An enlightening article on the illegal scams of the major US banks and financial institutions, and their immunity from criminal charges, is at (The Alternet site is well worth subscribing to, on many issues.)

Two noteworthy extracts from a speech by Speech by MERVYN KING, Governor of the Bank of England: "Banking: From Bagehot to Basel, and Back Again" – The Second Bagehot Lecture, at Buttonwood Gathering, New York City on Monday 25 October 2010:

"One simple solution, advocated by my colleague David Miles, would be to move to very much higher levels of capital requirements – several orders of magnitude higher. A related proposal is to ensure there are large amounts of contingent capital in a bank's liability structure. Much more loss-absorbing capital – actual or contingent – can substantially reduce the size of costs that might be borne outside of a financial firm. But unless complete, capital requirements will never be able to guarantee that costs will not spill over elsewhere. This leads to the limiting case of proposals such as Professor Kotlikoff's idea to introduce what he calls "limited purpose banking" (Kotlikoff, 2010).

That would ensure that each pool of investments made by a bank is turned into a mutual fund with no maturity mismatch. There is no possibility of alchemy. It is an idea worthy of further study.

Another avenue of reform is some form of functional separation. The Volcker Rule is one example. Another, more fundamental, example would be to divorce the payment system from risky lending activity – that is to prevent fractional reserve banking (for example, as proposed by Fisher, 1936, Friedman, 1960, Tobin, 1987 and more recently by Kay, 2009).

In essence these proposals recognise that if banks undertake risky activities then it is highly dangerous to allow such "gambling" to take place on the same balance sheet as is used to support the payments system, and other crucial parts of the financial infrastructure. And eliminating fractional reserve banking explicitly recognises that the pretence that risk-free deposits can be supported by risky assets is alchemy. If there is a need for genuinely safe deposits the only way they can be provided, while ensuring costs and benefits are fully aligned, is to insist such deposits do not coexist with risky assets."

………………………. and:

"The broad answer to the problem is likely to be remarkably simple. Banks should be financed much more heavily by equity rather than short-term debt. Much, much more equity; much, much less short-term debt. Risky investments cannot be financed in any other way. What we cannot countenance is a continuation of the system in which bank executives trade and take risks on their own account, and yet those who finance them are protected from loss by the implicit taxpayer guarantees. The difficulty is in finding the right practical way to achieve that. Some of the solutions that economists have proposed have been dismissed by some as impractical and pie in the sky. But I am reminded of Keynes' dictum that "practical men who believe themselves to be quite exempt from any intellectual influence are usually the slaves of some defunct economist" (Keynes, 1936).

Of all the many ways of organising banking, the worst is the one we have today."

– This from the Governor of the Bank of England!! See

An amusing but thought-provoking cartoon-story I can recommend is Crises of Capitalism, though it does not touch on the fact, nature and effect of the privatization of money-creation. See it at:

It is part of a series of amusing and thought-provoking cartoon-stories to be found on

– Brian Leslie