Turner and Sants of the FSA appeared before the Treasury select committee today, and finally fingered NuLab as the architects of Britain’s financial woes. I don’t see how Brown can dodge this one when normal hostilities resume.
Among the highlights, reported by Pesto:
'The FSA [will] be increasing the capital requirements for the trading activities of banks by several hundred per cent. This means that the securities trading and investment banking activities will become more expensive for banks, much less profitable. Banks will be deterred from engaging in the kind of financial engineering that led to the creation of all those poisonous, subprime-based investments. It implies that the FSA got it wrong to a mindboggling extent.'
Indeed. The FSA always had the power to set capital adequacy levels, at the stroke of a pen. So why didn’t it do so in a way that made stupid business too costly to contemplate ? The Grauniad picks up the story:
'Turner said: ‘All the pressure on the FSA was not to say why aren't you looking at these business models, but why are you being so heavy and intrusive, can't you make your regulation a bit more light touch?’ There was "political philosophy" under which the FSA was told to avoid being "heavy and intrusive" and asked to be more "light touch".'
And we can name names. Brown, of course, but also Blair, who famously said in 2005:
'Something is seriously awry when the Financial Services Authority … is seen as hugely inhibiting of efficient business by perfectly respectable companies that have never defrauded anyone.'
This was always in the public domain, of course, but the point hasn’t really been rammed home. Looks like it might be now - if Newsnight this evening is anything to go by.
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Pesto's piece on the www is headed FSA Admits Huge Mistakes. The URL suggests his working title was something different ...
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