In the UK today the Financial Services Authority, a british institution set up to protect financial markets from meltdown and destruction through a series of ‘light touch’ regulation seems to have accepted the reality that the markets are not always right.
The BBC’s report about the report is a good summary. The report itself is worth downloading (here :
). If you open the report and look at some of the graphs, there clearly were warning signs ahead of trouble. That’s easy to see with hindsight and we aren’t saying that they should have spotted it, and perhaps they did but felt it was ‘acceptable’ – after all they were acting rationally (see ‘Rational Markets: Are they doomed?“)
In that previous post I made mention of the Independent Insurance Company’ s failure (see this Times report covering the CEO’s jailing for 7 years)- Was there learning from that experience? I expect so. Was it the right learning? the evidence is not, because the same problems persisted, the ability of individuals to take decisions for personal gain over long term business needs lay at the core of the issues then, and now. Can we have faith that the learning will be better this time? That’s a much harder question to answer, we’ll get new regulation, and it’ll certainly be different regulation, but will it be more effective regulation.
I thnk the real question is whether society changes its attitude and ways of working, and there is a willingness to do that. Excessive, intrusive regulation might destroy that opportunity for societal change.
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