Saturday, 1 November 2014

News from the Front Line.

Had the opportunity recently to go to a meeting with the FCA about 'whistleblowing'. They are engaged in implementing the recommendations made in the Parliamentary Report on Banking.  And encouraging - or at least making sure that anyone can safely -  'whistleblow' as part of that. They wanted to talk to some blokes like me what run small retail FS businesses to see if they should extend the same new rules to cover us. (If so it would be piledriver missing nail, but hey.)

The FCA people were very good indeed.  The head one was a very smart, very well educated and very clued up lawyer who I genuinely liked, and her oppo was a nice intelligent lad who I think has been working in regulation since he left uni. (I have to admit I wasn't on my best form having had a 'late evening' the night before, so I got a bit irascible. Back to his basket for Mr. L).

I try to be prepared for these sorts of things so I read up on whistleblowing - it's philosophy and the legal side.  I printed out and speed read part 2 of the Report, which includes the recommendations. And did other background reading.  Quite a lot of work if you are also trying to make a living and run a business.

Needless to say, in comparison with the FCA apparatchiks I was woefully under-informed.

And that is point (1).  They can devote a couple people to something like this for months.  Which is paid for by me and you.  If I want to successfully rebut anything, or be in the least prepared I would have to do the same - employ a couple of people for months..  So that means I (we) have to pay twice.  But no, it's three times, because I now have to go to work to make the money I need to make to keep body and soul together and the business going.

I read the Report  through and it is a litany of government and regulatory failure.  An absolute indictment of Brown's totally failed 'tripartite' system, and of course the Banks.  But, what happened?  The FSA was closed  on a Friday and all the same people came back in on Monday.  And never missing a trick, set out to 'try harder' and 'do more'.  Well, duh!

So that's point (2).  The ability of functionaries turn their failure to an expansion of their empire.

And then there is the report itself.  In none of the recommendation that I could find did it set out to deal with the true cause of the 2008 crisis, to whit the fundamental instability of the current FRB/Central Bank/fiat Currency/Government nexus, which was aggravated by Browns hopeless FSMA2000 and associated nonsenses from the EU et al..  All the dozens of recommendations just added justification for more layers of regulatory interventions but did not tackle the fundamental issues inherent in the current FRB/fiat currency settlement.

So that's point (3).  You can apply all the new rules you like, but unless the primary causes of the problems are dealt with all you are going to be doing is either (a) kicking the can down the road and / or (b) just adding shed loads of regulatory grit into the smoothly meshing gears of trade and commerce.

The FCA Head Honcho was actually delightful and I think utterly wasted in the role, although she seemed to be enjoying it.  Very informed about the law, but as far as I could tell in the time allotted a bit weak on the economics.

How are we going to escape this endless self-reinforcing cycle of regulation on regulation?

It should be noted that every financial regulator since the 1986 Financial Services Act has failed. Isn't about time we at least wondered why?  And had a think about doing something other than adding more and more rules?


Serendipitously just found this:

"Benjamin Franklin observed, “Most of the statutes or acts, edicts, arrests, and placarts of parliaments, princes, and states, for regulating, directing, or restraining trade, have been either political blunders, or jobs obtained by artful men for private advantage, under pretense of public good.

Amazingly, this too:-

"The rule of law, yes, but what about the rule of lawyers? In a democracy, the first is good; the second is bad. Abraham Lincoln got it right in his first inauguration as US president: “If the policy of the government upon vital questions affecting the whole people is to be irrevocably fixed by decisions of the Supreme Court [lawyers working for quangos]… the people will have ceased … to be their own rulers.”