MercoPress. South Atlantic News Agency

US academic wants banks barred from gambling on world markets

Professor Laurence Kotlikoff from Boston University

A leading US academic who has been praised by the head of the Bank of England has called for banks to be barred from gambling on the world markets. Speaking on Jeff Randall Live, Professor Laurence Kotlikoff argued that the days of casino banking should be ended for good.

“We don't need them to be engaged in gambling,” he said. “They can just do their investment advice and make a good clean living that way.”

He also called for full disclosure by financial companies to allow investors to know what they are buying into.

“We need to move away from a system that's really set up for hucksters to basically produce securities that are fraudulent and then market them around the world,” he said.

The Boston University academic is the author of a radical new book called Jimmy Stewart Is Dead: Ending the World's Ongoing Financial Plague With Limited Purpose Banking.

The book proposes that banks should be turned into mutual funds that would take no risks and lend out only what they had taken in deposits from savers.

Professor Kotlikoff's views have already been praised by Mervyn King, the governor of the Bank of England.

Financial regulators, governments and academics around the world are looking at various measures to prevent a repeat of the banking crisis of 2008. If Professor Kotlikoff's ideas were undertaken in Britain, the changes would be more far-reaching than the so-called 'Big Bang' reforms of the financial industry in the 1980s.