A fragile peace pact between the government and Britain's top banks has fractured as the Bank of England's governor, Mervyn King, delivered a scathing rebuke to top financiers for taking big bonuses while exploiting "gullible or unsuspecting" customers.
In an attack that drew an angry reaction from the Square Mile, King suggested that "imbalances" in the banking system are beginning to grow again, posing a risk of another credit crunch.
The governor, who will get broad powers to regulate the banking industry when the Financial Services Authority is abolished next year, accused high-street lenders of taking a short-term view to "simply maximise profits next week". And he asked: "Why do banks in general want to pay bonuses? It's because they live in a 'too big to fail' world in which the state will bail them out on the downside."
The only reliable way of neutralizing the threat is to break up big financial institutions. We have come out of 2008 with the political power of the biggest firms enhanced rather than decreased. There is little political support for breaking up big companies, but we will regret that failure eventually. Twin Cities Pioneer Press