Sunday, 28 December 2008

When in doubt, blame the regulators, part 2

What is the principal cause of the financial crisis, according to David Cameron?
The greatest failure has been regulatory failure.

This is a silly thing for Cameron to put his name to. Politics aside (temporarily) I think this is fundamentally wrong. Surely the principal responsibility for failures at the banks lies with the boards of the banks themselves, otherwise why are they getting paid so much? If it's actually regulators that have most responsibility for ensuring the survival of the banking sector then surely salaries ought to be adjusted accordingly...

Being more serious, I don't dispute that regulators haven't done the best job, but there is no way that I would place regulatory failure top of the list of the causes of the crisis. This is becoming a popular theme in Right-leaning commentary on the crisis (and of course the self-serving guff coming from some in the City - stand up Nicola Horlick), and I actually think it poses something of an opportunity. To suggest that regulators deserve more blame than bankers comes across as an attempt to rewrite history in order to maintain an existing world view, and I suspect it sounds like a 'political' opinion rather than a gut response. As such it also feels out of touch with the popular mood. We could do worse than reuse Cameron's line repeatedly back against him.

The rest of the article is also worth a skim. The bit where he claims that the Tories got there first in terms of standing up to corporate Britain also raised a smile:
Sceptical of that last claim? Well, try this New Year's quiz. Which party: a) first set out how to ensure that non-doms paid a fair share of tax; b) suggested that in the private equity industry what looks like income should be taxed like income, in response to concerns that multi-millionaires were paying less tax than their cleaners; c) spoke out about a range of irresponsible marketing – from Lolita beds to padded bras for children; and d) called on the Financial Services Authority and other institutions to prosecute financial crime with the same gusto as in the US? The answer in each case is the Conservative Party.

I just want to focus on the claim about private equity. I was blogging about PE week in week out last year, and I think the argument that the Tories were making the running on the tax issue is thoroughly dishonest. Only in March last year George Osborne was kissing the rumps of the PE industry and defending their pay against us loony trade unionists (didn't stop him nicking the phrase he once derided either). He clearly suggested in his speech to the BVCA that the tax structure was safe as long as the industry was more transparent. And looking back over my own posts, it appears that Osborne only floated the idea of a review of PE taxation in middle late June, when Gordo had already told the GMB at the start of June that the Govt would be carrying out a review.

3 comments:

Paulie said...

Hmm. Maybe not the right place to allocate blame, but I'd get used to it if I were you Tom:

http://nevertrustahippy.blogspot.com/2008/10/reasons-behind-regulatory-failure.html

Anthony Z said...

Let's not forget the 80's, when bleeding-heart Tories always blamed muggings on social pressures and inadequate policing.

Was it not David Waddington as Home Secretary who said "All these young offenders need is a little love. The real problem is that no-one tried to stop them early enough, the poor dears. Society is to blame!"

I am remembering that right, aren't I?

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