Shard wrote:Disagree. These guys knew exactly what they were doing, which was playing fast and loose with other people's money, and paying themselves huge salaries and bonuses for doing so. They've been caught out.
That's all true. My point is that it has been going on for centuries - despite the best efforts of governments. Humankind is inately unable to resist the temptation.
You mention Spitzer; the UK has never been good at prosecuting white collar crime. Just one example, the Nat-West 3 who could not be prosecuted in the UK because the principal witness, a US citizen, had plea-bargained a reduced sentence in a US court for shopping the three of them and others who were jailed as well. In a UK court, he'd not have immunity even if they could have got him to appear. As New York attorney, Spitzer successfully went after all the banks who'd arranged Enron's dodgy debt at a cost, to the banks, of several $bn.
Shard wrote:Looking at UK pension regulation, if as much effort had been spent regulating the banks we might not have been in this position.
UK pension regulation is far from the exemplar you believe. When Maxwell jumped, we got the 95 Pension Act, the 97 MFR Regulations and a Regulator. Never again were we to be swindled by a corrupt and dishonest man. It didn't happen quite as intended. Maxwell's plundering was eventually paid back; the last time, I think, that informal approaches by the Bank of England governor, backed by the threat of prosecution for knowingly receiving stolen goods, operated and was successful. The Regulation was less successful. The Acts forced a prescriptive investment policy on pension funds; assets had to match liabilities otherwise the Scheme could be penalised by failing the solvency (MFR) test. A DWP official told me, in all seriousness, that every Trustee of a failing pension scheme should be prosecuted under the 1910 Trust Acts for investing in equities, to match liabilities and conformance with MFR, before a bear market and not investing "as a prudent man". Anne Abraham, the Parliament Ombudsman, eventually proved mal-administration not by a corrupt company official but by government. Gordon Brown was at best incompetent and, at worse, criminally culpable after he repeatedly fixed the arithmetic of MFR such that schemes were more likely to achieve an MFR score of 100% which indicated a solvent scheme to its members.
Abrahams successful prosecution of the government, which she paid for with her job I think, was only the tip of a much more malevolent iceberg. Risk aversion became the watchword of the EU. This was a natural position for the EU. For example, pensions in the EU, where they are not funded pay-as-you-go by government (the vast majority), are funded by investment in fixed-interest; their Trust Deeds prohibit them from investing in, riskier, equities. But the aversion to risk went much further; the ISAB (the bean-counters regulators) determined that balance sheet liabilities should be calculated using present value discounted against corporate bond +AA yields. An insurance cpy might have discounted its future premium income against the equity yield which is where the income was invested - no longer, they had to be discounted against the much lower bond yield. Clearly, getting debt off a balance sheet made good financial sense if that liability had to be discounted at much lower yields than were hithertofore commonplace. For the banks, this was a terrific wheeze because the debt could be sold and allow further debt and so on and on ... the principles of Obliquity (unintended consequences)
Hence we got CDOs and its toxic ilk. These SPV's removed debt. But, their sheer complexity is the seed of our undoing. If relatively straightforward securitised debt is beyond the comprehension of Yvette Cooper, governments will have extreme difficulties with such complex instruments as CDOs. But, they regulated for this to happen. They meddled with what I fear will be disastrous consequences.
If there is an effective way of governments to regulate effectively, then we have not found it; we probably never will. Some 4 years ago, a government minister, Patricia Hewitt, opined that the UK with its auditor's report of ".. a true and fair statement .." is a sufficient deterrent to keep UK plc's accounts in order. Governments dig the holes and then regulate to keep people from falling in. Don't dig the holes but who am I ...