A typically insightful post from Robert Peston on the BBC's site highlighting the differences between the Adair Turner prescription for dealing with a destabilising financial sector (more effective regulation) and that espoused by Mervyn King (break up the banking empires). But I wonder if there's an unnecessary opposition being erected in this debate.

King is surely right to argue that there can never be effective market discipline while some privileged institutions are deemed "too important to fail" by governments. But Turner is also quite right to argue that the financial authorities need to take action to prevent credit bubbles and other manias getting out of hand across all sectors of the financial system, whether state underwritten or not, because our economy can still be knocked of its feet by these crazes.

So why not implement both? Why not separate the "casino" from the "utility" (John Kay's brilliant characterisation of the two primary functions of modern bankers) and also keep a much tighter grip on the casinos through mandatory higher capital ratios, living wills, a ban on "naked" trading in credit default swaps etc?

These policies should be mutually reinforcing in the necessary work of cutting "big finance" down to size and making the financial sector work in the long-term interests of corporate clients and ordinary investors.