By: Mike Campbell
In a move which would make the blood of any true free-marketeer run cold, a key US House of Representatives committee has voted to give government the power to order that large banks be split up. The idea is that the survival of these very large banks is critical to US national interests: they are too big to be allowed to fail right now. The legislation, if passed into law, would give the power to a council of regulators to order the splitting up of firms whose scale is such that their failure could hurt the US economy – this would apply to banks that are healthy too. In part, this ought to prevent large banks from adopting very risky investment strategies since they would know that there would be no public money bailout if their plans unravelled. Naturally, the move is strongly opposed on Wall Street and by most Republicans who believe the bill gives too much power to regulators and may leave US banks at a disadvantage in the global marketplace. The bill has a long way to go before becoming law.
Although it is still way below its historic peak of $147 in July 2008, crude oil prices have risen by 70% this year. The International Energy Agency (IEA) fears that the rising oil price could hamper the tentative economic recovery, if it continues. The IEA pointed out that the economies of developed nations remained fragile and that demand in those nations would fall when oil hit $80 a barrel. The oil price rose to the $80 mark yesterday, on news that the US reserve was significantly smaller than expected (dropping by 4.4million barrels rather than the 1.2 million that analysts had predicted). Time will tell if the IEA prognosis is correct.