully capable of creating new communities, ones that value production, profit and voluntaryism. Nothing forbids us from circumventing their laws, creating and maintaining black markets or refusing to play soldier in their resource wars. Their power is limited, it requires our ACCEPTANCE to succeed.

Instead of decrying the impossibility of revolt, why not consider the possibility of LEAVING the system and establishing flourishing  colonies within the construct they have created? There will never be a benefit to the desperate screeching of the loser, the victim, the one that attempts to bring everyone down around them.

As of today, many of us have all the resources necessary to accomplish a radical new liberty or at least, the ability to step out in that direction. Most will not, because they want power and accolades from the system more than they want liberty. Others are too lazy to do anything but complain. 

Today, I'm giving thanks for my family, my friends, the internet and the limited expressions of liberty I experience everyday, hoping to continue to build upon them, until this Dante's Inferno of Elitist design burns itself out. It probably won't, the Elites have been manipulating the masses forever, but I don't have to play along. I can minimize my contributions at their alter of slavery. 

Now, are you going to sit there, crying in your beer about how terrible the world is or are you going to do something about it? 

Drachma's picture

I think you're confused as to the difference between capitalism and corporatism. The latter is not obligatory if the system is the former.

Dr Benway's picture

Interconnected holdings and crossholdings do not act as shock absorbers they act as leverage.

francis_sawyer's picture

Banks will be 'good' for society when 'society' is able to witness bankers hanging from lamp posts in the town square...

zhandax's picture

+1  to the last three comments (sorry RM, you may have made the cut, but you like to expound more than I care to read on Thanksgiving Eve).  Most thinking people can intuitively see that big = bad when speaking of conglomerations of money and power.  Regrettably, the fully-developed noun in that last sentence relegates most of us space monkeys on ZH to the minority in the US today. 

Happy Thanksgiving to all here!

Unprepared's picture

We don’t have a huge number of banks, sadly, large banks. I would like to see more.




"The list is quite short as British banking has been highly consolidated since the early 20th century. Unlike some other major economies, the UK does not have a major stratum of independent local banks. The list shrank further during 2008: Northern Rock was nationalized by the UK Government (now owned by Virgin Money), followed by Bradford & BingleyAlliance & Leicester was acquired by Santander, who own AbbeyLloyds TSB plc announced, on 18 September 2008, a confirmed agreement to take over HBOS plc."


The top 10 banks have a market share of around 80% and the top 5 banks' assets are around 7 times the UK national debt.

Zero Govt's picture

the UK banks are giant diseased dinosaurs ...ditto Europes, Americas and Japans ....ALL required massive bailouts.

Osbourne is a total fucking moron, he cannot see the colossal systemic problems of Big Banks in the West.

Stop Paying Taxes ...kill the fucking morons (it's the capitalist way)

Diamond Jim's picture

If the banksters screw it up after this last lesson...the hell with 'em. They are not too big too fail, they go through bankruptcy, some tar and feathering, followed by a sweet new set of handcuffs. Some one else will be more than willing to step up into the void if there is $$$ to be made. It will also serve as an example for those that cheat, swindle or do not take care of their bank and who later try to soak or shake down the taxpayers.

Coldfire's picture

Well he would say that, wouldn't he?

alentia's picture

When people open checking account in the bank and deposit money there... and people are aware the bank is trading their money all over the world...


Is it a chicken or the egg?


Or is it FDIC?

MedicalQuack's picture

Ok think we have the answer on why banks and other financial institutions are so successful...medical journal study here...from PLOS one.  People are afraid of math and experience pain when having to deal with it.  This is a full on MRI image documented study. 

When I used to write code i felt pain too:)  This includes everyone and certainly there's no pain at the banks or anywhere on Wall Street.  I wrote about it a little tongue and cheek but in the experience I have had with just some very simple articles I have written to include a little bit about can see how everyone shys away.

At any rate they might just have something here on people feeling bodily pain when math is introduced and I can't think of anything else that comes this close to some kind of acceptable reason.

q99x2's picture

Arrest that crimminal. Somebody call the police.

Taint Boil's picture



First the Aztec and then the Death Star …. You guys are good, what’s next the Pope Mobil?

dolph9's picture

The UK will protect its big banks because that's all they have left.

The North Sea oil is drying up, the music is getting stale, and they don't make much that the rest of the world needs or wants.

Acet's picture

The problem is that the banks are the main roadblock for the recovery: all the money from QE and of all kinds of measures from Government is effectivelly stuck in banks since they're effective not lending to SMEs (their lending conditions at the moment are of the "if you don't need a loan you qualify for one" type).

The Banks are literally starving the rest of the economy of capital.

The UK is between a rock and a hard-place and if government doesn't yield and do something radical soon, this might be the first western nation where bankers are literally hung from posts by their necks.

IED's picture

To Big to fail ? ..... To Big to Bail ! 

Sanksion's picture

Didn't you learn the rules of the game yet?

Even a 7 years old boy could get it... Let me remind you:

Simple, isn't it?


Urban Redneck's picture

"Ring Fence", "Lock Box"

Rinse, Repeat

Andy Lewis's picture

Fuck him in the mouth with a chainsaw to make him stop spewing out his plutocratic boo shit.

If you click on the link, you'll notice he looks like a piece of shit.   He talks like one too. 


falak pema's picture

the heart of the ponzi and the big crony lie. The Medusa Raft drifts on.

THE DORK OF CORK's picture

The UK has nothing but the banks now.........

It dumped the last bits of its non bank redundancy in the early 80s..........


Its a extreme Manchester school of economics island ............

When the North sea oil /gas reserves is gone it will depend on outside inputs for almost all of its needs.

Therefore it needs these banks to strip its wider hinterland of resourses.


They have been given further letters of marque.

AnAnonymous's picture

As time goes by, 'americans' take shelter into complexity to hide from simple obvious facts.

Hence a new dimension added to free markets so that 'americans' can call for a better tomorrow on the back of denying the present day.

Failure? But in a free market, an actor can look for establishing a company that shall be able to transfer risks onto a third party if certain circumstances arise.

If the actor delivers on that, that is success. If the actor does not deliver, that is failure.

'Americans' behind big banks are successful people. They are not failing.

Actually, from an 'american' perspective, the failing ones are the third party that does not manage to prevent big banks from pushing their risks on the third party.

Ultimately, if 'american' big banks do not manage to provide what they are supposed to provide, that is a system of transfer of risks under certain circumstances, they fail.

It is not the case.

This is an 'american' world and 'american' economics include free markets.

So more can kicking for 'americans' who can not face the reality of 'americanism'.

'Americanism' works very well at the moment. There is no malfunction.

But hey, all religions have sins, or religions without sins do not work or religions with sins work.

Somewhere, in those 'american' statements, there must be something to explain the current situation under 'americanism'...

TheFourthStooge-ing's picture

AnAnonymous said:

Somewhere, in those 'american' statements, there must be something to explain the current situation under 'americanism'...

That's certainly far more likely than finding any coherent explanations in your feverish verbal stumblings, Professor Poltroon.

AnAnonymous's picture

'Americans' talking about coherence... In itself, it could be enough to justify the US american building of fall out shelters.