Regulation has failed in the financial sector, so let’s have more regulation seems to be the popular cry. What we need is not more, but the right regulation that will tackle the issues that really matter – solvency and liquidity. In other words making sure financial institutions have enough assets and enough cash to do their jobs.
I am fed up with Labour’s pathetic attempts to play politics with the issue of the banking crisis. They want to suggest I was wrong and made the problem worse by saying the mortgage regulation Labour brought in should be scrapped. Their extra regulation clearly did not work. Never have mortgages been so regulated and never have we been in such a mess .I am astounded they think a single line recommendation in a long report which they did not implement can achieve anything! What sort of a world do they live in where a little read Report of advice is more important than the many deeds and misdeeds of government? Have they no idea about how they are responsible for the regulation of financial markets in London, have been so for more than 11 years, and should now tell us what they now think they did wrong.
The Report I helped produce said something much more important than the sentence Labour likes to quote. It said the Bank of England had been shorn of important responsibilities which meant it would not be able to cope with a banking problem when one came along. The Report pointed out how the Central Bank had left money far too loose in the good times, and how the next move was likely to be much more painful. We catalogued how the debt was getting out of control. In others words we warned in advance of this crisis and made proposals to start to correct it.
I am delighted that the Conservative party has now taken up the arguments in the Report to strengthen the Bank of England so it can control and help the banks. I am pleased they now wish to put in place ways of controlling the excessive public debt built up in recent years. Of course it all comes down to spending better and more wisely. There is just so much scope to do this after years of poor management. Let’s keep all the teachers, nurses, doctors, soldiers and sailors, and maybe add some more. But let’s get to grips with the rest, where we are overwhelmed by spin doctors, management consultants, unelected regional governments and people taking money off us and giving some of it back to us. Let’s have a simpler and fairer system, and start planning how to get people back to work after all the mounting redundancies of this summer and coming winter.
The ominous news is the pain is spreading from the City to the High Street, from the property developer to the building site, from the estate agent to the small service business. Banks are having to call in loans, charge more for facilities, value assets downwards and take other unpopular steps to try to make some money to repair their damaged balance sheets. People who blog to say falling house prices are a good thing need to pause and think about how big falls in house prices happening too quickly lead to many other people losing their jobs. A lot of our prosperity in the good times depended on rising property prices and property transactions. A lot of grief will now follow from the drops.