Over the weekend the first leaks of what changes to financial regulation seeped out of Washington and London. Peston has the highlights and his take on it here.
What is missing though is anything either exciting or bold. It is firmly in the lets tweak things a bit and hope it never happens again bit.
There is for example no core consideration of preventing banks from becoming too big to fail. This was the biggest issue in the crisis. AIG, a non-bank but still a big trader, has cost the US Treasury over $100 billion, which will never be seen again. Indeed much of that money seems to have come the way of Barclays and RBS banks'.
So no big knife to cut up the industry, little comment on the need for any accounting changes or thoughts about what may cause the trip up next time.
What does this tell us? That in their hearts, the US and UK Government know that they were the prime cause of the crisis with low interest rates and large money supplies warping the system. If they did not think this, the changes put forward would be more radical.
What is missing though is anything either exciting or bold. It is firmly in the lets tweak things a bit and hope it never happens again bit.
There is for example no core consideration of preventing banks from becoming too big to fail. This was the biggest issue in the crisis. AIG, a non-bank but still a big trader, has cost the US Treasury over $100 billion, which will never be seen again. Indeed much of that money seems to have come the way of Barclays and RBS banks'.
So no big knife to cut up the industry, little comment on the need for any accounting changes or thoughts about what may cause the trip up next time.
What does this tell us? That in their hearts, the US and UK Government know that they were the prime cause of the crisis with low interest rates and large money supplies warping the system. If they did not think this, the changes put forward would be more radical.
8 comments:
or, the banking sector is the last refuge for some NuLab directorships?
You have missed one here. There is the issue of banks wholly owned subsidiaries and their audit. The banks want them to be free of the open rigorous audit publicly on view. Yet it was these that were at the root of so many of the major problems that arose. If the banks can shift activities into such devices, and can avoid the audits needed for effective regulation, then they will be free once again to do what they like.
ROYM - You mena like Mr. Blair himself!
Demetrisu - I agree, hence my point about the need for accounting changes, everything needs to be on balance sheet so that the shareholders know the true position.
What do you think of a massive hike in interest rates to blow it open and kick start again?
JH - Can't see that for a while. Not when the economy is on printed money life support.
If we get to hyperinflation and interest rates need to surge, then the world has too many other problems to make this one worth worrying about.
Let's be sensible here. What regulation would the banks allow the Government to introduce before they spat out the dummy and upped sticks to a different location? Some may claim it would be global regulation, but that is just so much bollocks; to get the banks in their countries different countries and regimes would offer ever more lax regulation.
There is nothing the Government can do other than keep a close eye on the banks, and this Government failed miserably, if not downright criminally endorsed what they were doing.
"What does this tell us? That in their hearts, the US and UK Government know that they were the prime cause of the crisis with low interest rates and large money supplies warping the system. If they did not think this, the changes put forward would be more radical."
And if our govt's know that they caused the crisis by means of the loose monetary policies that they pursued during the 90's and 00's, what does their insistance on continuing such a policy - with record low bank base rates and QE - tell us? Do they actually believe the Keynesian and Monetarist policy prescription will be our salvation or are they in fact clueless?
Brown's/Mandelson's repeated insitence that for the govt to do nothing and let the market work would be the wrong thing to do is the opposite of the truth. It was precisley by doing sthg in the first place - i.e., the response to the threatened economic downturn in the early 00's in the aftermath of both the Dot.com boom/crash and 9/11 - that bought us where we are now.
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