Scotland Will Never Be Free as Long as It Has RBS

Scotland can have its independence from the U.K., or it can have its own too-big-to-fail bank. It can't have -- or afford -- both.

Scotland can have its independence from the U.K., or it can have its own too-big-to-fail bank. It can't have -- or afford -- both.

Scots voters will go to the polls on Sept. 18 to answer this question: Should Scotland be an independent country? They also should be asking themselves: How could an independent Scotland afford to support Royal Bank of Scotland Group Plc, which hasn't repaid the bailout money it got from U.K. taxpayers in 2008 and remains majority-owned by the British government?

The Scottish government has a plan for this, perhaps proving that ingenuity is an enduring cultural trait: It will rely on the munificence of England, and maybe even the U.S. Federal Reserve, in the event that RBS ever runs into serious trouble again (assuming it ever gets out of its present trouble). Scotland estimates it would have a 150 billion pound ($245 billion) economy during its first year after going alone. RBS has 1.1 trillion pounds of assets. So Scotland couldn't afford to bail out RBS on its own.

But have no fear. Or so says the 650-page blueprint for independence released by the Scottish government. It envisions the country continuing to share the Bank of England with the rest of England on a long-term basis. The pound would remain the currency of an independent Scotland. As for bank bailouts, it says: "If in the future wider support from governments is required to stabilize the financial system, this would be coordinated through the governance arrangements agreed between the governments of the Sterling Area."

All of this would be subject to negotiations with the U.K. government, of course, which I'm sure would want to have some say in the matter.

The Bank of England would continue to be the lender of last resort to Scottish financial institutions. Other central banks could be tapped as well if need be. "Banks receive lender of last resort facilities from across the world, and it is normal for countries to act in a coordinated way to secure financial stability," the blueprint says. "For example, the RBS and Barclays received significant liquidity support from the U.S. Federal Reserve at the height of the financial crisis."

With independence like this, who needs servitude?

In a related development, U.K. Business Secretary Vince Cable this week speculated that RBS would inevitably have to move its headquarters to London from Edinburgh if Scotland left the U.K. He seemed to be positing this as a bad thing, because of the many jobs Scotland would lose. Yet this might be the best possible outcome as far as Scotland's own financial stability is concerned. English taxpayers might not be so enthused, but they're already on the hook for RBS's losses anyway.

Recall what Iceland did, by comparison, when its biggest banks went broke in 2008. It let them fail, because it couldn't afford to do anything else. It also hadn't adopted the euro and therefore could devalue its own currency. Now Iceland is doing reasonably well again. Unemployment is at about 4 percent. And a 2 percent rate is a realistic goal, as Bloomberg News reported last month.

If the people of Scotland want independence from the U.K. after more than 300 years together, by all means, they should vote for it. But they shouldn't pretend this referendum envisions true autonomy. If freedom is what Scots want, they will need to get rid of RBS and stop looking to other nations for bailouts.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.