Economists Forum (Charles Goodhart): It is remarkable how powerful a well-turned phrase can be. There have been many such phrases generated in the course of this crisis, not all of them helpful, indeed in some cases misleading. Examples are: "Toxic assets"; "If a bank is too big to fail, it is too big"; and particularly relevant here: "Banks have become a combination of a casino and a utility." While I congratulate John Kay on his authorship of this last, arresting phrase, I am afraid that it is both misleading and wrong-headed.
To begin with, it is generally accepted that the greatest error of recent policy was to allow Lehman Brothers to fail. If ever there was a bank that would be characterised, under John's category, as a casino rather than a utility, it would be Lehman. Presumably John would also have been keen to have Bear Stearns, Fannie Mae and Freddie Mac, and AIG, declared bankrupt. None held retail deposits or was much involved in the standard payment system. That, of course, would have been a blood bath.
