Friday, 17 October 2008

Regulation, regulation, regulation

There's an interesting piece in today's Grauniad where Larry Elliot interviews Adair Turner. I've always been impressed with Turner. His book Just Capital had some great stuff in it (there's a great passage comparing the neo-liberal ideologues to marxist students in the 60s) and the Pensions Commission reports were great bits of analysis (I would have loved to work on something like that). As such I think he's a great bloke to head the FSA.

The most interesting thing about the interview IMO is the reflection of how quickly the crisis has opened up opportunities to examine new ideas, or re-examine old ones, a point I've been banging about a bit recently. The very fact that he can say that light touch regulation is over is significant in itself, but I particularly liked this bit:
One result of the crisis of the past 15 months, Turner said, was to free the FSA from the charge that it was stifling the City with bureaucratic controls. "If a year and a half ago, the FSA had wanted higher capital adequacy, more information on liquidity - had said it was worried about the business models at Bradford & Bingley and Northern Rock - and had wanted to ask questions about remuneration, the fact is that we would have been strongly criticised for harming the competitiveness of the City of London, for red tape, and for over-regulation," he said.

Exactly, though it is a temporary window. One thing following the post-Enron reform movement in the US taught me was just how quickly vested interests seek to reassert themselves. It may be that this crisis is significantly serious to make that less of a factor, but I certainly would not assume that.

Also it looks like the FSA is going to snap up a few ex-City types to beef up its understanding of how some of this stuff actually works. There was a very telling bit on the (rather rubbish) Panorama special last night where an ex-Barclays treasury bloke said that FSA staff that same to see them were way out of their depth. Hopefully we now have the oportunity to put a few of these faults right.

1 comment:

Charlie Marks said...

I didn't much like Just Capital. As I recall (dimly! it was ages ago!) it lacked sturdy foundations in terms of argument - lacking in clarity.

On regulation, the inability to oversee the actions of financial institutions was a problem - now, one exacerbated by financial institutions, no doubt.

Even if there's ex-City staff working for them, without a new paradigm there will quickly be a return to the discourse of deregulation.

The question is, will the new paradigm be economic regulation by the state, namely "regulated capitalism", or economic regulation through the democratic control of workers/consumers?

Time to dust off the Bullock report?