TEXT OF INTERVIEW

Stacey Vanek-Smith: Big banks also got a slap on the other side of the pond. The head of the Bank of England, Mervyn King called for the breaking up big banks in the U.K. Here to talk about that with us is our very own Stephen Beard in London. He joins us live. Hi Stephen.

Stephen Beard: Hello Stacey.

Vanek-Smith: What exactly did King say?

Beard: Well King is very critical about the way banks have been bailed out here. They’ve been given by the taxpayers, in one way or another, $1.6 trillion. That’s close to two-thirds of the annual output. Yet in return the banks have not returned. In a speech last night, in an ironic twist, King parodied Churchill’s famous wartime speech, which paid tribute to The Few, the handful of heroic spitfire pilots who won the battle over Britain in World War II.

Mervyn King: Never in a field of financial endeavor has so much money been owed by so few to so many. And one might add, so far, with little real reform.

Vanek-Smith: So Stephen, what specific reform is King calling for?

Beard: Well King says that the bailout has, in effect, sent the wrong signal to the banks. And it’s this: Take whatever risks you like, you’re too big to fail, the taxpayers will always bail you out. So King is floating an old American idea: the Glass-Steagall idea. Split the banks into utilities and casinos. On the one hand, boring, steady banks that handle all the core business of banking — payments and so on. And on the other, the racy, risky, bonus-fueled investment banks. Then you can guarantee the utility banks with taxpayers’ cash, but not the investment banks. If they get into trouble, tough luck, let them fail.

Vanek-Smith: What effect are these remarks having? Will anything change in the British banking system?

Beard: Well his remarks contradict British-government policy and actually U.S.-government policy, come to that. Both governments believe that tighter regulation and closer scrutiny are the way to go. But King is one of the world’s most prominent central bankers. His is a very influential voice. And his remarks could well strengthen the hand of those in the U.S., like former U.S. Fed Chairman Paul Volcker, who also argued that big banks should be split into utilities and casinos.

Vanek-Smith: Stephen Beard in London, thank you.

Beard: OK Stacey.