More Regulation, Overdue Recession and the Blame Game

More Regulation, Overdue Recession and the Blame Game

Trading Features / Strategies from Simon Denham of Capital Spreads.

Markets are still very much undecided about the recent rally. Is it just a bear trap or is it the first tentative signs of some sort of longer term support?

While my head says ‘bear trap’ my heart is definitely in the ‘hopeful’ camp.

There is much talk at the moment of much stricter banking rules and legislation to ensure that banks build up capital in times of feast to stave off disaster in times of famine. This statement brings the obvious question as to who decides which is which? At what point do you turn to the bank and say “gosh, things are going well… this is just the time to restrict lending and build up reserves”.

Not only this but the mere fact of insisting on higher capital reserves will restrict the lending capability and therefore reduce what growth we have. The stream of ‘ideas’ coming from the regulators seem to be as good a way of ensuring that we remain in recession for a long, long time as any I have seen.

The ‘principles’ based regulatory structure followed by the FSA over the last ten years only failed because the ‘Rules’ based structure followed in the States failed so spectacularly.

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Whilst I would not seek to defend this government there is a certain amount of truth in the fact that much of the huge banking losses (if not the actual recession, which was well overdue anyway) have ‘Made in the USA’ stamped all over them.

It seems to this commentator that Rules based obsessions are even worse than Principals based ones.

Also the various leaders across the globe seem obsessed with hedge funds and tax havens to the point of ignoring of everything else. I am sorry to have to say that these two units, whilst not blameless for other reasons, have had absolutely nothing to do with either the banking crisis or the recession.

For democracies they make a convenient whipping boy for the ignorant masses as there is nothing people like less than wealth in the hands of somebody else.

Lead a FTSE 100 company employing 150,000 people and you can expect public flaying if you pay yourself £2m, kick a football about for a living with nobody but yourself to worry about and nobody blinks an eye at salaries of £3-5 million. In fact supporters positively encourage their boards to dip ever deeper. Such is the world we live in.

The above comments do not constitute investment advice and neither Capital Spreads nor Clean Financial accept any responsibility for any use that may be made of them.

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'More Regulation, Overdue Recession and the Blame Game' edited by Simon Denham, updated 17-Mar-09

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