Monday, July 23, 2012

Tony Blair: "Hanging bankers won't help"

As reported by the Telegraph, former UK Prime Minister Tony Blair said,
Public anger over the financial crisis is wrong and must not lead Britain to “hang bankers at the end of the street.”
Of course, this statement might have something to do with
his commercial interests since leaving Downing Street five years ago. He is an adviser to JP Morgan, a US investment bank; Zurich, a Swiss financial firm; and has clients, including several governments, which are said to deliver an annual income of about £20 million.
 Mr. Blair
launches a defence of the free market and liberal economic rules established by the Thatcher government. 
The approach promoted by Baroness Thatcher’s government is not to blame for the recent financial and economic crisis, Mr Blair says, warning against taking vengeance on bankers and increasing State intervention in the private sector. 
We must not start thinking that society will be better off “if we hang 20 bankers at the end of the street”, Mr Blair says....
While hanging bankers would be a little extreme, there is clearly a need to reconnect an appropriate level of discipline for bad behavior.
Mr Blair cautions against letting that anger lead to regulations that could reverse Lady Thatcher’s work to reduce government involvement in free markets. 
He says: “Don’t take 30 years of liberalisation, beginning under Mrs Thatcher, and say this is what caused the financial crisis.”
Regular readers know the cause of the financial crisis was that regulators on both sides of the Atlantic elected not to perform their critical function of ensuring that market participants had access to all the useful, relevant information in an appropriate, timely manner.

By letting the banks introduce opacity to vast areas of the financial system, the regulators were complicit in causing the financial crisis. 
Senior figures from the main parties have suggested that the crisis and alleged wrongdoing of banks such as Barclays should lead to tougher controls on banks. 
Mr Blair challenges those calls, and says: “We mustn’t go back to the State running everything.”...
Actually, transparency would provide the toughest control on banks.  Sunshine is the best disinfectant and needs to be brought in to every part of a bank's global operation.
Instead of seeking to change laws and regulations, Mr Blair says that politicians must examine cultural norms. “We must regain the basic values of what society is about,” he says. “We’re not against wealth, but we are in favour of social responsibility.”
And the key to enforcing social responsibility is transparency so that market participants can see what the bankers are doing at all times and that the financial regulators are enforcing the existing laws and regulations when the bankers break them.

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