In a long review article, Bill Black sums up 4 conclusions.
'For the sake of brevity I make four points.
First, if regulation is determined by the race to the bottom the regulatory leadership will be selected (with a great deal of self-selection plus industry dominance) for their opposition to effective regulation. The leaders will lack a spine. The idea that anti-regulatory invertebrates (think slugs) will successfully go “toe to toe” with a fraudulent CEO is fatuous. Anti-regulators are bred to be lap slugs.
Second, “judgment-led regulation” is a PR phrase – not a positive theory of financial regulation. Honest bank CEOs would not “hate” effective financial regulation. Instead, they would see it as essential to their ability to compete. The true independence of effective regulators (as opposed to the faux independence of inside and outside professionals hired and fired by the CEO) is also invaluable to honest bankers.
Third, the PR phrase appears to be a pretext for further deregulation in the UK designed to achieve greater regulatory laxity in order to “win” the race to the bottom. It is disastrous to remove the regulations that drive dishonest banks CEOs “wild.” In the U.S., for example, the savings and loan underwriting requirement for mortgage lending that the Clinton administration removed was the single most destructive act of deregulation. The rule was a paperwork rule – the category that the anti-regulators love to target. We used it in 1990-1991 to stop S&Ls in Orange County, California (where all good financial frauds originate) to drive liar’s loans out of the industry. The rule was extremely useful in preventing criminogenic environments, bad loans, and in helping to prosecute accounting control fraud.
Fourth, the “old guard” at the regulatory agencies was the solution, not the problem. The S&L “old guard” established systems and professionalism that survived even the appointment of anti-regulatory leaders in 1987. The folks that failed during the current crisis were typically the anti-regulatory leaders of the regulatory agencies appointed to “win” the race to the bottom.'
And then, Bill closes with this zinger.
"The takeaway is that the elite banks demand that their political patrons be total sycophants like London’s mayor, who will celebrate banks committing felonies that aid terrorists as long as the banks are located in the City of London. The elites believe in the divine rights of bankers. Anything less [than] unconditional devotion from their political lackeys represents “demonization” and requires that the politicians be defeated and replaced. Modern [elite] bank CEOs are not tough. They are thin-skinned adolescents who demand veneration."
All good points. What do we do about this state of affairs?
First, interact widely enough to develop your own sense of situational awareness, and consider why an uninformed populace and it's options are soon parted.
Second, decide for yourself if you want to be easily manipulated by propaganda, or select methods that will actually form a more perfect union, and the insanely great capabilities and general welfare of the people that follow such union.
Third, decide for yourself whether we can scale up a larger version of a more perfect union, by practicing less, not more, self-regulation. Does agility vs clumsiness require more or less self-control?
Fourth, if Luddites are standing in the way of our national progress, please make a decision, and make it quickly. Either stand on those Luddites - now - and find a better way .... or get out of the way yourself.
Fifth, please consider if YOU are willing to pander to idiotic, so-called elites defined by their zeal at sequestering resources from their neighbors and country. Do we really need elite hoarders, or elite contributors?
Second, “judgment-led regulation” is a PR phrase – not a positive theory of financial regulation. Honest bank CEOs would not “hate” effective financial regulation. Instead, they would see it as essential to their ability to compete. The true independence of effective regulators (as opposed to the faux independence of inside and outside professionals hired and fired by the CEO) is also invaluable to honest bankers.
Third, the PR phrase appears to be a pretext for further deregulation in the UK designed to achieve greater regulatory laxity in order to “win” the race to the bottom. It is disastrous to remove the regulations that drive dishonest banks CEOs “wild.” In the U.S., for example, the savings and loan underwriting requirement for mortgage lending that the Clinton administration removed was the single most destructive act of deregulation. The rule was a paperwork rule – the category that the anti-regulators love to target. We used it in 1990-1991 to stop S&Ls in Orange County, California (where all good financial frauds originate) to drive liar’s loans out of the industry. The rule was extremely useful in preventing criminogenic environments, bad loans, and in helping to prosecute accounting control fraud.
Fourth, the “old guard” at the regulatory agencies was the solution, not the problem. The S&L “old guard” established systems and professionalism that survived even the appointment of anti-regulatory leaders in 1987. The folks that failed during the current crisis were typically the anti-regulatory leaders of the regulatory agencies appointed to “win” the race to the bottom.'
And then, Bill closes with this zinger.
"The takeaway is that the elite banks demand that their political patrons be total sycophants like London’s mayor, who will celebrate banks committing felonies that aid terrorists as long as the banks are located in the City of London. The elites believe in the divine rights of bankers. Anything less [than] unconditional devotion from their political lackeys represents “demonization” and requires that the politicians be defeated and replaced. Modern [elite] bank CEOs are not tough. They are thin-skinned adolescents who demand veneration."
All good points. What do we do about this state of affairs?
First, interact widely enough to develop your own sense of situational awareness, and consider why an uninformed populace and it's options are soon parted.
Second, decide for yourself if you want to be easily manipulated by propaganda, or select methods that will actually form a more perfect union, and the insanely great capabilities and general welfare of the people that follow such union.
Third, decide for yourself whether we can scale up a larger version of a more perfect union, by practicing less, not more, self-regulation. Does agility vs clumsiness require more or less self-control?
Fourth, if Luddites are standing in the way of our national progress, please make a decision, and make it quickly. Either stand on those Luddites - now - and find a better way .... or get out of the way yourself.
Fifth, please consider if YOU are willing to pander to idiotic, so-called elites defined by their zeal at sequestering resources from their neighbors and country. Do we really need elite hoarders, or elite contributors?
1 comment:
It's my view that any alternative system we could have come up with would be bound by similar if not identical arrangements.
Of course the rules are designed to record and report actual events, but they are not theoretical (causal) but rather operational. Factual statements are either empirically true or false. This is not the case with accounting rules. They are pragmatically arrived at, and they are sometimes altered to achieve a more desirable result, or more uniformity across a system, such as the global economy.
There are various ways to arrange the rules, and different accounting jurisdictions are somewhat different. Moreover there are often options within in the same system of rules, e.g., FIFO and LIFO. In fact firms can change from one to the others although not arbitrarily to gain advantage.
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