Douglas Carswell's Blog

City regulators want more City regulation

Speaking at a conference in the City yesterday about financial service regulation, I shared a platform with various government officials and regulators. What I heard concerns me.

Officials in charge of drawing up City regulation clearly believe that the financial downturn that started in 2007 – 08 was a “market failure”. It simply has not occurred to them that far from “failing”, the markets called time on a cloud cuckoo bubble created by people like them. The bust was a consequence of the boom – and the boom was caused by central bankers and Treasury officials. 

When challenged about the blizzard of City regulation now emanating from Europe, one official gave an inadvertently revealing answer. “Don’t worry” they soothed “it isn’t Brussels telling us what to do. We have lots of influence and we are writing the new pan-European rules”.

Treasury officials might regard meetings in Brussels where they help draft new directives as a case of “we Brits” writing the rules. Elsewhere, it just looks like officials meeting in Brussels to write more rules.

Because the new rules are drawn up by people overly confident of their expertise, they believe that they can assemble in one place enough knowledge to know what is right. History suggests they will be wrong, and that their rules will have unintended consequences.

But then again, perhaps not all the consequences will be entirely unintended. 

If you are officialdom and you are broke, what better way of getting big financial institutions to lend to you cheaply than by insisting that they take on more of those IOU bonds you keep issuing, eh? It’d be prudent to ensure that fund managers hold government gilts, don’t you see. And coincidentally, Basel III would mean banks buy more bonds ...

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